Marketing Matters: Fuel Costs Affect Beauty Buys

It is difficult to ignore the constant chatter in the media, in the office or in our own homes about how the high cost of fuel, the mortgage crisis and the credit crunch are changing the way we live. Higher gas prices, in particular, are driving large numbers of Americans to modify their lifestyles. According to BIGresearch, 86% of people admit to making different choices due to high fuel costs.

Research indicates that Americans are concerned with many economic issues: job uncertainty, foreclosures, the stock market, the November presidential election and increased gas and food prices. All of these factors affect consumer confidence. Every economic downturn changes shoppers in some way. Economists say that the new spending behavior is the most dramatic and extensive that they have seen since the mid-1970s. More than half of Americans revealed that they are concentrating on the things they need, not the things they want, which certainly affects beauty care products and services.

Consumers are also leveraging the Internet to either research products online and avoid the drive to the store and/or purchase online. For beauty product shopping, the Internet is one of the fastest growing channels, according to The NPD Group. As several mass merchandisers trim their beauty inventory to boost profitability, the Internet will be a welcome alternative for shoppers. Unfortunately, two issues are looming that could jeopardize online shopping retailers and potentially reverse consumer behavior: shipping charges and sales tax. Currently, many beauty care retailers, such as Sephora, have a free shipping policy (often contingent on a minimum spending plateau). But with rising fuel costs, will online retailers be forced to charge for all shipping orders to improve their bottom lines? In addition, as more states start to tax online purchases (New York being one recent example), it could diminish the cost savings benefit that consumers currently enjoy.

In the world of beauty products, 59% of consumers have curbed their spending, compensated by using less, trading down to cheaper brands or finishing the absolute last of an item before discarding. In past downturns, cosmetics have been the last splurge to go. Even in a weak market, consumers would regularly purchase an expensive tube of lipstick as their little luxury. This time around, however, the Lipstick Theory, proposed by cosmetics giant Leonard Lauder of Estée Lauder, isn’t proving true.

Some questions we need to explore once the economy recovers are: Which habits will shoppers maintain, and which will they drop? In hair care, will consumers continue to purchase a value brand like Suave or revert back to a category-leading, premium mass brand such as Pantene? Will families continue to buy only one shampoo for all family members instead of several to suit individual requests? Will consumers see products like Olay Definity Color Recapture, Regenerist 14-day Skin Intervention or Regenerist Micro-Sculpting Cream as products that perform at a good value versus department store brands tagged at $150 or more? The last big recession in the early 1990s generated a paradigm shift in retailing as affluent consumers shopped at discount retailers as well as upscale stores. Hunting for bargains seems to be popular this time around, too. Wal-Mart announced a hearty 5.8% increase in same-store sales, its best June performance since 2002. Department store same-store sales, though, plunged 4.1%.

Will consumers continue to purchase beauty products on the Internet, at mass retail markets or supercenters over department stores? Some sites, like, have instituted some of the same policies as the department store cosmetic counters. The site offers a 100% color guarantee on many makeup products, allowing customers to return them for a full refund.

How are beauty services fairing in this downturn? A number of consumers are trading down from full-service salons to cosmetology schools or nail salons, particularly for manicures and pedicures. Other consumers are extending the time between services, while some are dropping them completely. Will facial cosmetic surgery procedures continue to be on a spending freeze once the economy improves? Some believe that consumers will continue to be judicious in the way they spend their discretionary income due to a declining standard of living over the next two decades.

Blogs are becoming more important to shoppers as a means to review products with others in their peer group versus just trusting the vendor claims. More than 27% of women have posted a comment about a beauty brand, and 67% of women who read these blogs are more likely to buy a beauty product if they read a good comment or review from a fellow consumer.

Economic factors, the presidential election and blogs are creating unprecedented changes in beauty care shopping habits. In this environment, prestige beauty care manufacturers that will flourish are those that can increase the innovation gap between their brands and their mass competitors. A loyalty program targeted to frequent shoppers is one opportunity for brands to explore; linking a brand to consumers’ current interests in environmental responsibility is another strategy. The winners will be manufacturers who are able to refocus their efforts to strike the right balance between brand promise, pricing and marketing to respond to the shifts in consumer buying habits during this difficult downturn.

Liz Grubow is vice president and group creative director of the LPK Beauty Group.In her 20-plus year career, Grubow has helped develop and manage brand identity programs for some of the world’s most successful beauty brands—including Pantene, Olay, MAX Factor International and Cover Girl. She has been recognized internationally by the prestigious London International Advertising Awards for Design and has been bestowed with the Procter & Gamble CEO Design Award.

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