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A Whole New Makeup World

Social media, influencers and online threats change how retailers approach cosmetics

By Debby Garbato

Walgreens debuted in-store Birchbox beauty sections in December.
Walgreens debuted in-store Birchbox beauty sections in December.

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I n the 1990s, glossy magazines and

supermodels were the trendsetters in

beauty and fashion. Young women

emulated — or at least aspired to emu-

late — the clothing and color cosmetics

looks dominating the runways. There were few other choices. Food, drug and mass channels echoed this mantra. They offered a handful of dominant cosmetic brands supported by mega ad cam- paigns featuring the same looks and super- models. This left little room for smaller players, who normally lacked the funds to support top talent and big ad budgets. Today, supermodels and major brands no longer call all the shots in beauty. The advent of the Internet, social media and beauty influencers from YouTube and Instagram are providing myriad choices in color cosmetics and purchasing channels. A growing cadre of online beauty subscrip- tion services also let women regularly test new makeup from brands large and small. The degree to which millennials indulge in makeup, what they buy, what they spend, and where they get suggestions on looks and styles are up to them alone. “There’s no one-fits-all in beauty,” said Pooja Agarwal, vice president of operations at Birchbox, an online subscription beauty company. “There’s a trend towards person- alization. Before, everyone saw the same assortment. Consumers still care about beauty and feeling their best. But they don’t

need a supermodel to tell them what that is. Technology has changed the game.” The

need a supermodel to tell them what that is. Technology has changed the game.” The new rules of the game are threaten- ing food, drug and mass, where color cos- metics generate some of the highest profits per square foot. According to Nielsen, con- sumer spending on beauty has shifted online faster and more significantly than in nearly every other CPG category. Almost 1-in-3 U.S. dollars spent on beauty is spent online. In total, Americans spent more than $12 billion online for beauty and personal care over the past year. That represents 30% of dollars flowing through online chan- nels, up from 24% the year before. It also signifies the biggest shift among major FMCG categories. “These retailers are competing against online players,” said Matt Sargent, senior vice president of retail at consultancy Frank N. Magid Associates. “We’re facing a major change in how convenience purchasing is addressed. Cosmetics can’t exist in its cur- rent structure and expect to have sustain- able business in these channels. If they don’t figure out a different way, the cosmetics category will die there.” Mass retailers are fighting back. In addi- tion to offering smaller brands, a growing number are partnering with online-only labels. They also are employing in-store consultants to advise shoppers on product use, while featuring exclusive lines that tap into new trends and differentiate them from their online and offline competitors. “Keeping cosmetics relevant in food, drug and mass is incredibly important,” Sargent said. “People come for cosmetics and shop other categories. While price is a differenti- ator, you can’t have that alone. They can’t out scale Amazon or carry the same assort- ment as Jet.com. Part of what’s happening is a threat and part is an opportunity. They must figure out a model they can effectively scale to deliver an experience that doesn’t feel boxed away.”

On-Site Beauty Advisors

In recent years, such chains as Walgreens, CVS Pharmacy, Target and H-E-B have begun employing beauty advisors, or con- sultants, in major markets during prime shopping times. Unlike department store

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Unlike department store 90 January 2019 DRUGSTORENEWS.COM Rite Aid’s new nail bar features a high-quality nail
Unlike department store 90 January 2019 DRUGSTORENEWS.COM Rite Aid’s new nail bar features a high-quality nail

Rite Aid’s new nail bar features a high-quality nail selection.

consultants, they are not commissioned, employed by cosmetic manufacturers or assigned to leased departments. Nor do they primarily target beauty afi- cionados. Hooked on the latest trends, enthusiasts frequently visit department and specialty stores and make major invest- ments in high-priced cosmetics. Mass chan- nels tend to attract more casual customers who want to fill a specific need, purchase cosmetics for a special occasion or have a limited budget. “The Walgreens customer isn’t going to spend an hour seeing everything,” said Birchbox’s Agarwal, whose company recently launched special sections there. “She’s purpose-driven — she needs a lip- stick or tips for a special occasion, versus people who go to a specialty retailer to explore and see what’s new.” While they do not push specific brands, advisors’ ability to answer questions and solve problems often encourages consumers

