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New World Economy Drives Shift in Global Beauty Retailing
Posted: October 1, 2009
Global Beauty Sales by Retail Outlet
According to Kline & Company's Beauty Retailing 2008 Global Series, the cosmetics and toiletries market posted a respectable 3.9% growth in sales in 2008 despite the global recession, affirming that consumers will keep up their personal grooming and beauty habits no matter how dire the financial outlook may seem. But perhaps more important than the overall growth, the latest numbers indicate a significant shift in where consumers are shopping in nearly all of the major markets around the world. Channels that are posting declines in one market are experiencing growth in another. Marketers looking to compete on a global scale must stay ahead of the shift and examine local trends in retail patterns in order to compete in this complex market.
While the United States remains the dominant nation in the global beauty retailing equation with an 18.4% share, the emerging markets of the BRIC countries (Brazil, Russia, India, and China) continue to gain momentum posting double-digit gains, according to the Kline series. As these markets develop, consumers there are discovering the emergence of traditionally more Western retail formats. This delicate balance among distribution channels has enabled the industry to weather the economic storm fairly well, while other consumer goods markets have suffered worse.
Direct Sales Driven by Earnings Potential
As the fastest-growing channel worldwide, direct marketing posted an impressive 8.6% compound annual growth rate from 2003 to 2008. The current economic situation has made person-to-person sales an attractive earnings opportunity to help offset job losses. This, combined with the strong presence of the channel, has driven direct sales up by nearly 27% in China during the past five years. In Russia and Brazil, where direct marketing is still considered the primary purchase channel for high-quality cosmetics, sales have increased almost 20%, prompting leading marketers such as Avon and Oriflame to launch their pricier skin care products into these markets.
Meanwhile, in the largest, yet mature, direct sales market of Japan, the channel is losing share to other outlets—namely department stores, drug outlets/pharmacies, and specialty retailers as new, Western-style stores multiply.
Mass Merchandisers' Share Surges in BRIC Markets
Typically somewhat isolated from the effects of a dismal economy, the mass merchandisers channel may have suffered a tougher blow had it not been for stellar growth in the BRIC markets. Faced with a declining share from erosion by drug outlets/pharmacies and direct marketing, this channel eked out less than 2.5% growth in the United States. However, the developing BRIC economies posted double-digit growth in the channel: 14.1% collectively and around 25% each in Russia and India. The leading international retailers, Walmart and Carrefour, dominate in Brazil and China, with Walmart launching an aggressive expansion in Brazil through the acquisition of local chains.