Right: Tough sledding for department store brands caused by continuing consolidation forcing examination of alternative channels of distribution. Clinique in Super Drug (upper mass) outlets in Canada, for example. Another: Prescriptives on QVC.
Right: Confusion will prevail regarding what is natural and what is organic?
Wrong: Company stores and kiosks for prestige lines. Maybe even a co-op catalog for several non-competing prestige lines such as an all-French endeavor.
The New Realities for 2009
No one doubts that the upheaval in the economy will impact our industry to a huge degree. Although everyone will have the crystal balls working overtime, a few directions are already foreordained.
For sure, the turmoil in the channels of distribution will change the face of the industry, much as the advent of mass merchandisers and self-service had its impact in the 1970s. Those who can recollect, will do so favorably, as the business boomed. We believe that the thrust of changes in distribution will be good for the consumer and ultimately, the industry, although the growing pains will challenge the best and brightest.
Working off last year’s broadening distribution, the prevailing movement seems to be engendered by continuing “Sephora Envy,” following JC Penney’s successful co-opting of the “chain-in-chain” concept. Space NK will do the same for Bloomies. Macy’s is also moving in the “store-in-store” concept, and can Walgreens and Rite Aid be far behind CVS’s 360? And, where will the impact of this distribution shift fall most heavily?
The goal of the store-within-a-store concept is to attract a new customer in order to bring younger traffic and excitement to the troubled and aging department store channel. But, will it? OK, if they’re in the store to visit NK, they may very well get that non-traditional shopper to also visit other departments (that is, if they have alerted her, and actually have what she wants). Good for the store. But will it help Lauder, Chanel and Lancôme, plus the other assorted up-market brands? Maybe M.A.C., but that’s about it. The net is that Bloomie’s total business will be up, but the individual brands will probably not achieve much benefit, (unless they have their own strategies and executions to attract this customer to their counters).
What all of this upheaval does is create a legitimate “license for major change” (right in tune with the country’s new direction), in the total distribution system. Now the traditional department store beauty brands have solid reasons to move forward strongly with their own stores, plus other new forms of distribution. You know, once the genie is let out of the bottle it will never be the same again. Now, the big bang will come when a beauty marketer develops a store with the atmosphere/impact of the Apple stores. Go Lauder, you can do it! We look forward to next year’s recap. With the economy and distribution and consumers all in play, you can be sure that new stars will emerge.
Now, a few kind words about natural and organic certifications. At last count, there were about four viable U.S. certifications and about the same number for the EU. In the U.S. we have the NPA doing naturals, and OASIS, the NSF, and the NOP (Dept. of Agriculture) doing organics. In Europe there is the BDIH (German) doing naturals, EcoCert doing both with a new group called COSMOS, NatTrue, a manufacturing trade group, and the Soil Association in the UK replicating some of what the U.S. Dept. of Agriculture does for food with a personal care fillip thrown in (but as a non-government agency, it has no enforcement power). Some are concerned with the ingredients being natural or organic and some get into “natural” processing. As our new government ponders sitting down with Iran and North Korea, similarly the aforementioned groups are trying to come to some mutually satisfactory certification agreement. And, they have about as much chance as the new Washington team does.
Meanwhile, what’s a marketer to do? Strategy will be, go with what you have and keep going more natural/organic as you develop new products. Problem is that marketers will still have to deal with real benefits (ones that are truly perceivable at their higher prices in these tough economic times) with permission-to-believe, along with permission-to-buy. Quite a big order.
Certification will surely provide permission-to-buy. But if all those lines that compete in this arena are all certified, they have equaled the playing field. Where’s the differentiation? If all products are reasonably interchangeable (and they are), clearly it will come from which company can do the best branding. A tool for which we expect to see more of is the use of a “cause.” This new marketing mix component is designed to answer for the questioning consumer, “What does this product do for me, and what does it do for the world?” That’s on top of natural, organic, sustainable, and the product working reasonably well—real or imagined.
Recession Takes a Toll
Of course, no discussion of 2009 is complete without taking into account the recession. Aside from the struggle to make the numbers, we believe there will be a noticeable drop-off in innovation. That is, without recourse to venture groups or even relatives to raise capital, the entrepreneur is stymied. Where would Bare Escentuals or Physician’s Formula be without their honey pots?
This will be a time when the well-funded companies must carry the burden of innovation. Not just a new anti-aging crème or a one-off fragrance, but the kind of entrepreneurial adventures that really built the business. Now that’s really a change even Republicans can live with!
Givenchy's ad for Phenomen'Eyes is striking.
Wish We Had Done That!
In a sub-market of the prestige cosmetic business, Lancôme has dominated the mascara category. Buttressed by unrelenting advertising, a portfolio of patents, and its new vibrating brush, it is trailed by Lauder (which has one, too), Dior, and Chanel. So what is Givenchy doing in this snake pit? Actually, once you take a good look, its basic marketing strategy is innovation plus striking advertising. “Striking advertising” is defined as, “Nobody will miss this ad!” After the dust-up in England about fake lashes in mascara ads, it has become difficult to show what your mascara will really do. Oh, the creative team went for the absurd. And it works!
A fascinating study by Cone/Duke University provides the first real proof that Cause-Related Marketing (CRM) works. Briefly, one group reviewed a regional magazine with CRM products—shampoo, toothpaste, chips and light bulbs—while a control group saw non-CRM ads. Then, given money to shop in a convenience store, the exposed group lifted sales of a CRM toothpaste by 74% and shampoo by 28%. The increase for chips and light bulbs was marginal.
An additional Cone study designed to better identify what drove substantial product sales for only two of the four brands revealed:
• Picking the right cause is important.
• 84% want to select their own cause.
• The larger the cause’s appeal the better; e.g., breast cancer.
• 83% say personal relevance is key.
• “Name” causes are best; e.g., March of Dimes (Permission-to-believe).
• 80% believe the specific nonprofit associated with the campaign matters (Permission-to-buy).
• 77% say practical incentives for involvement, such as saving money or time are important (More permission-to-buy).
• 65% find emotional incentives for involvement, such as it making them feel good for alleviating shopping guilt, important.
Net, net, according to Cone, consumers want to feel a connection to the issue and the nonprofit, while fulfilling their personal needs. While this is a tall order for companies, it provides great opportunity for continued innovation and business growth. And, it makes you feel good, too.