to try products or buy a higher-priced item with an application or purpose they were unsure of. Consultants also provide an experience unavailable online. “They’re raising the bar on what a drug store is,” said Joann Marks, founder and CEO of Cosmetic Productions. “Consultants make stores more interac- tive. A consumer may not know which con- cealer is best. They also want to touch and feel. Anything that lets people try on colors helps. These consultants are highly trained on everything from proper skin care to how to apply eyelashes.” CVS Pharmacy’s BeautyIRL pilot offers custom makeovers, braids, manicures and hair blowouts at four Florida, Connecticut and Massachusetts locations via a part- nership with Glamsquad, an on-demand, in-home beauty provider. Additional loca- tions for the format are planned in 2019. The BeautyIRL concept stores also have “Mini Must-Have” boutiques, where

customers can assemble a personalized bag of miniature beauty products, and a “Test- and-Play Hygiene Bar” to safely try products. Alyson Fischer, senior associate at Chicago consulting company McMillian Doolittle, said beauty departments in BeautyIRL stores are double the usual size and feature additional brands and acces- sories in special brand boutiques. “It’s all about service and in-store experience.”

In-Store Events

Retailers also drive traffic and sales with in-store events. In addition to makeup tips, shoppers can watch demos and receive coupons and gift bags, Marks said. Her company works with retailers and suppli- ers to orchestrate these occasions by pro- viding samples, coupons and testers. This strategy generates “higher than average rings.” Walgreens, for one, stages events twice monthly. Loyalty program custom- ers receive extra points for purchases made during these times, furthering the sales lift. Some events are seasonal. This past fall, Cosmetic Products worked with Rite Aid to stage back-to-school and Halloween demo events in its top 200 locations, pro- viding toolkits and beauty experts. Around the same time, Kokie Cosmetics also con- ducted Halloween makeup demo events, working with online makeup subscription company Ipsy. “We’re creating excitement, working with our supplier partners creating in-store beauty events in key markets,” said Cathy

Furtado, Rite Aid’s category manager of skin care, sun care and general cosmetics. “They create great buzz around new items and sampling.” Sheila Keating, national sales manager and vice president of sales at Kokie, said demos are definitely having an impact in that 25% of Rite Aid’s cosmetic purcha- sers are new customers. At mass, Walmart used demos during the first half of 2018 to showcase new Hard Candy cosmetic items at 365 locations. Events included personalized makeup con- sultations and tips on creating day and night looks. Demos emphasized five new collec- tions containing items retailing for under $10. Walmart became the exclusive retailer of the former prestige brand in 2009. This type of aggressive pricing is key when targeting millennials. “People discuss millennials as one big cohort,” said Maria Steingoltz, managing director at LEK Consulting. “But there are older millenni- als in their late 20s, early 30s and younger ones, who are much more constrained from an income standpoint. This explains the success of such brands as e.l.f., which offers affordable products — that’s their whole positioning.” According to recent estimates, about 25% of millennials live with parents, far more than previous generations.

The Korean Influence

Korean-style makeup, natural ingredients and cruelty-free cosmetics increasingly

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have become important. Sometimes, ingre- dients emulate popular food and beverage trends involving such healthy fare as avo- cados or green tea. “There’s a tie between what people eat and put on their faces,” said Laura Maclay, project manager at New England Consulting Group. “If you want to know what’s hap- pening in cosmetics, look no further than the restaurant industry. Ingredients are very important and people want to know where they come from.” Rite Aid is featuring facial masks with ingredients that include lemon, avocado and sugar. Masks are merchandised on a spinner. And Target, Fischer said, eventually wants to eliminate certain chemicals from all beauty products. Korean-influenced products are made from traditional ingredients like pearl powder, snail secretions, starfish extract, bee venom, ground bamboo, seaweed and Tremella mushrooms. Research group Kline said U.S. K-beauty sales totaled $225 million in 2016, up 30% over 2015. Ingredients have been popular in Korea for years, but growth of social media brought them worldwide attention. Today, CVS Pharmacy features a K-beauty section in 2,000 stores. Products are affordable, easy to use and have eye-catching, color- ful packaging. “K-beauty, which emphasizes skin care and effective natural ingredients, merges health and beauty, which is at the core of our mission,” Maly Bernstein, CVS

What Influences Beauty? Digital influencers have overtaken celebrities and are now the No. 1 preference
What Influences Beauty?
Digital influencers have overtaken celebrities and are now the No. 1 preference in talent choice for representing beauty brands
98%
70%
78%
73%
Ninety-eight percent of the
beauty industry thinks influencer
marketing is effective.
Influencer marketing budgets
are set to increase for 70% of
the beauty industry.
In 2018, Instagram was the
resounding channel of choice for
78% of the beauty industry.
Nearly three-quarters of the
industry said Generation Z pushes
them to be more transparent.
SOURCE: CELEBRITYINTELLIGENCE.COM SURVEY

