Struggling to find a solution to the mass market’s declining beauty sales, the best and brightest in the industry met in Scottsdale, AZ this past weekend to figure out how to best re-engage the consumer who isn’t visiting mass stores as often as in the past—and who is buying even less.
More than 2,000 members of The National Association of Chain Drug Stores converged at The Phoenician Hotel for the show’s 63rd NACDS Annual event, many of them to strategize how to address sagging beauty sales, which for the first quarter of 2014 were down 3.2% in dollars and 2.6% in units. Many of the major beauty brands are seeing declines, according to Nielsen, including Maybelline New York (-6%), Cover Girl (-3%), Revlon (-6%), Sally Hansen (-19%) and Almay (6%), with categories such as nail dragging down the business with a 14.2% dip in sales for the quarter, or almost $26 million.
“There’s a lot of concern with the lack of beauty consumption and traffic in stores,” said Wendy Liebmann, founder and CEO of WSL Strategic Retail. One possible reason for mass’s sales dip is the mass beauty consumer, who is seeking her beauty purchases elsewhere. “For the first time in six years we’ve seen an increase in the number of women who say they turn to specialty stores for their beauty purchases,” Wendy said, with the number growing from 23% to 27%. Retailers such as Bath & Body Works, Victoria’s Secret, Ulta and Sephora as being cited as the key culprits luring shoppers from food, drug and mass stores.
The prevalence of stand-alone beauty service bars, as well as beauty bars in department stores, are also seen as threats to the mass market’s (sometimes) solitary beauty shopping environment, as is the online space, which is also being touted as a possible incubator of smaller beauty brands.
But not all is bleak.
“It’s great to reinvent for what this industry expects and for what it deserves,” said NACDS President and Chief Executive Officer, Steve Anderson, at the show’s opening remarks Saturday morning.
Retailers such as Walgreens are said to be leading the beauty pack by providing what specialty and department stores already have: in-store beauty advisors. To that end, the buzz at NACDS Annual speculated that Rite Aid is considering adding beauty advisors to 1,000 stores, joining the likes of Target, which also has made a commitment to service in stores.
NACDS Annual attendees also talked about the addition of 10 feet of Boots beauty space to Walgreens’ beauty department in 2015, and possibly even the appearance of some Boots stores in several U.S. test markets.
While some of the bigger beauty brands may be experiencing declines in the first quarter, many of the segment’s smaller players said they have no where to go but up.
Jeff Rogers at Physician’s Formula discussed some of the fun things the brand is working on with digital, including its new PFace the Facts app that uses Layar technology, which connects users with content via their smartphone, adding layers of digital information – videos, photos, sounds – directly on top of print ads, for example. The brand is planning 50 new sku’s for 2015, which aim to meet retailers’ desires for higher quality, higher priced beauty items to get consumers back in the front door. The brand will also be upping ad spend to $20 million from $5 million in 2015.
Pacific World’s new Chief Executive Officer, Jim Colleran, attended NACDS and talked about how the nail company is looking to do a deep dive into consumer research to better learn its core consumer, and possibly explore untapped future consumers.
Nail of course was a hot topic—again—with some brands pointing to retailers as hurting the category, as some remove secondary nail bars in favor of newer beauty opportunities. Some brands mentioned sharp double-digit declines at Sally Hansen, which has a 27% dollar share of the overall U.S. nail market, which is pulling down the category.
And since the beauty industry is such a tight-knit community, it wasn’t too much of a surprise to see industry veterans including former Family Dollar executive, Mike Bloom; RadioShack CEO (and former Walgreens executive) Joe Magnacca and former Walgreens executive Steve Lubin at NACDS Annual, networking among the retail and manufacturer attendees.
On that note, noticeably absent from NACDS Annual was the Ulta beauty team, including Barbara Zamudio, VP Merchandising.
Talk of NYX Cosmetics being on the selling block was a hot topic at the show, especially with the brand reportedly tapping Wells Fargo to shop it for an estimated $300 million, said people in the know. NYX, which is a strong partner to Target (and will be sold there chain wide beginning in August) is currently being tested in a small amount of Walgreens stores and is now sold in 3,000 CVS units in three-foot endcaps. The brand also recently launched to Douglass in France in 81 stores, to Sephora in Thailand and to certain stores in Hungary. The makeup brand operates 60 stand-alone stores and 40 shop-in-shops globally.
“Our goal is to draw people to the store,” said Scott Friedman, NYX CEO.
E.l.f., which recently saw a majority stake purchased by TPG Growth for an estimated $275 million, is building off its beauty entrepreneurship expertise and combining it with a new CPG leadership team, including CEO Tarang Amin and Senior Vice President and Chief Commercial Officer Richard Baruch, to “operate at a higher level.” Shawn Haynes, Vice President of Sales at e.l.f., said that the brand looks to grow both its distribution and space in mass retailers, and uses data from online sales and its two Manhattan-based stores to provide retailers with star items. About 150 e.l.f. sku’s are sold at retail, 1,200 skus online and 600 sku’s in its stores. New items being considered for 2015 include a Smudge Pot, Xtra Lip Gloss and a Moisturizing Foundation Stick.
Frederic Fekkai, which this year is celebrating the 25th anniversary of its salon brand, is now launching a Blowout Collection, bringing the energy of beauty bars into the HBA aisle. The line includes a Dry Shampoo, a Style Primer and a Serum, with the Dry Shampoo using a tapioca-based formula to avoid flaking. Also new for spring/summer is a range of Fekkai Hair Fragrances, which have hair solution properties. Each will sell for $20. Since the brand’s re-launch in January, sales have grown 25% in dollars and 36% in units, the company said. A revamped website took place in Q1, with behind-the-scenes video footage, how-to’s and weekly emails promoting either special deals or content.
Sally Hansen showcased its new Miracle Gel Collection at the Phoenician’s salon and spa, which includes a light activated topcoat (no UVA needed), formulated to work in tandem with a range of 47 lacquer shades. The system dries in eight minutes and will be available in August for $9.99 each.
Shea Moisture is one manufacturer looking to grow some of its newness. Recently it launched its one-year exclusive cosmetics line with Target, one that consists of 150 skus and targets tonal and hyper-pigmentation issues.
Markwins is heavily investing in its first TV ad campaign, scheduled to launch in September, said the brand’s President and COO, Bill George, to promote its Wet n Wild brand. At Annual. Wet n Wild also debuted a new, backlit, six-foot merchandising display, which features fresh creative and an iPad for video.
Overall, while the smaller beauty players came off as much more upbeat than their multinational competitors, as one small player noted: “We are no real threat to the big guys because of their domination, but they are richly developed and we just have the opportunity to grow in space and store count.”
For a video overview of this year’s NACDS Annual, meeting click here.