Will the lipstick effect be strong enough to help the high-end cosmetics sector ride out the recession. Imogen Matthews attempts to make sense of the premium market
Understanding the trends in today’s premium beauty markets has never been more important given the speed at which the recession has gripped the global economy. So far, the UK premium beauty markets have outperformed many other consumer categories, proving that cosmetics, skin care and fragrance are essentials that few women would be prepared to give up. This year’s Premium market report, published by Imogen Matthews Associates, has been expanded to take account of the current chaotic economic conditions and includes insights, analysis and predictions from beauty industry experts on how to succeed and survive. Here are a few highlights.
To all intents and purposes, trading on the high street last December was dire. According to the British Retail Consortium, retail sales fell in December 2008 by 3.3%, the largest drop since it started collecting data in 1995. Part of the problem was the deep discounting which so many retailers undertook in a desperate attempt to get consumers into their stores and persuade them to part with their cash. Only a few years ago, discounting in December was frowned upon, especially by the premium beauty suppliers, who have an image to maintain. In 2008, all bets were off and retailers across the board undertook various forms of discounting, such as one-day 20% off ‘spectaculars’, price matching and spot discounts for those brazen enough to ask. Some retailers [not beauty] even dropped their prices by as much as 70% in the last few weeks before Christmas.
Discounting has become such a regular feature of pre-Christmas retailing that it has almost usurped the traditional January sales. Savvy consumers now expect an extended period of price offers from early December through to the end of January and beyond.
The beauty markets thrive on new product launches, even in a recession, and there is no sign of any let up here. Many new launches are planned up to two years in advance and the scale of investment already in place means that they must go ahead. Whether this pattern will continue remains to be seen. If companies scale back on NPD now, it will only become noticeable in 2010.
The fragrance juggernaut certainly shows no sign of slowing, with another bumper year in new men’s and women’s launches in 2008. According to international fragrance consultant Michael Edwards the number of new fragrances globally passed the 1,000 mark for the first time in 2008, reaching 1,013, up from 903 in 2007.
Fragrance traditionally sells well at Christmas, especially for those brands which have been around for years. When people feel nervous, they tend to turn to what they know rather than risk their hard earned cash on something new and unknown. However, this has not deterred the fragrance houses from looking for new niches, with celebrity fragrances proving the most popular, especially amongst teenagers. But maybe celebrity fragrances are starting to lose their shine, with fewer major new signings, and follow-on launches to existing brands not quite hitting the mark. Future successes are likely to come from celebrity campaigns that are underpinned by a strong brand message or story.
Economists believe that during tough times, people forego extravagant purchases but continue to spend on small luxuries such as make-up. After 9/11, Leonard Lauder, chairman of The Estée Lauder Companies, made the observation that lipstick sales rose while other sectors of the economy contracted.
It is perhaps too early to predict whether make-up sales will ride out this recession, but the early signs are that women are continuing to buy products they consider essential to their well-being. Of course no-one “needs” a new Chanel lipstick, but it is an affordable treat that makes one feel good and is a lot cheaper than a Chanel handbag.
Premium brands will have to work harder than most to win over cautious consumers who could all too easily trade down to cheaper, good quality alternatives. NPD has never been more important in premium make-up, and the launch of vibrating mascaras [Estée Lauder’s Turbo Lash All Effects Motion Mascara, Lancôme’s Oscillation] and mineral make-up that you grind yourself [Elizabeth Arden’s Pure Mineral Powder Foundation SPF20] have had customers returning to counters.
The UK economic outlook is bleak, with consumer spending forecast by the CBI to decline by 2.7% in 2009. Unemployment is rising, the value of sterling is falling, as are interest rates, which means that savers will be better off putting their money under the mattress, or spending it.
However, beauty is regarded as one of the most resilient sectors, which is likely to fare better than most in a recession. This was certainly the case last time there was a recession in the 1990s. Bryan Roberts, global research director for Planet Retail, is optimistic about the prospects of the premium retailers. “Retailers that offer a depth of range, a great in-store environment and compelling customer service, will still have appeal for upmarket customers,” he says.
The Premium market report provides a clear and up to date picture of the trends, successes, company and retailer strategies to help premium beauty brands ride the recession.