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What Price Beauty?

May 24, 2010

FGI takes a hard look at an industry undergoing tremendous change.

What Price Beauty?

FGI takes a hard look at an industry undergoing tremendous change.

The Fashion Group International (FGI) took a good, hard look at the beauty industry, and deemed it alive and well, albeit changed. On April 29, moderator Karen Young, chief executive officer, The Young Group, and a panel of industry notables, including Thia Breen, president, North America, The Estée Lauder Companies; Allen Burke, director of beauty merchandising, QVC; Maureen Kelly, creator and chief executive officer, Tarte Cosmetics and trend analyst Alisa Marie Beyer, The Benchmarking Group, explored new models of innovation in the industry and the ways in which they are impacting the future of beauty.

The event, “Survival of the Fittest: What Price Beauty?,” was introduced by Carolyn Pieper-Vogt, president, Fusion Brands, and addressed a marketplace in a state of flux and what it will take to lure the value conscious beauty customer back to the counter. It began with a trend overview by Beyer of The Benchmarking Group, who wryly titled her presentation, “She’s Come Undone and She’s Not Coming Back,” a nod to the new values impacting consumerism in today’s market.
Left to right: Carolyn Pieper-Vogt, president, Fusion Brands; Karen Young, chief executive officer, The Young Group; Thia Breen, president, North America, The Estée Lauder Companies; Allen Burke, director of Beauty Merchandising, QVC; and Maureen Kelly, creator and chief executive officer, Tarte.
“Trends are sometimes mistaken for fads, but trends are values that are ascending in our social system, a representation of the social fabric,” said Beyer, who discussed some of the major trends affecting consumer purchasing today. “Looking at macro trends for 2011, which are the psycho-cultural trends that affect the core belief systems that motivate and inspire consumers today, we see these are the ones that reflect our lifestyles. Macro trends are the ones you have to predict,” she said, noting these are the ones that should be reflected in your brands.

Beyer further stated, “Those wishing to create successful, relevant brands, need to understand that the two fundamental points that drive beauty are hope and vanity, relating to a woman’s belief that she can be the person she wants to be. When a woman looks at your brand she has to see herself in your brand.”

She proceeded to cite six of the most relevant trends in today’s market, beginning with self-renovation.

“Every minute of every day we want to be a better person, to be greener, more aware, healthier,” said Beyer. These aspirations are part of a larger trend.

The second factor is outsourcing. Beyer noted that it takes a lot of help to live our lives and we aren’t about to trade down.

“The bottom line is we won’t compromise on our needs,” added Beyer.

“Me-Moments,”the third trend, are a nod to women's "exit strategy," and something they don't feel guilty about.

“Like the Calgon ads of the past, imploring ‘Calgon, take me away,’ women want moments of peace, reclaiming me time, and mommy-free zones,” noted Beyer.

The fourth trend was an appreciation of home base.

“Even in the big city, we are becoming local yokels. We are utilizing local resources, making lifestyle choices on a regional level, and connecting locally,” she added.

In addition, Beyer added entitlement, saying that today’s woman has a “Youth On Demand” attitude, aka, “Young looking is my right.” She emphasized that women purchase products they expect to work, supporting growth of the entitlement factor.

Finally, she cited a new attitude about religion. “We want faith, but we don’t want guilt, penance or purgatory,” she said, noting that philosophy and faith are merging, as we make some of the bigger choices in life.

“These six trends are the tip of the iceberg, but they are guidelines for developing beauty brands that will allow women to respond and allow women to see themselves in the brand.”

Flickers of Consumer Confidence

Young of The Young Group opened the panel discussion stating “Consumer confidence is beginning to flicker, the market is coming back; however, I would caution against rampant hysteria, as consumer behavior has changed.”

She provided the following statistics based on a recent survey: half of consumers said they are brown-bagging lunch, two out of five say they go to the hairdresser less frequently, 90% are buying more generic brands, 33% have cancelled one or more magazine subscriptions, one in five have cancelled cable TV, and others have cut down on dry cleaning.Within this context, panelists provided their perspectives on what works in the current beauty market.

Alisa Marie Beyer, The Benchmarking Company
Kelly of Tarte—a brand which she started a decade ago with $20,000—said performance naturals are the essence of her brand.

“We started a line of fashionable high performance naturals 10 years ago and we haven’t looked back,” said Kelly, who emphasizes healthy ingredients in the line. She cited the rebranding of the company five years ago, utilizing such natural ingredients as white clay, maracuja, and acai, and careful attention to what goes on the skin, as significant drivers of the brand’s success and aesthetic.

