(Photo by Andreas Rentz/Getty Images for #SephoraXKaufhof)
Behold the beauty aisle; prepare to put on your war paint. Once invulnerable to promotions, price cuts and similar commodity-moving tactics, the beauty category — specifically higher-priced, prestige beauty — is buckling under competitive pressure from savvy consumers finding new ways to purchase venerated brands. As a result, some of the best names in the business are doing what was once unthinkable: negotiating deals.
These deals are appearing in the form of rewards programs, online promotions or straight-up freebies. New retail channels, including brand-specific sites, are forcing traditional beauty sellers such as department stores to offer up bargains that would make old-school cosmetics purveyors blush.
But retailers have themselves to blame. Shoppers, loath to wait for service personnel or veer too far from convenience, are carving out their own paths to purchase, often on the fly thanks to mobile devices. Luxury cosmetics brands from Shiseido to MAC responded with online stores while an industry of specialty beauty chains blossomed with easy-to-shop formats.
Department stores struggled to maintain interest. The department stores’ share of the prestige makeup market dropped to 19% in North America in 2016, from 23% 10 years ago, according to Morningstar, citing the market research group Euromonitor International. In the same time span, market share among specialty beauty retailers rose to 20% from 14%.
Competing for Attention — Macy’s to MAC
The net result isn’t less spending, but more, indicating that shoppers have a healthy appetite for beauty innovation and trends. U.S. sales of better cosmetics rose 11% in the 12 months ending May, to $8 billion, according to the market-research firm NPD Group Inc. Among traditional brands vying for a cut:
- The luxury chain Bloomingdale’s, operated by Macy’s, recently offered members of its Loyallist rewards program a $25 gift card for every $100 spent on beauty products, according to Morningstar. On top of that, members continued to earn double points for cosmetics and fragrance purchases — now that is double dipping!
- Macy’s opened 16 freestanding Bluemercury beauty stores in the fiscal first quarter. It also is looking to boost beauty sales through the relaunch of its rewards program in the fall, and by making its beauty departments easier to shop, Morningstar reports.
- Nordstrom recently granted as much as 40% off select beauty items on its website and regularly gives free samples with purchases. During its anniversary sale in July, the Seattle-based chain offered a selection of beauty tools such as anti-blemish devices, which seldom get discounted, at 33% off.
- Cosmetics maker MAC promotes exclusive offers on its website as well as free shipping and returns. Through its Back to MAC program, customers receive a free lipstick for every six packaging containers they return (in store or online). Members of its MAC Select program get free samples, access to exclusive member products and anniversary gifts.
Accentuating Ease
Indeed, many if not most major brands offer online-exclusive deals; they have little choice. Digital beauty is one of the key perpetrators of the battle for the beauty customer.
However, it’s not the first. One could track the market upset to Sephora’s U.S. launch more than 15 years ago. Its model of inviting shoppers to help themselves to a variety of labels was liberating — no more waiting for a professional to fetch that eye shadow or lipstick. The model was duplicated, notably by Ulta but also many others, and is now a sizeable industry. Sales at specialty cosmetics stores rose 30% since 2006, according to USA Today.
The upshot is shoppers are skipping department stores in favor of specialty chains, online options, drug stores and mass merchants, many of which are of expanding their prestige selections and then layering on promotions that were once uncharacteristic of better brands:
- Specialty chain Sephora’s online beauty site features limited-time markdowns, exclusive sales and free products for members of its rewards program, Beauty Insider. During one recent week, offers included half-priced eye shadow palettes by Tarte, four-times bonus points on rouge and free samples with $25 purchases.
- Target’s foray into prestige beauty includes the labels La Roche-Posay, W3LL People, ZuZu Luxe and Bliss. Its website includes a page dedicated to beauty and personal care deals — recently a $5 gift card for every $20 purchase.
- CVS is the exclusive carrier of the Korean beauty line Peach Slices, by Peach & Lily. Members of CVS’s ExtraCare Beauty Club program earn $5 off for every $50 spent, a 10% off beauty shopping pass and exclusive promotions and new product information.
Time for a Makeover
The blend of new labels and nonglamorous outlets accentuates what many traditional department store beauty counters have been missing: the needs of the shoppers.
There was a time when consumers had little choice but to wait for someone to notice them at the beauty counter. Today they have expanding options, and traditional beauty has in many cases been slow to catch up.
Macy’s and others could recover lost sales, but their efforts will require three essential ingredients:
- Singular experiences: Specialty makeup stores feature private group classes, color palette tutorials and technology that allows shoppers to virtually try on cosmetics. Drug stores and mass merchants present an opportunity to buy mascara, toothpaste and pet food in one trip. Department stores will have to work within their offerings to make the trip to their cosmetics counters worth it.
- Data: Shopper data collected through a loyalty program will enable merchants to understand the customer’s path through the store and determine, for example, if promotions for free makeovers will succeed in the prom-dress section. Credit card–tied reward programs further reveal shopper preferences outside the store, for a more complete understanding. Such insights could reveal if he or she prefers all-natural ingredients, for instance.
- Value: All-around discounts aren’t necessary, but a beauty brand should spell out clearly why it’s a good deal for the shopper. It may be unique ingredients, donations to a charity or free samples with every purchase. But today, when there are so many choices, the shopper expects to feel she is getting a little more than the item she paid for.
The beauty aisle may not be at full-blown war, but the battle for the shopper is in full swing. The influx of online and specialty beauty will mature just like department store beauty, but shoppers are guiding the progression. Capturing sales, therefore, means choosing the shopper.