01.07.11
American consumers are going “back to basics” when it comes to their personal care, planning to spend more on shampoo, toothpaste, deodorant and shaving cream, while cutting back on items like perfume, makeup and lipstick, according to a survey conducted by AlixPartners LLP, New York.
Though the bulk of the 1,000 consumers surveyed by the company said they plan on spending roughly the same on personal care in 2011 as they did in 2010, nearly one in five plan to spend less on fragrances, half of whom expect to cut such spending by more than 25%. While only 15% said they would cut back on cosmetics, nearly half of these consumers anticipate cutting spending by 25% or more. Demand for oral, skin and hair care products is expected to increase in 2011, though not markedly, noted the company.
“Given the stagnant demand, personal care products companies are facing pressure from customers to drive prices lower. This environment is likely to continue well into 2011,” said David Garfield, a managing director at AlixPartners and head of the firm’s consumer products practice. “In response, companies have adjusted their cost structures and cut prices in many categories, but this will become increasingly difficult in the coming quarters.”
But there is a glimmer of hope for makers of cosmetics, fragrances and oral, hair and skin care products. When factoring in demographics, most 18-34 year olds plan to ratchet up spending across all five categories in 2011. “Incremental demand for personal care products likely will be dictated by 18-34 year-olds over the next 12 months,” said Rich Vitaro, a director in the consumer products practice at AlixPartners. “Though somewhat promising, the industry dynamic is a double-edged sword. This group is ultra price-sensitive and expects to pay less per unit through aggressive promotions and everyday low prices. They’re also a group that is more apt than older consumers to switch brands to get the best value. That’s why marketing and trade promotion effectiveness will be the key levers in generating growth.”
The vast majority of consumers in the survey said they are looking for more items on sale, supporting the idea that price appears to be the dominant theme driving buying behavior, regardless of age. Approximately 40% of customers expressed a potential interest in switching brands to capture meaningful savings.
And a word to wise: keep your products on the shelf. The survey found that when consumers’ desired product is out of stock, 15- 25% of the time, depending on product category, they purchase another brand. According to Jon Hanover, a director in AlixPartners’ consumer goods practice, this fact “highlights the importance of supply chain efficiency for replenishment and the potential lost sales and costs associated with out-of-stocks at both the time of sale and potentially in the future.”
“This survey, along with additional AlixPartners research done for the study, suggests that many retailers and consumer products companies in the personal care market are going to be under increasing pressure in the year ahead, particularly makers of fragrances and cosmetics,” added Garfield. “As consumers continue to demand value, companies will need to focus on cost structures.”
More info: www.alixpartners.com
Mood Matters in Fragrance Purchases
While factors influencing fragrance purchase for women may be well known (think price, celebrity
endorsement or season), the latest research from Mintel reveals that the biggest influence may not be a fixed factor at all. It seems mood is now the most popular motivator of scent choice for women.
According to Mintel, more than half (54%) of female fragrance users decide what fragrance to use based on how they’re feeling. Some 31% of fragrance users say they decide which fragrance to apply based on their activity, such as work function versus a personal outing. Meanwhile, 26% of users decide based on the time of day and 25% decide based on what they’re wearing.
However, those over 45 appear to be less moody—when it comes to scent choice. They are more likely to wear one fragrance, or a signature scent, and are less likely to base their choice on their clothing or mood, according to Mintel.
“Women in the 18-44 age range are more prone to change their fragrance based on a number of different factors, while women over 45 are more brand loyal,” said Kat Fay, senior beauty analyst at Mintel. “This may be a result of these younger women juggling multiple activities and responsibilities with a busy work schedule. While they may deem a certain scent appropriate for the office, they might choose a more flirty scent for social functions.” While motivation for fragrance purchases differs, the clear favorite is in-store samples. According to Mintel, 69% of fragrance owners say they’re motivated to purchase a new fragrance based on samples they’ve tried in-store, while 26% cite a recommendation from a family member or friend as the impetus behind a new purchase.
“Women have to experience a scent to make sure it’s appropriate, as there aren’t many objective criteria they can use to test smell,” explained Fay. “Female consumers often say that a fragrance smells differently on their skin than it does out of the bottle, so trying an in-store sample increases the likelihood that they’ll still be happy with their purchase once they get it home.”
