Strengths
Loyalty cards – our discussion group research highlights just how popular loyalty cards are with consumers in this market. Boots and Tesco have both ramped up the rewards on their programmes and Boots also opened its scheme to online retailers in 2010 (see profile). Other players have launched schemes more recently including Debenhams (Beauty Club card) in 2009 and Space NK in 2010. Meanwhile Superdrug is about to do the same in Spring 2011 and is particularly well placed in that it can leverage the expertise of parent company AS Watson which has around 28 million customers in various loyalty schemes around the world.
Product innovation – prevalence of global manufacturers with large R&D budgets secures a constant flow of innovation and renewal in the market. Beauty is often at the forefront of latest thinking and development in areas like science and technology, provenance and sustainability, organics, packaging, and now we are seeing blurring lines between beauty and food too.
Own brands – the skincare and cosmetics market also features many popular and often good value own brands, most particularly from Boots (eg No 7, 17, Botanics, Soltan) but also from Superdrug, The Body Shop, Neal’s Yard etc. Data from Mintel’s GNPD suggest that there was a substantial development in private label products in 2010 as well as new ‘economy’ products both of which were reacting to consumers’ increasingly price-driven choices (see Weaknesses below).
E-commerce – beauty products have been slower to take off online than many categories, but are now starting to grow fast from a low base. This market lends itself well to online purchasing as the products are small and easy to distribute to individual homes, and high margin premium lines allow the more upmarket retailers to build in free delivery to business models too. Moreover strong branding makes for easy recognition and price comparisons. These characteristics should also work well in the context of m- and f-commerce.
Luxury brands come on board - for a long time luxury stakeholders suggested that the price-led footprint of the internet coupled with the depersonalising of the experience made the web an inappropriate channel to market. But that is now changing fast as these brands recognise the importance of responding to consumer needs and expectations, and also appreciate that the combination of a trusted website and the busy lifestyle of their patrons adds up to significant sales potential. Perhaps one of the more notable achievements here is the presence of the Chanel brand at Boots.com.
Affordable treats – at the prestige end of the market beauty can still be an affordable treat, much more so than garments, leather goods or jewellery, which in these hard times many consumers have cut out altogether.
Non-discretionary core – to an extent core beauty products are deemed to be an essential purchase for many women and are quite habitual (see Internal Market Environment tracker research comments). So even though we expect 2011 to be a much tougher year for retailers this characteristic certainly provides an important measure of protection.
The Enthusiasts – our consumer target groups show that although the most enthusiastic beauty shoppers account for just one in ten adults they draw from a wide cross spectrum of by age and affluence.
Weaknesses
The Indifferent – however while 11% of adults are beauty ‘enthusiasts’, a massive 48% are really quite indifferent to beauty/grooming goods according to our consumer research. The bias here is to men and older shoppers and, although the average spend in both demographics is likely to be on the low side, the sheer scale of this target group represents a major weakness in the market but arguably also leaves a lot ‘up for grabs’.
Ageing population – given the relative apathy of older age groups, the ageing population also represent a weakness but again an opportunity too.
Intense competition – the deals/special offer culture has become deeply entrenched in beauty with Boots now blazing the trail because of its influence and sheer scale in the market.
Price-driven choices – but findings from our discussion group and omnibus survey show this is changing the way consumers value beauty products and, for very many, purchasing decisions are based largely on price rather than for example added value qualities, ingredients, claims, recommendation, provenance or efficacy.
E-commerce – importance of colour, tones, texture, scents etc presents some major albeit not insurmountable challenges to online retailers.
Squeezed disposable income – after a recovery in beauty sales in 2010 the more discretionary end of the market could suffer again in 2011 as consumer incomes are squeezed by higher inflation and wage freezes. On the other hand John Lewis reports that its middle class shoppers currently remain relatively unharmed by the austerity measures so this provides a glimmer of hope for retailers that can get their selection, prices, service and ambience right.
For more details of brand specific innovation, new launches and trends, clients should also refer to Mintel Beauty Innovation and GNPD.
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