The era of pessimism and austerity could be coming to an end in Italy. Political stability and the first signs of economic recovery have given Italian consumers reason to shop again. The selective beauty retail market in Italy, which is made up of 2,900 perfumeries and department stores, saw a slight increase in 2015. This follows years of sales declines in the country.

Growth of beauty was higher in perfumeries only when sales of prestige brands are taken into account – prestige sales rose 2 percent last year in the country. “Mass brands saw a double-digit decrease in perfumeries in the first nine months of 2015 as the channel is in direct competition with drugstores, which are booming in Italy,” explains Francesca Comis, senior Manager Beauty, The NPD Group Italy.

NPD states that the five largest chains (Limoni, La Gardenia, Sephora, Douglas and Marionnaud), as well as the country’s two main department stores (La Rinascente and Coin), generated most of the growth in prestige last year. However, while businessmay be better for these chains, it is nonetheless tough, with strong competition from drugstores and from budget brand Kiko, which now has 300 stores in Italy.

There are around 2,000 drugstores in the country (according to industry sources, this number could reach 3,000 in the next five years) specialized in home and personal-care products. But they also sell the most prestige fragrances, which are supplied either through the gray market or directly by some beauty companies. And last year supermarket giant Groupe Auchan introduced its own drugstore format called LillaPois/Lillamoi (a test for Auchan before a possible rollout in other European markets), which already has 40 stores. “Competition is tough because while about 400 to 500 customers shop daily in each drugstore, in an average perfumery there are only 40 to 50 sales a day,” comments Luca Catalano, Commercial Director for Italian beauty brand Collistar.

To face this competition, major prestige beauty retailers are looking to transform their stores into luxury destinations and enhance their image. Many perfumeries have dropped mass brands from their stores and have given increased space to prestige lines that create a more luxurious environment. “Retailers realize they can generate more profit and give more appeal to their stores with a prestige identity,” sums up The NPD Group’s Comis.

To read BW Confidential’s full report on Prestige retailing in Italy click here.