These freestanding stores offer unique concepts, a fun environment and highly knowledgeable staff. Unlike e-commerce, which is another strong channel, customers have the advantage of trying products and having in-store guidance. There is also no other direct brand competition like in department stores.
“Boutique retailers offer a fun and interactive environment that isn’t found in other channels, which is appealing to younger, digital consumers,” noted Ewa Grigar, the study’s manager.
“It is almost like a cult, the followership is often buying into the exciting concepts of these stores virtually more than the products themselves. The success of such stores depends on whether brands can keep up with the pace of younger consumers’ digital needs, as well as keep a store’s levels of innovation and engagement high,” added Kelly Alexandre, key analyst for the report.
Realizing this new, engaging way of diversifying where their products are sold, many brands are opening their first doors or dramatically expanding their existing number of openings, particularly in Europe and the US, notes Kline. Several large, multinational brands opened their first boutiques; British designer Burberry opened a high-tech beauty boutique in Covent Garden and L’Oréal’s recently-acquired NYX brand grew from one store to 20 in a single year, while its long-established L’Oréal Paris brand opened its first branded cosmetics store in Paris in September. In November, Estée Lauder opened its first store with its millennial-focused collection, Estée Edit, in London.
Even Bath & Body Works added 16 locations in 2015 and 20 more in 2016.
Kline contends there is also fast expansion of retailers outside the US. Israel-based Sabon and Rituals, located in The Netherlands, are among the fastest growing retailers in terms of sales and door counts, and have recently focused on international expansion.
Beauty brands use this as part of an omnichannel strategy, as it offers numerous brand-building opportunities. It is a way to boost brand awareness, strengthen consumer loyalty, and drive brand sales across all channels of distribution.
“However, opening such a store is not the ticket to immediate success,” warned Grigar. “Companies that cannot maintain a high level of innovation, keep up with the essential amount of interactivity and overall exciting experience are doomed to lower engagement and sales.”
While the boutique retailing market shows some similarities across countries, such as local brand popularity or unique store concepts, brands and brand leaders vary by country. Sales by product class also vary dramatically, with makeup growing the fastest in the UK and France and the slowest in the US. Growth rates are also different, ranging from 2% to 10%, affected by various political and economic conditions.
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