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Online beauty retail can still thrive in hard times


Retailers across the UK are feeling the strain at present, but there are pockets of the industry that continue to thrive amid the gloom. Aaron Chatterley, CEO of online health & beauty retailer, tells Retail Gazette that his company’s sector still has plenty of growth potential despite wider economic woes.

Every retailer I speak to, regardless of whether they are of the bricks and mortar or the dotcom variety, is worried about the economy in general and consumer spending in particular.

The simple truth of the matter is that no-one actually knows what is going to happen over the next 12 months. Don’t bother asking an economist. They fall into two categories: those who know they don’t know what is going to happen and those who don’t know they don’t know what is going to happen.

Working at the coalface of the retail economy, there are numerous worrying indicators. Like-for-like spending for February was down 0.4 per cent, according to the British Retail Consortium, and the likes of Andy Hornby at Alliance Boots and Richard Pennycook at Morrisons have been particularly bearish in recent days.

Raw material costs are also rising steeply and that impacts the beauty product market in the same way as every other sector.

Factor in the cataclysmic events in Japan, public sector finances and the rise in the price of oil and other commodities and you have an enormous number of factors that all add to the lack of certainty.

To me it feels like the retail sector is walking on an economic tightrope and it is an awfully long way down!

But for the online beauty market, there are grounds for optimism, despite the macro economic climate.

According to a recent Mintel report, the online market for beauty products is relatively undeveloped. Mintel estimates that the value of the market in the UK has more than doubled in size between 2005 and 2010 and is now worth £420 million.

While that sounds like a punchy number, Mintel says it still only represents about five per cent of the total market.

So that leaves huge room for growth. What is driving that growth is not just consumers looking for an online bargain, but also the recently acquired ability of beauty product e-tailers to provide a level of service and advice that mirrors or exceeds what is available on the high street.

Interaction with consumers through social media has given the sector the ability to engage with our customers in a manner that wasn’t previously possible.

Online beauty product retailers are not just shop fronts that churn out product - but rather they are home to beauty consultants, hair therapists and others who freely dispense advice to consumers without the high-pressure sales environment you typically find in a department store.

Yes, there are consumers who like to physically experience a product before they buy, but the vast majority are already familiar with the products and brands they are buying.

Mintel claims that six out of ten female internet users find it difficult to buy beauty products online because they cannot tell if products suit their skin tone, for example. But in our experience that number seems very high.

And despite Mintel’s warning, the august research group still believes that the online beauty market will double in size again by 2015 to an estimated £855 million.

The new sense of prudence on the part of the consumer is unlikely to diminish this growth.

The beauty product market is extremely resilient to recessions. Women - and men - will reduce their expenditure in a huge number of ways before they contemplate not buying that moisturiser or that body lotion.

Beauty products have the power to make people feel good about themselves and in a recession this is particularly important. Does that make us all very vain? Possibly, but it is still a reality.

If anything, the economic downturn will work in the favour of online beauty product retailers who could benefit from consumers who suddenly need to find themselves a bargain.

But if the online beauty product market is going to continue to thrive, the secret is successful engagement with the consumer. Crack that nut and there will be good times ahead for the sector, regardless of wider economic woes.

Every reader of this column can pursue me for a free bottle of moisturiser if I am wrong!

Note: The views expressed here are those of Aaron Chatterley and do not necessarily represent the views of Retail Gazette.

Published on Friday 18 March by Editorial Assistant

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