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The Future of Beauty

By: Leslie Benson and Jeff Falk
Posted: October 9, 2008, from the October 2008 issue of GCI Magazine.

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For IAC Retailing-owned HSN, the fourth largest cable network, its television channel reaches 90 million homes. Both HSN and its online retail counterpart raked in $1.9 billion sales in 2007. The business boom, which includes sales from 75 beauty brands, even attracted exclusive distribution rights this year from BeautyBank, a subsidiary of The Estée Lauder Companies. In addition, Coty Inc. announced a new partnership with HSN and in 2008 for the marketing and distribution of its select prestige products, including from Lancaster.

HSN and QVC are right on target by offering Web-based retail outlets in addition to their television channels. The Census Bureau of the Department of Commerce announced the estimated amount of U.S. retail e-commerce sales for the first quarter of 2008, at $33.8 billion, an increase of 13.6% from the first quarter of 2007. Although the rate doesn’t factor in the beauty market specifically, Internet sales are on the rise.

Karen Grant, senior beauty industry analyst for The NDP Group, says more consumers are buying their trusted beauty brands online. “Women aged 45–64 now make up approximately 41% of the Internet shopper base, compared to 36% of women aged 18–34, and this older age group is set to become still more important in the coming years.”5

In addition, research group Gartner, Inc. predicts that to stay in the game, major retailers will soon have a marketing presence in virtual worlds such as Second Life.6 Gartner suggests targeting tech-savvy Generation Y customers in environments they frequent—especially online—will better position a brand for sales. However, that doesn’t mean brick-and-mortar stores will become obsolete. On the contrary, in addition to supermarkets expanding their beauty stock, drug stores are also becoming a force with which to be reckoned.

Drug Store Analytics

Among drug stores in the U.S., specifically, CVS Caremark Corporation tops the list with triple-digit growth between 2006–2008.7 Earlier this summer, CVS Caremark announced the acquisition of Longs Drug Stores Corporation for $2.9 billion. Known as a platform for independent beauty brand launches, Longs was once one of only two chains selling Elizabeth Arden products on a direct basis. Therefore, bigger brands may hold more power in the newly acquired stores, unless CVS agrees to support more niche beauty brands.