Beauty Retailing - US - September 2018

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY 
The issues
Market is growing, but may be impeding its own potential
Heavy competition for a piece of the pie
Figure 1: Retailers shopped primarily, June 2018
The opportunities
Define what inclusivity means
Capitalize on the store experience, but encourage more cross-channel shopping
Figure 2: Method of shopping, by generation, June 2018
Go beyond free to value-add
Devise strong social media and influencer strategies
What it means
THE MARKET – WHAT YOU NEED TO KNOW
Slow gains expected
Some troubled segments impede overall growth
Population growing and diversifying
Interest in health and wellness spills over to beauty
MARKET SIZE AND FORECAST
Inching up, one year at a time
Figure 3: Total US retail sales and fan chart forecast of beauty products, at current prices, 2013-23
Figure 4: Total US retail sales and forecast of beauty products, at current prices, 2013-23
MARKET BREAKDOWN
Share leaders
Color cosmetics maintains stronghold
Fast-growing categories
Strong economy boosts smaller, discretionary categories
Facing challenges
Concerns about nail damage and a general orientation towards lower-priced products impedes growth of struggling sectors
Figure 5: Total US retail sales of beauty products, by segment, at current prices, 2016 and 2018
Vast majority of purchases occur outside of grocery and drug channels
Figure 6: Total US retail sales of beauty products, by channel, at current prices, 2016 and 2018
MARKET FACTORS 
Women 35-44 represent a key target segment; men still important contributors
Figure 7: Level of involvement, by gender and age, June 2018
Country’s diversification shapes the beauty market’s future
Consumers more mindful of their health and wellness, leading to a “clean beauty” phenomenon
Clean beauty
Figure 8: Attitudes toward product labels and ingredients, by age, June 2018
Ingestibles
Cruelty-free claims on the rise in color cosmetics
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Augmented reality: are brands more interested in it than consumers?
Direct sellers and subscription services attract niche targets
The Amazon effect is about to get stronger
Brands using tech to become more personalized
WHAT’S TRENDING?
Au naturel in all forms is in, but that’s not all that women want
Figure 9: Interest in beauty trends, by race and Hispanic origin, November 2017
Augmented reality is what’s now and what’s next
Figure 10: Influence of augmented reality on store selection, by generation, June 2018
In their words: AR, yay or nay?
Target’s on a beauty craze
Riley Rose on the scene
WHAT’S STRUGGLING?
Direct sales companies and subscription services not scaling audiences
Direct sales companies
Figure 11: Shopping incidence of direct sales companies, May 2017 and June 2018
Figure 12: Interest in direct sales companies, by generation, June 2018
In their words: thoughts on direct sales companies
Subscription services
Figure 13: Beauty box subscription shoppers – Any shopping (net), by generation, June 2018
Figure 14: Dollar Shave Club “Getting Ready” TV ad, July 2018
WHAT’S NEXT?
Wellness 2.0
Here comes Amazon…again
Voice-activated assistants as the new beauty advisors
Machine learning aids online retailers in becoming more personable
DNA testing takes personalization to a whole new level
THE CONSUMER – WHAT YOU NEED TO KNOW 
Not all beauty buyers are women 18-34
Spending on the rise
Amazon has surpassed specialty beauty retailers in terms of where consumers shop
Sensorial experiences tough to emulate online
Social media and influencer strategies required
WHO’S BUYING?
Retailers should focus on increasing basket size or stimulating repeat purchases among light buyers
Figure 15: Repertoire of beauty items purchased, June 2018
Heavy buyers: adults 35-54 emerge
Figure 16: Repertoire of heavy* beauty purchasers, by age and gender, 2017 versus 2018, May 2017 and June 2018
Light buyers: African American consumers buying less
Figure 17: Repertoire of light* beauty purchasers, by race and Hispanic origin, 2017 versus 2018, May 2017 and June 2018
Two thirds actively involved in the beauty buying process
Figure 18: Engagement, by repertoire of beauty items purchased, June 2018
SPENDING
On average, spending has increased 13% in past five years
Figure 19: Trended mean spending by category, January 2013 – March 2018
Figure 20: Trended mean fragrance spending, January 2013 – March 2018
Figure 21: Amount spent on fragrances, January 2017 – March 2018
Multicultural consumers outspending Whites
Figure 22: Mean spending by category, by select demographics, January 2017 – March 2018
RETAILERS SHOPPED 
Nearly eight in 10 consumers shop at five channels
Figure 23: Retailers shopped, June 2018
Channel shifting continues to occur
Figure 24: Retailers shopped – Any shopping (net), 2017 versus 2018, May 2017 - June 2018
In their words: where they shop and why
Men seek the basics while women are more selective
Figure 25: Retailers shopped – Any shopping (net), by gender, June 2018
Where are the young women shopping?
