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New World Economy Drives Shift in Global Beauty Retailing
Posted: October 1, 2009
Global Beauty Sales by Retail Outlet
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Also contributing to growth through the channel, mass merchandisers have fine-tuned their product offerings and revamped store space to appeal to consumers and boost cosmetics and toiletries sales. By devoting more shelf space to naturally positioned brands, luxury and masstige products, and male grooming products (especially in India), the mass channel will continue to grow at a moderate rate.
Department Store Dichotomy
Perhaps the biggest dichotomy of all can be found in the department stores channel. The much-aligned stalwart of the American shopping mall has experienced a sharp decline in recent years, even before the economy began to falter. Shifting consumer patterns saw traffic move from the traditional mall to the strip mall and standalone stores, with specialty retailers offering a more intimate shopping experience, especially in the cosmetics and toiletries arena. Suffering the cost of high overhead and expensive real estate, the number of department stores in the United States and Europe has dwindled steadily—some closing up shop in the United States and others consolidating in Europe. Despite the notorious contraction, the U.S. is the only market to actually see sales decline in the channel, losing less than 1% of share.
On the other side of the globe, however, department stores are blossoming, with shoppers in India and China discovering this decidedly Western concept. Economic expansion in both countries has spurred new interest in shopping center developments anchored by major department store retailers. With more than 5,000 doors in China and 150 in India, the channel has become synonymous with the shopping “experience.” Department store sales of beauty products are up by 21.3% in India, albeit from a small base, and just above 19% in China, the third largest market in the channel. Clearly, all is not lost for department store brands on a global scale.
Market Hot Spots
The Chinese market stands out as the hands-down global growth leader for beauty sales, with double-digit gains in every channel. However, key hot spots exist in each of the top 11 markets examined in this report. Double-digit growth in every channel in Brazil also provides new opportunities for marketers, even in the absence of an established department store channel. Food outlets command a strong presence here, particularly in rural areas where there are few other options for consumers. Robust growth in the Russian market benefits modern retail establishments, such as the direct sales, specialty and mass channels, at the expense of the more traditional general store. Conversely, the Indian general stores channel, known as kiranas, maintain an overwhelming presence in the market with a 78% share and 9% growth, despite intensified competition from the department store and mass channels.
With overall sales growth for the global market expected to peak at 3.6% over the next five years, the outlook may seem a bit dim on the surface. But, as the individual channels continue to evolve, big gains are expected, particularly in developing nations. The key to success in this shifting global marketplace is to stay ahead of the curve for product and consumer trends with a diversified product portfolio and distribution strategy that allows for a nimble approach to strike while the iron is hot in a variety of channels and markets.