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Breaking Barriers: Retail’s Natural (R)evolution

By: Sara Mason
Posted: February 27, 2009, from the March 2009 issue of GCI Magazine.

Aveda’s spa retail environment strives to create added value at multiple stages of the customer journey.

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While personal care may be better insulated than other industries in a downturn, the natural and organic market is not unaffected by the current economy. “We thought for the longest time that we were invincible,” said Paula Alexander, director U.S. marketing, Burt’s Bees. But consumers are likely to go for more mid-range and private label organics instead of luxury options. “There’s no doubt people are switching to less-expensive brands,” added Darrin Duber-Smith, founder, Green Marketing. “We don’t have the disposable discretionary income that we used to.”

There is no magical formula for bringing consumers in the store and getting them to spend their precious disposable income on high-priced products. This gives an advantage to big companies that are able to spread their costs and offer lower prices. “Lower your prices, lower your profit margins,” said Duber-Smith. “It’s about survival.” He adds, however, that after a holiday season full of discounts, consumers are numb to sales. Instead, find other ways to give them value.

Now more than ever, products that reflect a rich or unique brand story are perceived to be more valuable. “By doing the right thing—providing for the greater good, through health and well-being, the environment and in humanitarian causes—we provide value to the consumer,” offered Alexander. Although aware of the need to be cognizant of the current economy, Burt’s Bees is not willing to change its existing price strategy. “We will remain true to our values, which ultimately guides our retail strategy,” she added. Other brands, positioned with an opening price point, also have an advantage. Brands such as Green by Nature are taking the opportunity to gain greater market share in the natural beauty sector. It seems to be working. Green by Nature’s products have driven the 25-year-old company’s sales into triple digit increases. “We were able to anticipate demand and build our inventories accordingly,” said Steven Shwecky, founder. This demand comes in part from environmentally conscious tweens, who Shwecky feels have been neglected. In response, the company soft-launched Green by Nature girl!, an eco-friendly skin and cosmetic line for girls 7–13, in November 2008, and launched the full line in early 2009 (available at Urban Outfitters, Delia’s, Ricky’s, select Target stores and more than 3,000 specialty stores in the U.S.). “The main driving message in this market has to be that you can’t save the people or the planet if you can’t afford the products,” said Shwecky.

Transforming Retail

For a long time, health food stores were everywhere and doing well within the natural channel—self-regulating what was natural and organic since government regulation did not exist. But Whole Foods dramatically changed the retail landscape for natural and organic products. The retailer not only is flexible enough to work with the small and local vendor, but it merged the grocery concept with gourmet and natural, transforming the shopping experience. “Whole Foods has an in-store environment where consumers can be educated or inspired by their five senses,” said Burt’s Bees’ Alexander. The result was bridging natural products to the mainstream by making natural products more credible, believable for the mainstream. “It was no longer just a hippie experience, it’s a gourmet experience,” explained Duber-Smith. “Whole Foods legitimized natural products ... for everybody.”

And, eventually, made it okay for natural and organic products to be on the shelves at mass retailers. The industry resisted for a while, wanting to remain segregated at special retail outlets. But now those core brands that dominated the natural channel for so long are big enough to meet the demands of volume, safety and packaging. And more and more shelf space became devoted to these high-growth categories.