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COLOR COSMETICS Pharmacy’s senior director for divisional merchandising, beauty care, told the Pittsburgh Post-Gazette

Pharmacy’s senior director for divisional merchandising, beauty care, told the Pittsburgh Post-Gazette when the com- pany rolled out its K-Beauty offering. “It was a natural extension. Customers have been providing great feedback, and the program has exceeded expectations.” Rite Aid also is bullish on K-beauty. In November, Kokie Cosmetics became an in-store exclusive. Developed by a Korean beauty executive, Kokie’s fun, colorful packaging sports elephants, following the millennial trend towards using animal designs on packaging —“Kokie” means “elephant” in Korean. Cosmetics are cruelty-free and affordable. “Millennials don’t want their mother’s makeup,” Keating said. At the same time, Rite Aid launched Cake Beauty, another in-store exclusive featuring vegan, all-natural hair and body products. Also cruelty-free and certified by PETA, the company’s motto reads, “Beauty without bunnies.” “Both brands offer something our com- petitor doesn’t,” Furtado said. “We’re cap- italizing and moving quickly on trends like the new nail bar, which offers best-in-class nail selection. We are also creating a new beauty shopping experience by adding large focal cutouts, way-finding within the beauty aisles.” Both new Rite Aid lines started as online- only labels. Keating said Kokie’s popular- ity was fostered by 600 online influenc- ers, a strategy developed when the brand was launched four years ago. “It’s all about engagement, which drives in-store sales. With millennials, old ways of promoting products aren’t working.” When it comes to differentiating mass beauty departments, changes did not begin yesterday. Retailers have been experiment- ing with new models for several years. Some have worked, some have not. Yet it is crucial these channels continue testing and reinventing themselves to gain and main- tain consumer momentum. “The experiments you’re seeing are import- ant,” Sargent said. “This is a crucial cate- gory for driving margins. With the conve- nience component usurped by e-commerce, they must do things differently.” dsn

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Birchbox Curates Walgreens Beauty Sections Walgreens is creating in-store Birchbox beauty sections designed around how

Birchbox Curates Walgreens Beauty Sections

Walgreens is creating in-store Birchbox beauty sections designed around how millennials shop. The first six opened in December in New York, Chicago, Los Angeles and Minneapolis. In early 2019, these will be joined by five more in Chicago and Los Angeles, as well as in Dallas and Miami. These 400-to-1,000-sq. ft. dedicated sections are differentiated from Walgreens’ existing beauty departments by special signage and elevated design elements. A curated assortment fea- tures skin care, hair and makeup products from 40-plus prestige brands marketed by Birchbox, which specializes in online subscription beauty. Birchbox-trained Walgreens beauty consultants are available to assist shoppers. Announced in October, the deal also involved Walgreens’ purchasing a small interest in Birchbox. In addition to its strong millennial following, Birchbox brings prestige beauty to Walgreens and a style of marketing and merchandising that suits the chain’s casual beauty customer. “The addition of Birchbox to our growing beauty offering is a big step in delivering on our promise to differentiate and elevate the beauty experience,” said Richard Ashworth, Walgreens’ president of operations, in announcing the partnership. Products, said Pooja Agarwal, vice president of operations at Birchbox, include what she called “approachable” basics — not the stuff coveted by beauty junkies. “We have a section of basics, of simple routines, including one called ‘night out,’” she said. “It’s less about trends.” Merchandise is organized by end use, not brand, simplifying the experience. “It’s hard to com- pare products merchandised by brand,” she said. “We make it easy and show how products work. We don’t give shoppers too many choices, so it’s not overwhelming. Millennials want options to do it their way.” Brands include Sand & Sky, Wander Beauty, Huxley and Davroe. Rather than push products, consultants try to make the right “fit” by asking customers how important beauty is to them, how often they use cosmetics and how cosmetics fit their lifestyle. In-store events focus on such techniques as five-minute, get-out-of-the-house-quickly makeup routines — “not about how to do the perfect cat eye,” Agarwal said. Stores also will offer Birchbox subscriptions and the “Build Your Own Birchbox” experience, a signature element of the online brand’s two physical flagship stores in New York and Paris. —Debby Garbato

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