21-27. 10. 2018

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Why beauty will continue to rule retail in 2018

2018.01.05


From leaders Sephora and Ulta to relative newcomers Glossier and Birchbox, beauty is killing other sectors. Here's how.

If retail was a bingo board, whoever stocked up on bankruptcies would be winning right about now.

From retailers who are at risk of going bankrupt to those who already have, the bad news for retailers just seems to keep on coming — and marketers have their own host of problems. A vast majority (88%) don't feel confident about emotionally engaging customers and a shocking 75% aren't confident that their data is reaching in-market consumers.

So why is it that the beauty sector seems to be posting so much good news? Ulta's online sales grew 63% in the third quarter, Sephora's in-store experiences are blowing other retailers out of the water (in fact that retailer also took home Retail Dive's Store Concept of the Year award) and Glossier is one of the most disruptive companies of the year.

Either there's something in the water at these powder-filled palaces or the rest of retail just isn't learning the lesson here.

Top-notch in-store experiences

"Experience" is a buzzword in retail today, with companies falling over each other to create a store with the right atmosphere, the right price points and loyalty programs, and a unique format. But beauty, more so than any other sector, has been at the forefront of that trend. Storefronts in that category tend toward the experiential — and none more so than Sephora's.

The brand's Beauty TIP workshops actually encourage shoppers to play with products before making any purchases, and the newest store concept offers similar experiences, albeit designed for perhaps a more serious beauty customer than one shopping the Beauty TIP stores. The retailer has also launched a social media platform specifically designed for loyalty members to talk to each other about products and have beauty-focused discussions.

Still, in order for an experience to be successful, shoppers have to find value in it — and that's easier said than done. According to Hana Ben-Shabat, a partner in the retail practice of global strategy and management consultancy A.T. Kearney, Sephora's success comes in part from the retailer's reputation for always having the newest and best brands — something that invites shoppers in to test products out.

"[Sephora] created a concept that disrupted the way people shopped for beauty. Until they showed up, people had to go to the department store and buy in a very traditional way — brand by brand, counter by counter."

Hana Ben-Shabat
Partner, A.T. Kearney

"Sephora has been a playground for all of these new brands that are emerging because they always want to be in the forefront of what's happening in beauty," she said, noting that both Sephora and Ulta have "really managed to crack what experience in beauty is."

Indeed, even with Sephora's Instagrammable store concepts, free in-store classes and overall tight-knit beauty community, Ulta is posting remarkable growth — especially online. In August, the retailer's net sales rose 20.6% to $1.29 billion and e-commerce sales climbed 72.3%. The most recent quarter saw 63% growth in online sales and a net sales increase of 18.6%.

According to Ben-Shabat, the fact that both stores have done so well also has to do with the fact that they cater to different types of customers. Sephora focuses more on upscale brands, whereas Ulta has a mix of prestige and mass consumer brands, and both have friendly environments that appeal to shoppers more than the department store model.
 
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