Unser opened the session with a macro overview of US retail trends.
“The posture of the US consumer is now different and consumers are doing things differently. The biggest spends are on homes and autos, most of the retail growth is in the online market, with a trajectory that continues to grow, and percentage growth in prestige beauty is the fastest growing industry in the last two years,” said Unser.
Unser noted that beauty is driven by makeup; i.e., face, eye and lip, and he advised brands and retailers to consider the evolving retail landscape, saying that e-commerce is maturing in every category. He said Amazon poses the biggest threat to retailers, with an online market share of 35%, and noted that in a survey on Amazon prime memberships, findings revealed that 25% of US households have an Amazon Prime subscription, and Amazon offers approximately 500 million items.
Some of today’s game changers, according to Unser, include Birchbox, Dollar Shave Club, Pop Sugar, Blue Apron, and Rent the Runway. At the same time, he said innovative retail methods are energizing retail, with such options as, “pin to buy,” on Pinterest; and the advent of such “beauty considerations” as curated assortments and deliberate distribution according to geographic and consumer spending propensities.
“Shifting generations are key,” said Unser, as are new ways of reaching consumers continues to be the retail challenge.
Beauty’s Global Beat
Grant provided insight into 2015 global and US sales in prestige and mass channels, including data from Nielsen. In the global arena, Grant found positive, but sometimes conflicting findings. She noted, however, there is projected global growth for 2016-17, particularly in prestige, with the strongest growth led by South America.
While all prestige beauty categories grew in 2015, makeup posted the biggest increases. North America gained 14%, Europe added 8% and South America increased 26%. Notable launches in prestige makeup included Urban Decay’s Naked Smoky Eye Shadow, Benefit Roller Lash Mascara, Bare Minerals Complexion Rescue Foundation, Anastasia Contour Cream Kit New Light palette, and MAC Lipstick Stone Grey.
In the mass category, lip was the top performer for makeup, and body was the top performer for skin care, driven by brands like Nivea, Dove, and Gold Bond. Grant also cited such innovations in the mass category as the hyper-personalization trend, citing the use of iPads at Target for beauty finds, online subscriptions; for example, at e.l.f. makeup, and the continuing blurring of the lines between mass and prestige. She noted Walmart’s tagline, “We live like prestige, but our address is a drugstore.”
Fast growth in mass has seen the rise of such brands as Boots No. 7, with average price points of $19.99, and Salma Hayek’s Nuance line, with price points at $11.99.
For the first time in 2015, the fragrance category outperformed skin care, with fragrance dollars growing by 4%, and skin care by 3%. Prestige skin care still showed considerable growth, with the natural and clinical categories growing 10%, outpacing the total facial skin care market, which grew by 1%. Brow sales also grew around the globe for the third year in a row, with double-digit increases, led by Canada with 42% growth, followed by the US, Italy and Spain.
Grant noted that we may be seeing a sea change in beauty, as the consumer profile continues to morph and change.
“The Boomers are very important, but who makes the choices that tell you what apps to use? This is the Next Gen arena. They may not have the money, but they have the influence,” said Grant, noting that young fragrance users have increased their fragrance usage, artisanal brands are driving growth, and flankers are coming back in a younger way. “The familiarity of classics is coming back to the younger consumer,” she said in citing such examples as Miss Dior, Black Opium, and Modern Muse.
In skin care, Grant said that “look and feel” responses have outweighed the “moisture/hydration” equation, and clean, functional elements are resonating strongly with consumers. Skin care benefits that enable consumers to be “selfie-ready,” have become a reality, hence the appeal of contouring to achieve makeup benefit, and leveraging the skin care and makeup balance, so consumers can ultimately “look the best that they can,” said Grant.
The top five skincare brands, said Grant, were Clinique, Estée Lauder, Lancôme, philosophy, and La Mer. The top five makeup brands were MAC, Clinique, Urban Decay, Lancôme and Bare Escentuals.
Grant cited another trend, called Convergence, in which gender neutral styles have been adapted, as have gender neutral scents; and hair styles are changing too, including those worn traditionally by African-Americans, now worn by Caucasians. Grant also discussed the brow statement as an anti-aging solution, which has driven brow sales.
“The beauty industry is in a state of flux, and what’s driving the industry today has changed," she explained. "The lines continue to blur between makeup and skin care as consumers look for immediate results through makeup and rediscover smaller primary categories in skin care."
She described fragrance sales as dynamic in core components like juices, the market for ancillaries continues to grow, and the unadulterated trend has gained strength.
"It’s about the juice, going for the fragrance itself, and not the set," Grant noted.
She said the unadulterated trend continues in face care, too, with face masks and lip care posting gains, and ingredients such as clay, oil, and paper being used in toners and clarifiers. Highlighting with concealers and illuminators is also a growth trend, while mascara continues to show double-digit growth. Nude and brown lips have over taken pinks and red, and neutral color categories in lip products have grown.
“The trends in beauty are more diverse and moving faster than ever, as are the consumers,” concluded Grant.
Andy Mantis, executive vice president, checkout tracking, The NPD Group, spoke about consumer spending trends among millennials. Mantis said that millennials account for about $60 billion in sales, but they are a challenging demographic. He noted that by 2020, millennials are projected to spend $1.4 trillion annually, per Accenture, and will represent 30% of total retail sales.
Using NPD’s Checkout Tracking, a service that provides information on consumer buying behavior based on receipts for both online and in-store purchases, Mantis provided insights into the luxury retail millennial buyer, noting that 87% of this group also shops at off-price retailers, and are giving a large share of their beauty spend to department stores and specialty stores, compared to non-luxury retail millennial buyers.
“With millennials representing such a large share of annual spending power, it is critical to engage this demographic," said Mantis. "Brands and retailers need to understand how millennials spend their money, what they buy, where they shop, and what brands they value. NPD’s Checkout Tracking services allow us to capture this data by harvesting the rich information on paper and e-receipts to understand consumer spend."
He noted that millennials are health conscious, seek quality (often at bargain prices), purchase both physical and digital goods, and live a multi-channel lifestyle. He urged retailers to understand their consumers, saying, “Inform your strategy by exploiting the lifestyle of millennials, life stage purchasing, and channel spend preferences.”
Carlotta Jacobson concluded the evening, saying, “We are delighted to have collaborated with The NPD Group again to present this critical beauty industry intel. Our CEW members are fortunate to have received this data and learn about how it will impact their companies.”
Additional information about CEW programs and membership may be found at: www.cew.org.