The beauty market is expanding exponentially, with a diverse demographic shopping in the beauty aisle. In fact, 94 percent of all U.S. households purchase beauty products, with sales across the industry totaling $33.5 billion last year. But beauty sales are not growing in many types of stores.
A new Nielsen study explores how this massive industry could be struggling in some areas. NACDS.org caught up with Nielsen Senior Vice President of Global Consumer Insights James Russo, who headed up the study, to discuss the findings and trends.
Q: According to your study, 94 percent of U.S. households purchase beauty products, but beauty sales are not growing in many stores. Why?
A: It’s a fragmented market. The variety of products and places to buy them is overloading the market. Beauty dollars are increasing in value channels such as grocery, dollar, warehouse and online, but beauty sales are not growing at mass merchandisers. As far as the consumer dynamic is concerned, some of the products look the same and some of the advertising looks the same.
This is not a demand issue. The demand for beauty products is there when you look at baby boomers and a very important consumer segment—the millennials. There is also an increasing number of men who are embracing beauty products, and there is the multicultural consumer—specifically Hispanics.
Q: What can retailers do to stem the fragmentation of the market?
A: Within beauty, one of the bigger consumer trends is health and wellness. We see very significant growth in organic beauty products, specifically within hair care and skin care, which are generating higher levels of cumulative average growth—24 percent over the past four years. So that’s one area to focus on.
Men are also buying beauty products. The core three products for men are skin care, hair care and shaving. Then there is the multicultural piece—understanding the importance of Hispanic consumers is a really important dynamic. When we looked at the dollar sales growth across cosmetics, hair care, hand and body lotion, etc., in every one of those categories, Hispanic percent growth is outpacing non-Hispanic growth by a significant margin.
We had a custom research study done to understand the traits of products that resonate with consumers on the shelf. It’s a road map in terms of how to break through on the shelf. It’s necessary to understand the importance of natural, organic products for many consumers—specifically millennials—but you don’t want to do that with packaging that is flat, and doesn’t look glamorous or innovative.
The other dynamic here is to watch the wording that’s being used on packaging. Terms like ‘retinol,’ and ‘collagen’ don’t really resonate with consumers. You need to have more terminology that breaks through to consumers. Beauty product consumers want to see what the benefits of the product are, and they want a clear indication of when they will see the results.
Q: Why are beauty ads are less memorable?
A: When you look at ads in the past year and a half, a lot of them have the same look, feel and dynamic to them. So when we look at consumers that have seen the ad, their ability to remember the ad and to recall attributes of the ad is 20 percent lower than all other consumer-packaged-goods advertising for women aged 18 and older.
When a consumer sees a beauty ad on TV, there is 40 percent less brand linkage than in any other category. That tells us that these ads aren’t necessarily memorable as a whole and, more importantly, attributing the ad to the brand is even less effective.
Q: Are marketers and retailers doing enough to differentiate how they sell beauty products to women of varying ages?
A: To some extent, yes. When you think about marketing, a very important consumer group for beauty is the millennials and they respond to strong, relatable story lines. That is consistent, not just for beauty but for other advertising as well. The younger millennials—between 18 and 25—want to know about the efficiency and functionality of the product. For older millennials—26 to 34—information on product benefits and the resulting lifestyle changes resonate well.
Q: How do you think retailers could do a better job of meeting the customer where she is in life, both professionally and personally?
A: Collaboration between retailers and manufacturers working together to understand the consumer segments who are purchasing their brands is important. They need to understand that the dynamic of capturing consumers where they are is, to a large extent, what’s happening in the store, but it’s also happening online. It’s should be a coordinated strategy.
With the in-store experience, there’s a higher level of service that’s needed, and drug stores are a really good example of that. Service is such an important part of who they are.
Q: What kinds of beauty trends are you anticipating?
A: The multicultural impact is only going to increase, which affects product offerings and there is a huge opportunity there. The no-makeup look is something that is gaining increasing traction as well with women, so there’s a big opportunity there. The role of men and how they continue to embrace beauty on various levels is going to increase.
With more men buying beauty products and the added multicultural element, there is currently a reconfiguration of how to communicate with consumers to improve and execute the in-store experience.