Why retailers are attracted to the beauty market

Beauty is one of the fastest growing sectors in the retail industry, and is set to grow by over £15bn by 2020. Retailers that have never explored beauty before are now launching own-brand beauty ranges or fascias to maximise offerings. Retail Gazette unpacks this growing appeal.

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Beauty concept store boutique cosmetics
The beauty market has become an attractive market as more and more retailers explore own-brand ranges or fascias.

In 2013, research showed that shoppers were happy to pay 30 per cent more for their beauty items at high street favourites Boots and Superdrug.

Just over six years later, many retailers who once did not have a beauty division are now launching their own version of beauty items, while dedicated beauty retailers – such as Space NK and The Body Shop – are thriving on the high street.

Inevitably, the more crowded the beauty market becomes, the more difficult it will be to connect with customers. Retailers have arguably ventured into beauty to maximise their offering.

“Harrods’ new H Beauty is an exciting disruption to beauty retail”

Beauty products are something customers will often want to try and feel before they buy. According to Naeem Arif, managing director at NA Consulting, “it is common to see people spend a lot of time in a store trying different combinations of product to get the right product, sometimes for a relatively inexpensive price”.

Undoubtedly, this allows retailers to capitalise from customers spending more time in store, as well as the likely increase in footfall.

This arguably works well within department stores or grocers, where customers initially visit for more reasons than one, and would come across a beauty offering in a convenient supermarket setting.

Big 4 grocer Sainsbury’s relaunched its own Boutique cosmetics range in 300 stores and online in October last year to ramp up the pressure on Boots and Superdrug.

Beauty concept store boutique cosmetics
Sainsbury’s relaunched its Boutique range last year and redesigned the packaging on over 100 products

In addition, the retailer introduced over 1500 new products which customers would “not expect to find in a supermarket”, at eight Sainsbury’s stores.

Boots also recently started to roll out a new-look concept store that had a focus on in-store beauty products and customer experience.

Janet Saunders, vice president and general manager of the commercial and transition team at Estée Lauder UK & Ireland, argued that physical stores are a “top beauty destination” which provide consumers with “the ability to feel and try the products”.

One department store that decided to unveil its own standalone beauty fascia is world-famous luxury retailer Harrods. In June, its flagship Knightsbridge store launched a 90,000sq ft beauty emporium known as H Beauty.

This was soon followed by a 9000sq ft skincare space which opened earlier this month.

Last month, Harrods revealed plans to launch H Beauty – this time as a standalone store – at Intu Lakeside shopping centre in Essex.

“Traditional high-end beauty shopping formats such as department stores are falling out of favour”

Linda Ralph, vice president of international business development at Mood Media, said Harrods’ recent announcement was “an exciting disruption to beauty retail and brings into focus the power of the in-store experience”.

“Consumers want to touch, test, explore and learn about beauty products in a destination that truly excites them,” she told Retail Gazette.

“In-store technology has played a key role in transforming and enhancing this experience with the spread of new beauty concepts rising – as seen with the Instagram ports in the recently opened Meadowhall Boots.”

Ralph added that beauty stores in the UK are likely to become more tech-savvy, taking inspiration from their global counterparts – such as Chinese tech giant Alibaba.

“Alibaba’s connected voice-powered makeup mirror can assess a customer’s skin type and suggest products while they apply makeup,” she said.

Ralph predicted that the UK would see more retailers introduce technological beauty concepts as well as a dedicated in-store space for consumers to explore new products “as tech continues to enhance the in-store beauty experience”.

Despite numerous department store chains launching branded and own-brand beauty labels, Yujin Jung, managing director of Korean beauty brand Nature Republic, argued that beauty formats at department stores are becoming less popular due to a rise in online spending.

Beauty concept store boutique cosmetics
An artist’s impression of the new H Beauty store in Intu Lakeside, Essex

“The UK beauty market is highly competitive,” she told Retail Gazette.

“Traditional high-end beauty shopping formats such as department stores are falling out of favour and shoppers are increasingly spending their money online.”

Jung said a standalone beauty concept store would work better for retailers in terms of differentiating from others.

“A store format gives retailers the opportunity to create a more focused shopping experience that is unique and that reflects brand personality in exactly the way they want it to,” she said.

“Beauty is diversifying & this is manifested in the appearance of more stores & pop-ups”

However, Laura Gurski, senior managing director at Accenture, argued that although online spending is becoming increasingly common, younger consumers are “watching tutorials and following influencers online, but going into store to meet experts to learn how to apply make-up”.

“For beauty, there is still something about the touch and feel of things,” she said.

Meanwhile, some retailers are utilising pop-ups to launch beauty concepts in store as a way of maximising their offering.

Saunders said it’s wise for retailers to consider experimenting with new store formats such as pop-ups as well as “continuing to have a significant department store presence and grow an online business”.

Luxury department store Selfridges regularly uses pop-ups to drive customers into stores, and it launched its first beauty pop-up Beauty Project in 2014, which ran over three months with rotating pop-up activity, some retail focused and some more category focused.

It’s evident that experience is a buzzword in today’s retail climate, with retailers falling over each other to offer a unique shopping experience for customers, and beauty – more so than any other sector – is arguably at the forefront of this trend.

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