Burke of QVC said that when he began working with the channel, it had a vision of what television shopping should be.

“Television was to 1987 what the Internet was to 1997, and we had a vision of becoming America’s beauty channel. Today beauty is 14% of QVC’s business in the U.S., and is over $1 billion in sales worldwide,” he said.

The key, noted Burke, is to give the customer a good experience.

“We make sure the products we buy give the customer a good experience. They have to love it. That’s how you get real response in this economy. The customer has to be so happy with the experience that they tell their friends,” added Burke. “We tell the brand’s story with fidelity and our customer is an upscale early adopter who just wants you to help with her shopping. We’ve reached this level by listening to our customers, living our vision, and being agile."

Burke noted that today, there are many new platforms to reach consumers. In fact, Facebook is the fourth largest source of traffic to QVC.

“In the final analysis, we love the beauty business and have seen unprecedented numbers of customers coming to QVC, and we’ve seen plenty of customers respond when the product is right," he concluded.

The Power of High Touch

Breen recalled a vision of Estée Lauder speaking to women at the retail counter, which she said was the start of “high touch” with consumers. While scale has definitely changed, “what hasn’t changed is the fact that the product is still king,” said Breen, who noted that Lauder now has 28 brands, including MAC, Aveda, Bumble & bumble and Clinique, and “it's become a great launch and leverage strategy for the company. While lots of different channels have come into the retail picture, it’s important to remember that 70% of customers come in for replenishment, and we see with our retail partners the importance of leveraging brand equity across all channels.”

Kelly discussed the importance of providing green, natural, long wearing, and efficacious products to customers. “One hundred percent of our products don’t include parabens and we focus on environmental packaging, refillable palettes, and biodegradable ingredients,” Kelly said. To extend the brand’s innovative reach to customers, she added, “With high performance ingredients and being an indie brand, we have to be super nimble.”

Burke said of the QVC collaboration with Tarte, that, “Obviously this brand gives the consumer what they want and we like to think of this as a synergistic community. If we find something that works for the customer, we can find space for it.”

Breen discussed a new attitude among today’s consumers.

“At Lauder we talk about mass because they’re good at what they do. What’s happened during the last recession and now recovery, showed that the lens wasn’t that the consumer was going down to mass, but she was seeing things with a different perspective now,” said Breen. She added, “At Lauder we put a lot of money into high touch service, that’s our business model. What we talk about at Lauder is how we compete against mass.”

Social Networking and New Strategies

“The internet has become beauty’s third largest retail channel. For many brands, the internet has become their biggest door,” said Young.

Tarte’s Kelly added “Social networking is a significant platform for Tarte, where we can directly engage with the customer, doing things like ‘Backstage at the Runway,’ offering our point of view on beauty news and trends, as well as our Tarte blog, Facebook, tweeting and assorted contests and collaborations for Earth Day, Mother’s Day and Operation Smile. These all offer a way to get the customer involved. Logging in is a lifestyle choice and if you have something of interest to tune into, it’s a platform that can be truly leveraged and since it is virtually free, it’s an interesting resource. It offers an economical way to be cutting edge.”

Burke said, “We have a strategy we are pursuing and we’re in a favorable position with our viewers and brands, so we really don’t think about our competition on television, but rather on the future of getting new customers to us. We’re not the stereotypical TV model. We’re happy with where we are and where we’re going.”

Breen noted that with Lauder’s 28 brands, management is key. “We’ve got to grow 1% ahead of market, regardless of which brand, which is all public knowledge, however, each brand has its own strategy. The R&D is very important in our company. Every brand has a determination of what is going to be important to them in a particular stream. The smaller brands at Lauder will get what they need as much as the larger brands at Lauder, as long as the corporation is in sync with their strategy,” she added.

In response to a question regarding whether the beauty market is saturated in North America, and whether there are new ways to slice and dice the market, Breen responded, “As the head of North America, it’s not saturated. I don’t know if we are serving the customer in the best way. I believe there is a lot more to be learned from the customer. The beauty customer still has the lines and wrinkles and is shopping in all channels. The beauty consumer loves the industry and will be continuing to look for efficacious products,” she noted.

Burke concurred, “It’s understood that we will have continuing growth in the coming years. If we provide the right products there is still huge opportunity.”

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