Figure 26: Retailers shopped – Any shopping (net), by females and age, June 2018
Where are multicultural consumers shopping?
Figure 27: Retailers shopped – Any shopping (net), by race and Hispanic origin, June 2018
SPOTLIGHT ON ULTA BEAUTY AND SEPHORA
iGen and Millennial women still love specialty stores
Figure 28: Specialty beauty retailers shopped, 2017 versus 2018, May 2017 and June 2018
Similar offerings and clientele
Figure 29: Specialty beauty retailers shopped, by select demographics, June 2018
In their words: Ulta versus Sephora
Recent initiatives
Figure 30: Ulta Beauty “The Possibilities Are Beautiful” TV ad, September 2018
METHOD OF SHOPPING 
Flocking to the store
Figure 31: Method of shopping, 2017 versus 2018, May 2017 and June 2018
Figure 32: Method of shopping – nets, May 2017 and June 2018
Nearly half of iGens and Millennials are multi-channel shoppers
Figure 33: Method of shopping, by generation, June 2018
In their words: store versus online?
A DEEPER LOOK AT ONLINE SHOPPING
Exclusive online products can create intrigue
Figure 34: Online purchase drivers for beauty items, March 2018
Online brand personality is important to consider
Figure 35: Reasons for adding the last beauty product purchased online to an online shopping cart, by women 18-34, February 2018
Barriers such as lack of sufficient product information or reviews are easier to address
Figure 36: Reasons for not shopping for beauty products online, April 2018
In their words: what consumers will buy online
ITEMS PURCHASED 
High purchasing rates for grooming staples
Figure 37: Items purchased, June 2018
It’s not all about women 18-34
Figure 38: Items purchased, by female and age, June 2018
Online shopping rates fairly consistent for most categories
Figure 39: Online versus in-store shopping habits for beauty products, February 2018
SHOPPING BEHAVIORS: ROUTINE VERSUS VARIETY
Majority of beauty buyers comfortable in their routines…
Figure 40: Routine behavior, by repertoire of beauty items purchased, June 2018
…but open to exploring options
Figure 41: Experimentation level, by gender and age, June 2018
Loyalty programs can create an emotional connection with customers
Figure 42: Loyalty program engagement, by female age, June 2018
INFLUENCERS
Instagram is the place to be
Figure 43: Social media influence, by generation, June 2018
Using social media to engage customers
Are sales associates losing their credibility to other influencers?
Figure 44: Social media influence, by generation, June 2018
In their words: the role of the sales associate
Personal stylists another (secondary) source of influence
Figure 45: Influence of personal stylists, July 2018
INTEREST IN RETAIL OFFERINGS
Women want more than free stuff
Figure 46: Interest in retail offerings, July 2018
Samples and unique products could reach two thirds of shoppers
Figure 47: TURF Analysis – Interest in retail offerings, June 2018
In-store beauty services gaining universal appeal
Figure 48: Interest in select retail services, by female age, June 2018
Multicultural consumers prefer a personalized approach
Figure 49: Interest in select retail services, by race and Hispanic origin, June 2018
In their words: if they owned their own store
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Sales data
Fan chart forecast
Consumer survey data
Consumer qualitative research
TURF methodology
Abbreviations and terms
Abbreviations
Terms
APPENDIX – THE MARKET 
Figure 50: Total US retail sales and forecast of beauty retailing, at inflation-adjusted prices, 2013-23
Figure 51: Total US retail sales of beauty products, by channel, at current prices, 2016 and 2018
Figure 52: US supermarket sales of beauty products, at current prices, 2013-18
Figure 53: US drugstore sales of beauty products, at current prices, 2013-18
Figure 54: US sales of beauty products through other retail channels, at current prices, 2013-18
Figure 55: Female population by age, 2013-23
Figure 56: Male population by age, 2013-23
Figure 57: Population by race and Hispanic origin, 2013-23
Figure 58: Consumer Sentiment Index, January 2007- July 2018
Figure 59: Disposable Personal Income change from previous period, January 2007-June 2018
APPENDIX – THE CONSUMER 
Figure 60: Trended purchase incidence of personal care products, January 2013 – March 2018
Figure 61: Trended purchase incidence of fragrances, January 2013 – March 2018
Figure 62: Trended spending on personal care products, 2014 versus 2018, January 2013 – March 2018
Figure 63: Trended spending on fragrances, 2014 versus 2018, January 2013 – March 2018
Figure 64: Amount spent by category, January 2017 – March 2018
Figure 65: Table - TURF Analysis – Interest in retail offerings, June 2018