Beauty Is their Specialty

The importance of department stores to the beauty industry continued to decline through the recession.

More women have shopped atspecialty stores for beauty products in the past year than at traditionaldepartment stores (27% vs. 15%, respectively), according to a new study by NPD.

Specialty stores are among thethree most cited channels shopped for beauty products in the past year,surpassed only by mass merchants (53%) and drug stores(41%).

While specialty stores is thethird most popular destination for beauty shopping, the specialty storeshopper is generally among the most likely to cross-shop. Compared to mass anddrug store shoppers, the specialty store shopper is significantly less likelyto shop in this channel most often for her beauty needs (39% and 20% vs. 6%respectively).

“This may be due to the ratherpronounced shift in the age distribution of those who shop this channel mostoften compared to those who shop the channel overall. Unlike mass, drug anddepartment stores, the age of those who shop in specialty stores most oftenshifts increasingly younger,” saidKaren Grant, senior global industry analyst and vice president,beauty.

While women in the 35 and oldergroup who shop at mass or drug stores most often account for at leasttwo-thirds of sales in those channels, the proportion of women in the 25 andolder group who shopped at specialty stores in the past year decreases from58% to only 50% when asked if they shop this channel most often.

“This 8percentage point drop off in the number of consumers aged 35 and older whoshop specialty stores most often for beauty products has a direct impact inthe sales growth opportunity for this channel,” saidMs. Grant.

Of the top three channels,specialty stores have a higher percentage of women who say they spent more inthe past year than mass merchants or drug stores (21% vs. 16% and 15%,respectively). However, the number of women saying they spent less atspecialty stores on beauty products in the past year also increased since 2006by 11 percentage points. Considering the state of the economy, it is notsurprising that the No. 1 reason (51%) given for spending less on beauty throughthis venue is that “my financial situation has gotten worse, so I havedecreased my spending on beauty products.

However, in looking at otherreasons stated for spending more versus spending less at specialty stores,there is an interesting dynamic. While only 2 in 10 say they spent more atspecialty stores in the past year, of these, 29% say it was because theystarted purchasing brands/types of products that are more expensive comparedto what they purchased last year. By comparison, almost 1 in 3 women say theyspent less at this channel and 25% of those who spent less say it was becauseI started purchasing brands/types of products that are less expensive comparedto what they purchased last year.

“This may indicate that while a certainportion are ‘trading down’ within this channel, there is a small, butimportant sub-segment that is actually trading up within the channel as well,”said Ms. Grant.

“Capitalizing on this group whowill spend more becomes quite important for specialty stores in light of thefact that compared to mass and drug stores, the specialty channel shopper isthe most likely to say that she plans to spend less for beauty in this channelover the coming year (28% for specialty store shoppers versus 20% and 24%,respectively, for mass and drug store shoppers). And, the specialty storeshopper is the least likely, among the top three channel shoppers, to statethat she will spend the same as she did in the past year (63% for specialtyversus 71% for mass and 68% for drug stores),” concluded Ms.Grant.