More info: www.mintel.com
Opportunities in Green Cleaning Market
According to new consumer research on household cleaning products by EcoFocus Worldwide,
Around half of shoppers find plant-based cleaners and those made without chemical dyes or fragrances to be desirable, according to the St. Petersburg, FL-based firm.
“Shoppers are looking for manufacturers to give them more choices by creating green products using their brand’s recognized expertise. This is a significant opportunity for traditional CPG companies with longstanding reputations as experts in cleaning,” noted Linda Gilbert, chief executive officer of EcoFocus Worldwide.
According to EcoFocus, too often, green products focus on communicating environmentally friendly attributes and forget to make it easy to tell fabric softener from detergent, for example. EcoFocus suggests that manufacturers need to focus on product performance for the mainstream consumer.
“Consumers tend to perceive greener cleaning products as being less effective than their counterparts,” stated Lisa Harrison, consumer insights and research leader for EcoFocus. “It is critical for corporations to disprove these perceptions by waiting until they develop high performing products rather than rushing to market with inferior products that consumers try once and abandon. After a bad experience, getting them back into the category, let alone to your brand, will be difficult.”
According to EcoFocus, shoppers also want manufacturers to help educate them about green by telling them how to recycle packaging, and what makes this choice greener than the next one through effective labeling.
More info: www.ecofocusworldwide.com
Is American Frugality Lingering?
The frugal habits adopted by U.S. consumers during the economic crisis of 2008-2009 have continued and even deepened in
some cases, and may be here to stay, according to the latest annual survey of 2,000 consumers by Booz & Company. The third annual Booz & Company consumer spending report revealed that U.S. consumers continue to feel they are on shaky ground, fueled by high unemployment and feelings of uncertainty, even among those who are employed. As a result, consumers are economizing broadly, deferring spending on discretionary items, and trading down on essentials. In fact, most consumers cut back spending even more this year than last, according to Booz & Company.The survey also found more affluent consumers are less willing to trade down on price or prestige than the less affluent. “The new frugality that consumers reported last year—one that requires trade-offs between price, brand and convenience—has become dominant and ingrained behavior in several categories,” said Booz & Company partner Nick Hodson. “Consumer products companies and retailers need to monitor and understand the evolving behaviors of different consumer segments and respond to each, category by category. Going back to business as usual is not an option.”
According to the survey, cutbacks on both discretionary spending and essentials this year were again significant, and even greater than the previous year. For example, in health and beauty, 28% cut back spending vs. 25% in 2009 and in household products, 28% reduced spending vs. 21% in 2009.
Consumers also continue to trade down on essentials by switching to less expensive brands. For example, this year’s survey found that 39% continue to trade down on household products and 37% said they traded down on food at home, similar levels compared to last year’s survey.
While U.S. consumers across the board continue to economize overall, spending behaviors seem to vary among consumer segments. For example, more affluent consumers continue to defer purchases of discretionary items, but are not necessarily trading down in terms of price or prestige when they do buy. Conversely, less affluent consumers (those with household incomes less than $100,000 per year) are more likely to reduce spending by trading down. In non-discretionary categories, less affluent consumers were much more likely to trade down in brands or prestige than more affluent consumers.
In non-discretionary categories, less affluent consumers were much more likely to trade down in brands or prestige than more affluent consumers. In household products, for example, 41% of less wealthy consumers traded down to cut spending last year, while only 30% of more affluent consumers took that step. “Consumers continue to pay down debt and build up their savings. There is little reason to believe that consumers will give up their frugal behaviors in the short term. Consumers remain cautious, especially following their disappointment with the slow pace of improvement over the past year,” noted Marcelo Tau, principal at Booz & Company.
According to Booz & Company’s analysis, newly frugal purchasing behaviors are most likely to persist in those categories where consumers felt that their frugal behavior was “unpunished,” such as with private label items purchased at the supermarket. When the economy rebounds, Booz & Company expects private label sales will remain strong and branded consumer packaged goods may find it difficult to regain their lost market share.
In contrast, some frugal behaviors are not likely to stick as conditions improve. In discretionary categories including cosmetics, consumers often found that switching to cheaper brands was an undesirable trade-off and plan to switch back post-economic recovery, Booz & Company said.