Over the decade between 2000 and 2010, additional sales of almost $175bn were generated across the beauty and personal care industry on a global basis. From a retailing standpoint, one would think that given the size of this figure there was enough for everyone to be happy with in their gain in share. However this has not been the case, with certain channels accounting for the majority of these new sales.
The biggest winners were non-store channels and while the internet is included in this, it was not the channel which gained the most share over the decade with that accolade instead going to direct sellers. Only Japan saw a contraction in sales for direct sellers over that period while the markets of Brazil, Russia, China and Mexico generated additional sales worth $1bn or more.
In Brazil direct selling has benefited from the country’s women increasingly using social media networks like Orkut, Facebook and Twitter to either promote or comment about products and brands. As a result, sales consultants from Avon, Natura and others are increasingly using social media networks as a way to supply product information, enhance customer relationships and attract new customers through referrals.
The individual link is mirrored in China, where direct selling’s personalised consultation service is proving to be very popular among consumers looking to purchase beauty and personal care products. In Mexico, where the price difference between stores and direct selling is small, direct selling is benefiting from the fact that salespeople have a close relationship with their customers and are willing to grant credit even without a credit card, which is something store based retailers do not offer.
The internet, however, garnered an additional 200 basis points in value share over the 2000-2010 period. The majority of this gain derived from the developed markets of western Europe and North America, with strong advances also achieved in Eastern Europe and Asia Pacific. However the internet is not generating the same excitement in every region and in Australasia, Latin America, the Middle East and Africa the channel’s gains were almost negligible.
From 2000-2010 only three countries (the US, Japan and France) generated additional internet sales of more than $1bn, underlining just how impressive the performance of direct selling has been. However France serves as an example of the fact that the internet retailing channel is maturing and is perhaps not the best medium through which to sell beauty and personal care products. During the decade to 2010 internet retailing of beauty and personal care products registered a weaker performance than the wider internet retailing channel, despite new entrants such as Sephora.
Meanwhile, the success of internet retailing in the US highlights opportunities for manufacturers with Procter & Gamble (P&G) launching its own direct to consumer website which allows consumers to order all P&G products directly from the company. As retailers expand their private label ranges, manufacturers will need to investigate such opportunities in order to sidestep store based retailers.
However, aided by the economic downturn, the biggest gains were made by the supermarket/ hypermarket channel which gained a further 350 basis points over the ten year period. This growth however was not uniform across the globe. Strong advances were seen in North America and Asia Pacific but this was tempered by lacklustre growth in western Europe and a contraction in sales in Latin America.
In these regions particularly towards the end of the period, different channels saw a heightened level of competition. Discounters and parapharmacies/ drugstores boosted their presence, together providing different competitive pressures, for example in terms of pricing, widening the availability of private label products and offering a small retail format in which consumers are able to shop quickly and conveniently.
Further evidence of this trend can be seen from the strategy currently being adopted by one of the fastest growing parapharmacy/drugstore retailers in the world, US based Walgreen, with the company’s chief executive Greg Wasson saying that it aims to be the “first choice for health and daily living needs” and “convenient providers of healthcare, not just prescription drugs”.
And it is this convenience factor that is expected to become increasingly important to consumers. Small store formats and the successful direct selling and internet retailing channels will be able to get closer to consumers, offer advice and a wide range of products at competitive prices, all at a time and place to suit the consumer. Thus the trends seen in these countries suggest that while supermarkets/hypermarkets may have been the growth formats of the past, the future will belong to others.