Traditionally dominated by chemists and department stores, the beauty retail landscape is changing dramatically, putting pressure on the biggest high-street players.
Back in May, Boots reported a revenue decline of c.£40m for 2017 amidst challenging marketing conditions. A lack of differentiation in brands and experience, eroding value competitiveness and better convenience offered elsewhere all play a part in their struggles to attract new consumers. On top of this, new entrants and challengers are growing and changing the competitor sphere.
So how are consumer shopping preferences changing??
1. Online pureplays
The online channel in beauty has always under-indexed versus other sectors such as clothing, due to the desire for staff service and trying products. However, as the customer experience becomes more seamless and the offer more appealing, online pureplays are benefitting.
Feelunique recorded revenue growth of 27% in 2017, claiming to be Europe’s biggest online beauty retailer. With their already-strong online presence, ASOS are starting to look like strong contenders in the market. Selling big name brands such as Bobbi brown, Benefit and MAC, it is also looking to take a bite out the subscription market with its monthly Beauty Box.
Other competitors include Amazon and Fabled.com, a joint venture between Ocado and Marie Claire magazine.
2. Discounters and supermarkets
Supermarkets have gradually gained share over the last 10 years, with growth fuelled by the rise of online grocery shopping and the convenience this offers for replenishing core toiletries. Last week, Sainsbury's announced they are looking to introduce department store-style beauty halls into 11 stores and are also opening Fragrance Shop concessions in two stores.
The high street discount channel, which comprises the likes of Poundland, B&M, Home Bargains, Savers, and Wilko, has demonstrated significant share gains. The toiletries fixtures in these stores increasingly resemble a Boots or Superdrug, with similar brands at significant discounts.
3. Direct-to-consumer brands
Additionally, big players are having to compete with the rise of brands choosing to shun traditional channels. Fast growing premium beauty brands, including Charlotte Tilbury and Tom Ford Beauty, have not listed in the high street channels. US cult-beauty brand Glossier has side-stepped having a permanent physical presence in the UK, using media hype and a pop-up store to direct consumers straight to their own website. We also see some direct-to-consumer subscription models gaining a foothold in the market, such as Harry’s shaving and GlossyBox beauty subscription.
We still see physical stores as playing an important role in this market, with c.60% claiming they prefer to see, touch or try items in store before they buy. And the traditional channels are reacting to stay relevant. The beauty hall in the just opened Debenhams in Watford (shown above) has been completely redesigned to support the customer journey: 20% of the store is serviced by Debenhams employees and zones, such as the ‘hair lab’ and ‘colour lab’, have been created making it easier for consumers to browse by category. Superdrug is expanding their beauty services, having recently announced a trial offering Botox and fillers in stores. Boots, meanwhile, has just re-vamped its cosmetics fixtures to improve customer experience and enable a faster distribution of up and coming brands.
This may be too little, too late. Competitors are increasingly able to offer either a better selection of brands, better value, or more convenience. The retail landscape is likely to continue changing and the big players will continue to play catch up with newer, innovative challengers.