Sales of cosmetics and toiletries through alternate channels have skyrocketed, growing by nearly US$ 1 billion since 2005, reveals a recent report by consulting and research firm Kline & Company. [1]
Internet sales (e-commerce) are leading the way with a 25.4% growth from 2005 to 2010, followed by home shopping networks like QVC and HSN posting an annual growth (CAGR [2]) of nearly 20%.
More growth to come
As “consumers are increasingly drawn to the convenience of at-home shopping to meet their beauty needs,” Kline forecasts that double-digit growth should continue.
“Consumers are spending more time at home, either by virtue of unemployment, telecommuting, or merely a desire to save money by not going out so much,” observed Karen Doskow, Consumer Products Industry Manager at Kline. “Instead of running out to the store to buy their beauty products, they’re watching home shopping channels and infomercials to get the latest on new products.”
Kline also says that consumers increasingly tend to use online services to get more information on products. “The Internet and mobile technologies are empowering consumers to be even more aggressive in their product and price comparisons and driving marketers to deliver value-based products to meet these demands,” adds Doskow.
Players adapt their strategies
Both brand marketers and retailers are adapting their strategies to the growing importance of these channels.
Kline’s study reveals that as brands increasingly look to leverage mobile and e-commerce to create seamless and ubiquitous purchase options for their customers, single-channel marketing is being rendered less and less viable. In order to build online buzz, brands are also using daily deal sites, such as Groupon, LivingSocial, and so-called “flash sale” sites such as HauteLook, Rue La La and Gilt Group, which are fueling e-commerce sales by creating awareness and enticing interest about new products or services by offering one-time discounts in order to create trial.
The bricks-and-mortar front is far from lagging. Doskow notes that “beauty has become the new revenue sweetheart in the traditionally slow-growing drug store channel as pharmacies reinvigorate their beauty offerings to lure customers with a more upscale, specialty-store look. For example, Walgreens’ acquisition of Duane Reed and its high-end Look boutiques is expected to promote growth for both the chain and the channel. Meanwhile, CVS, Rite Aid, and others have begun offering new and improved customer loyalty programs and expanding shelf space for their beauty merchandise.”
