The economic turmoil that has continued into 2009 has greatly intensified consumers’ anxiety, and the end does not seem near. The most important implication we anticipate is more evidence of how consumers will learn to cope. Consumers will be increasingly prone to relishing simple pleasures—re-evaluating their priorities and revising their purchasing habits accordingly. The economic realities will bear real incentives for consumers to discover novel ways of enjoying what they have, rather than the uncontrolled, conspicuous consumption of the last decade. At the annual National Retail Federation convention, former Wal-Mart CEO Lee Scott warned against expecting a buying spree when the economy starts to recover. He noted that consumers are giving up habits such as eating out and shopping, but there is one difference about this recession compared to the past: consumers are talking about how good they feel about their own pullback in spending.
In our caseload at LPK, we’ve observed that many consumers are also beginning to re-examine their skin care habits, and Gen-Y consumers will continue to drive the anti-consumerism movement, purchasing only what is truly essential or even making their own skin care formulations. Gen-X consumers will spend with caution, perhaps looking for discounts or incentives or innovative offerings like hybrid or multi-use products. A growing number of baby boomers will postpone visits to a cosmetic surgeon in favor of less-expensive fixes such as Botox, Reloxin (a new Botox rival), products such as the NV Perricone Light Renewal Therapy or stronger topical treatments instead. From this adversity will flow opportunity. Well-managed manufacturers of skin care products will have the cash flow to continue their focus on innovation and research.
For some skin care brands, the guiding principle will be the performance/price ratio; i.e., Which products and services in a given offering (premium, mid-tier or value) provide the most capacity for real performance at a reasonable price? How can the performance component be emphasized without drastically raising the cost? According to an Information Resources, Inc. (IRI) report titled, “Shopper in Crisis” (Nov. 6, 2008), 52% of consumers at all income levels said they tried to make personal care products last longer. Will manufacturers create more concentrated skin care products, similar to what’s happened with laundry detergents? Will larger sizes be demanded by consumers in an attempt to cut down on shopping trips and get a better price per ounce?
As consumers look for shopping strategies, what will they seek out? Will they be looking for skin care products with ingredients that are comforting and familiar to them, perhaps those with good-for-you ingredients like vegetables from the produce aisle?
Spinach appeared as an ingredient in two beauty products in 2007. This year it appears in at least 10—including CosMedix Purity Clean Exfoliating Cleanser and MAC Studio Moisture Cream.
Will consumers buy more multi-use products because they are starting to question if they really need all of those products in their bathroom? Lush’s Seanik Solid Shampoo is one multitasker that can be used for hair and body, Revolution Organics’ All-Over Body Balm touts more than 20 uses, and Philosophy offers a high-foaming shampoo, shower gel and bubble bath in one SKU.
Multitasking products deliver on many manifestations of value: saving money, time and/or space (in bathroom/shower) and reducing environmental footprints. Consumers are exhibiting more support for the environment, a positive side effect during this recessionary time, than during any other time in history. Consumers are proud to proclaim, “I’m saving money and being greener.” Skin care manufacturers that downsize packaging and pass the cost savings on to the consumer or increase the use of biodegradable/recyclable packaging could attract elusive buyers.
What will manufacturers learn during this recession? Will manufacturers with a narrow portfolio of products outpace market averages because they are easier to sustain than a larger portfolio of products? The strategy seems to be working for Beiersdorf AG. A recent news release indicated that its three major brands—Nivea, Eucerin and La Prairie—had achieved double-digit growth on a worldwide basis. Will we see a resurgence of dormant brands or products that don’t advertise often and/or don’t get frequent media attention? One product that has made its way back into the headlines is Unilever’s Vaseline brand. A recent Superdrug poll conducted with 2,000 British women, published in the Telegraph, named Vaseline Petroleum Jelly the number one beauty product women cannot live without. The study surmises that the reason this simple petroleum-based moisturizer is tops is because it is a familiar, trusted, reliable brand with an inexpensive price tag. Another notion to consider during this downturn is whether to focus more on offerings and engaging the customer in grocery stores or online stores such as Amazon.com and Drugstore.com, which have been reporting solid revenue growth of late.
A Matter of Self-reliance
According to IRI, many U.S. shoppers are settling into self-reliance strategies to save money—45% of shoppers earning $35,000–54,000 annually agree with the statement, “I go to hair salons or spas less often.” Those in higher income brackets are also spending differently than before. According to a recent Forbes article, “How The Luxury Consumer Will Spend in 2009,” these consumers will seek concentrated, high-potency and increased-efficacy products that may also have a social or ecological benefit.
P&G’s Olay is one brand with a strategy to lure luxury brand shoppers with its new Olay Professional Pro-X line—squarely positioned as a professional skin care line for the mass market. Starting at $42, it has been called “a savvy buy in a down economy” by beauty care analysts due, in part, to its trusted brand name among consumers. The Pro-X line is the brand’s most potent formula, utilizing a proprietary peptide ingredient for increased hydration and to help build collagen and elastin. Olay is betting on the credibility of its authority and the three years of development, which included a panel of beauty experts and skin care professionals in dermatologic practice, for success with the Pro-X line.
A Global Issue
Skin care is taking a beating around the globe due to the financial crisis. Europeans are scrutinizing prices more closely, reining in their spending. In the U.K., for example, decreased skin care sales in back-to-back months has been the trend. The British are stating that they are taking this opportunity to look back on the austere postwar years with pride.
In addition, foot traffic in European and U.S. department stores is decreasing dramatically, and retailers are reassessing their product offerings—while customers are thinking harder about what products provide the best value. Asia is fairing the best, enjoying surging growth in recent years—after its own financial crisis—that has expanded the ranks of middle-class consumers. Asian consumers are being cautious and tightening the purse strings on luxuries, but have generally done a better job of budgeting and have less credit card debt than the West. In South Korea, estimates indicate that as many as 30% of women aged 20 to 50 had surgical or non-surgical cosmetic procedures in 2008, but these procedures are currently experiencing a decline. Although research indicates that Asians save anywhere from 40–70% of their salaries, job losses, forced retirement and pay freezes/reductions are affecting these consumers as well. In an attempt to decrease the impact on the economy, some Asian countries have provided economic stimulus vouchers to their neediest citizens.
For retailers, private label consumer packaged goods continue to be a strategy to gain market share, and private label brands continue to evolve in their sophistication and availability. Private label options do provide good quality at a good value; however, trusted brands provide certainty in terms of expected product quality through time-tested research and technology.
Skin care brands that will experience sustainable growth will be those that bond and form allegiances with consumers that are more than skin deep—the value proposition must be real, authentic and honest. With continuing revelations of corporate and political greed and misdeeds, cynical consumers are demanding consistency, accountability and authenticity. This will be a difficult barrier to overcome since some manufacturers will still have to create breakthrough products with some degree of restricted resources—a reduced workforce, frozen or slashed advertising budgets, or other outcomes of the economic crisis. The strong will survive—the brands that have longevity are backed by companies with flawless reputations for how they are managed financially, how they treat their employees and their level of responsibility as genuine corporate citizens. Skin care brands will need to work overtime to prove they are authentic; a fleeting change in tactics or simply dusting off the last recession playbook is not going to suffice. There must be a profound, strategic shift that builds closer, stronger relationships with consumers that will survive long after the recession subsides.
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.
Valerie Jacobs is a group director for LPK Trends and a design forecaster focusing on the development of trend analysis for LPK client brands. Jacobs is also a professor at the University of Cincinnati College of Design, Architecture, Art and Planning, and is a guest lecturer for the In-Store Marketing Institute, Design Management Institute and the Industrial Designers Society of America.