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Retail: Spheres of Influence
By: Jeff Falk
Posted: December 10, 2007, from the December 2007 issue of GCI Magazine.
The face of retail has changed a great deal over the past decade. Online sellers and the QVCs and Wal-Marts of the world have altered the way consumers across segments shop. Euromonitor International reports that convenience and low prices are key drivers of change, and retailers built to deliver both attract market share from other channels. However, other retail formats—specialty shops and department stores, for example—have been able to leverage their ability to engage consumers shopping for beauty products to maintain an edge in the category. Nicola Kinaird, founder of the highly successful Space NK stores in the U.K. and the U.S., said, “Consumers in this category are increasingly knowledgeable about products and look to retailers not only to purchase, but also as a source for information. In today’s marketplace, it is essential that retailers have foresight and insight into products and trends that appeal to consumers.”
As these factors evolve, other trends impact what consumers shop for, notably natural and organic products. The natural personal care market, already worth nearly $7 billion, is growing at approximately five times the rate of the personal care market as a whole, according to Green Marketing, Inc. Mintel’s Global New Products Database recorded 624 new natural or organic cosmetics and toiletries launches in 2002, and 2,900 in 2004—illustrating the increasing amount of shelf space dedicated to these products.
Natural and organic products—regardless of real and perceived benefits or deficiencies—engage consumers, and the “mainstreaming” of natural and organic products, according to Organic Monitor, is a major driver of market growth. Kline & Company’s “Natural Personal Care 2007: Competitive Brand Assessment and Ingredient Analysis” report (released in October 2007) cites consumer demand for natural personal care products as driving a significant shift from niche distribution channels to more mainstream mass retail outlets. Wal-Mart, for example, introduced Natural & Organic Bodycare Oasis in nearly 400 superstores, which, according to Euromonitor (“State of the Industry: Eco-values Escalate,” GCI magazine, June 2007), helped lift the profile of natural and organic products.
The product category itself engages consumers, and mass retailers leverage this appeal to neutralize, to an extent, the competitive “engagement” edge of niche and specialty retailers. To navigate these continually changing currents, manufacturers and marketers must be willing to consider multiple distribution channels to maximize growth and achieve a cross-sectional consumer base. Greater market segmentation has also led to dedicated brands being developed for specific channels and the emergence of private label natural and organic products. The latter adds another level of complexity to the retail decision making process—manufacturers and marketers must compete with the retailers they are selling through.
Increasingly, mass merchandisers are introducing natural and organic personal care products. Boots launched an organic cosmetics line in October. The pharmaceutical, health and beauty retailer’s Botanics Organic line ranges from 90% to 100% certified organic content, and all contain a 100% organic essential oil blend authenticated by the U.K.-based Royal Botanic Gardens. According to Organic Monitor, the move follows the launch of ErbaOrganics organic skin care products by Target stores earlier in 2007. Natural cosmetics are also becoming more visible in drugstores; Be Fine Food Skin Care was launched in CVS drugstores, for example.