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New Perspectives in Beauty Retailing

By: Ada Polla
Posted: August 27, 2012, from the September 2012 issue of GCI Magazine.

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Also per Gaynor, the key to success for this new retail concept is its focus on convenience and architecture. Under the same roof, yet in spaces that look and feel different, consumers can get prescriptions, laundry detergent, and lipstick, body wash, nail polish, moisturizer and more beauty options quickly and easily. Gaynor did note that she considers the Look Boutique retail venues prestige, given some of the higher-priced items offered—and apparently, many brands agreed. While three years ago, the retailer had to woo department store brands to the concept, now Gaynor finds more high-end brands are wooing her.

The success of the Duane Reade Look Boutique is particularly noteworthy given that earlier this year CVS announced its retreat from this type of retail channel with the closure of its Beauty 360 concepts. Indeed, before the first Look Boutique, CVS opened its prestige concept Beauty 360 in Washington, DC, in November 2008. Over the past four years, CVS opened 25 additional Beauty 360 locations, including many on the West Coast, but now all of these are closing.

Gaynor maintained the success of the Look Boutiques built on their smart development and interesting product mix, giving an edge to Duane Reade/Walgreens in this masstige category. Enforcing the Look Boutiques’ importance, in the March 30, 2012, edition of WWD, Joe Magnacca, president of daily living products and solutions at Walgreens, said, “Beauty is a strategic pillar in all of our stores. We have 27,000 beauty advisers in our stores and that’s a major commitment to the category.”

Also, with Walgreens’—which owns Duane Reade—recent acquisition of a 45% equity stake in Alliance Boots GmBH, it seems likely that this concept will grow even further. But this acquisition could also mean other changes in the beauty retail channel, including the possibility of more U.K. brands in Look Boutiques and other venues, as well as the possibility of Look Boutiques in Boots stores.

Retailers aggressively launching their own lines. While retailers have long developed their own proprietary brands, this phenomenon seems to be increasing lately, and particularly in skin care. Bluemercury recently launched M-61 Skincare, a nine-piece line CEO Marla Malcolm Beck coined as a “green cosmeceutical line”—namely, a line meant to bridge the high-tech and natural skin care categories. Priced between $19 and $92, M-61 is being distributed in Bluemercury boutiques and on the boutique’s website, and is expected to generate up to $3 million in its first year.

Similarly, Ulta, Sephora and CVS also expanded their own skin care lines in the past 12 months. Ulta recently launched its proprietary brand Ulta Skincare, to be distributed in all its 449 stores and on, and the Sephora Collection Skincare was also launched on the retailer’s home turf, in its 300 stand-alone U.S. doors and inside more than 300 Sephora in JC Penney locations. Adding a bit of star power, CVS worked with actress Salma Hayek to launch her skin care line Nuance, again exclusively within the CVS chain.

What exactly this means for skin care brands remains to be seen, but it does indicate increased competition and the retailers’ belief that there is a spot in the marketplace for these brands. A distinct advantage of these skin care lines is their immediate and broad distribution, but skin care and retail are two very different businesses and areas of expertise, so tracking their popularity with consumers will certainly be something to watch.

Emergence of pop-up stores. While retailers are busy launching their own product lines, brands are busy launching their own retail formats. Not only their own retail boutiques (such as those created by brands such as Origins, Aveda and MAC, which have been around for several years), but also in less expensive, less permanent pop-up stores. This wave of retail has taken on a variety of forms.

And while this format may seem new, versions of it have been around for quite a long time. Panelist Walsh mentioned that back in 2001, she set up an early type of pop-up store—selling products from her car. That concept has evolved, and today it has been reinvented in roaming beauty trucks. After food trucks, several beauty brands—including Urban Decay, Bare Escentuals, and I Love… Cosmetics—have helped lead this feet-on-the-street trend.

A truer sense of the pop-up store was launched for the summer by Skyn Iceland. When asked about the motivation behind this move, Skyn Iceland founder and president Sarah Kugelman commented, “We wanted the opportunity to interact firsthand with our customer base, and what better way to do it than in the heart of New York City? Because stress can be a very personal issue and because it affects everyone’s skin in a different way, being able to communicate directly with customers and provide soothing solutions is invaluable.”

Gaining quite a bit of popularity and press attention lately, pop-up shops allow small brands to generate awareness without the long-term commitment to a physical location. Brands are able to saturate various markets in one year and get to know who their customers are in each region, which is useful in planning for growth.

Finally, there is the in-store version of the pop-up store. For example, beauty partnerships have been key to Target’s recent strategy, getting independent brands into the act—and into the hands of consumers. On May 6, in an initiative known as The Shops at Target, the mass retailer launched store-in-store partnerships with various smaller brands, including Cos Bar, a beauty boutique with multiple locations based in Aspen, Colorado.