Alternate Beauty Channels Are Booming

Alternate Beauty Channels Are Booming

Sales of cosmetics and toiletries on shopping networks are booming, according to Kline & Company. Above, Mally Roncal, founder of Mally Beauty, is on-air with QVC program host Albany Irvin.

Sales of cosmetics and toiletries through alternate channels have exploded, growing by nearly $1 billion since 2005, according to the latest Beauty Retailing USA 2010 report by Kline & Company. More double-digit growth is expected as consumers are increasingly drawn to the convenience of at-home shopping to meet their beauty needs.

Posting 25.4% growth from 2005 to 2010, e-commerce sales are leading the way, followed by home shopping networks like QVC and HSN posting a CAGR of nearly 20%. Similarly, infomercials for brands such as Hydroxatone, Proactiv and Sheer Cover, bolstered by industry veteran Guthy-Renker and its multi-media celebrity-endorsement approach to marketing, have recorded sales growth in excess of 17%.

“Consumers are spending more time at home, either by virtue of unemployment, telecommuting, or merely a desire to save money by not going out so much,” noted Karen Doskow, consumer products industry manager at Kline. According to Doskow, instead of running out to the store to buy their beauty products, they’re watching home shopping channels and infomercials to learn the latest on new products or searching online sites to get more information. Consequently, brand marketers are exploring new tactics to build online buzz. Daily deal sites, such as Groupon, LivingSocial, and so-called “flash sale” sites such as HauteLook, Rue La La and Gilt Group, are fueling e-commerce sales by creating awareness and enticing interest about new products or services by offering one-time discounts in order to create trial.

Doskow also noted that the bricks-and-mortar front is far from lagging.

“Beauty has become the new revenue sweetheart in the traditionally slow-growing drug store channel as pharmacies reinvigorate their beauty offerings to lure customers with a more upscale, specialty-store look. For example, Walgreens’ acquisition of Duane Reed and its high-end Look boutiques is expected to promote growth for both the chain and the channel. Meanwhile, CVS, Rite Aid, and others are offering new and improved customer loyalty programs and expanding shelf space for their beauty merchandise,” she said.

Furthermore, Kline’s study reveals that as brands increasingly look to leverage mobile and e-commerce to create seamless and ubiquitous purchase options for their customers, single-channel marketing is being rendered less and less viable.

“We expect a great deal of cross-channel promotion that will drive solid growth over the next five years,” predicts Doskow. “The internet and mobile technologies are empowering consumers to be even more aggressive in their product and price comparisons and driving marketers to deliver value-based products to meet these demands.”
More info: www.KlineGroup.com



Are Daily Deal Companies Here To Stay?
With email messages promising half-price sushi, 66% off laser rejuvenation treatments, and $10 to

Daily deal offers lure consumers with slashed prices and special offers.

spend at Whole Foods, daily deal companies like Groupon and LivingSocial are trying to tempt cash-strapped consumers in this web-driven, but stagnant economy. And despite recent news reports questioning the long-term viability of these companies and others like them, a new study from researchers at Rice University and Cornell University shows that daily deal companies are more popular than ever among consumers.

“The key finding is that there is no evidence of waning interest among consumers of daily deal promotions,” said Rice University’s Utpal Dholakia, co-author of “Daily Deal Fatigue or Unabated Enthusiasm?” “In fact, the more deals purchased by an individual, the more enthusiastic they seem to be.”

Dholakia, a professor of management at Rice University’s Jones Graduate School of Business, and Sheryl Kimes, professor of hospitality management at Cornell University, examined consumer perceptions of daily deal promotions. The researchers surveyed 973 respondents in August; 655 were daily deal users and 318 were not.

The new study shows significant opportunity for growth among consumers, as only 16.7% of the research panel’s population has used daily deals before, and the majority of non-users (90.6%) haven’t bought a deal because of awareness or access issues.

“We see significant further opportunity for trial and use of daily deals by current non-users,” Dholakia said.

Overall, daily deal customers tend to have little interest in being seen as different or “fringe” in their shopping patterns, are not very careful with their personal finances and do not think about spending issues all the time. They are interested in trying new products and services to have new experiences to talk about and influence others. They are attracted to a deal because it is a deal, and are likely to be less sensitive to the actual terms of the offer made by the merchant.

“All of these psychological characteristics indicate that the underlying motivations for purchasing daily deals are complex and multifaceted, having to do with more than just saving money,” Dholakia said.

The study brings into question a basic belief held by most in the daily deal industry.

“There is a theory that consumers must be offered deep discounts (50% percent or more) to be interested in daily deals,” Dholakia said. “Our research shows that a significant number of consumers will continue to buy the deals even if the discounts are slightly smaller. This is a significant finding because my previous research showed that businesses find huge discounts to be unsustainable. The industry seems to be operating under the opinion that deep discounts are the only way to be successful, but that’s not the case.”

The study was funded by Cornell’s Center for Hospitality Research and Rice University.
More info: www.ruf.rice.edu/~dholakia



Beauty Brands and Brand Loyalty
Beauty brands like Mary Kay, Estée Lauder, Crest Whitestrips and Maybelline accounted for nearly one-third of the 2011 edition of the Brand Keys 100 Loyalty Leaders, an annual survey conducted by Brand Keys, the New York-based brand, customer loyalty and engagement consultancy.

“Brand loyalty has always been primarily driven by emotion,” said Robert Passikoff, Brand Keys founder and president. “The rankings on the 2011 index make it clear that more than ever consumers seek to emotionally connect with brands that actually stand for something, and to connect with each other too.”
The 2011 Brand Keys Loyalty Leaders List includes 528 brands in 79 categories. The top-50 ranked Brand Keys Loyalty Leaders is comprised of eight general categories. Beauty brands account for 32% of the most loyalty brands, according to the company.

“The‘emotional engagement’ that women share with their favorite beauty brands is very powerful,” said Amy Shea, Brand Keys executive vice president for brand development. “But that emotional resonance extends to technology too, as consumers seek to customize their life experience more than ever.”
Among the beauty brands in the top 100 that saw the greatest losses in loyalty were Chanel cosmetics and Eucerin skin moisturizer.

“Some brands have, of course, suffered loyalty losses as consumers shifted to less expensive brands that had considerable meaning,” said Shea. “But brands that understand that real emotional connections can serve as a surrogate for added-value can create stronger loyalty bonds no matter the economy.
The complete 2011 rankings can be found online at the Brand Keys website.
More info: http://brandkeys.com/awards/leaders_11.cfm