Six Major Beauty Retail Changes The Pandemic Has Accelerated

Plenty of retailers took huge hits last year. According to Retail Dive’s count, nearly 30 filed for bankruptcy in 2020, including Neiman Marcus, Lord & Taylor and Century 21.

However, amid the pandemic that shuttered stores and sequestered people in their homes, the resilience of retail, particularly brick-and-mortar retail, is evident. United States Census data shows retail and food service sales in the country progressed .6% in 2020 from the prior year. An estimate from Digital Commerce 360 pegs online spending at 21.3% of total U.S. retail sales last year, up from 15.8% in 2019. Still, at a time when going out posed a health risk to many, almost four-fifths of U.S. retail sales occurred offline.

Grocery stores, big-box chains and e-tailers saw their fortunes mount in 2020. For the November/December holiday period, Target’s comparable-store sales jumped 17.2%. Stock prices for Target, Amazon, Whole Foods, Costco and Walmart soared between 12% and 160% last year. They benefited from trends such as e-commerce adoption existing before the coronavirus that have accelerated during it.

Where retail goes from here is unclear, but there’s no doubt it will be permanently altered by the recent shifts in shopping habits. Stephanie Wissink, managing director at Jefferies, Elizabeth Lamont, president of EL Luxury Consulting, and Beauty Independent editor Claire McCormack participated in an In Conservation webinar last Wednesday to dissect the changes in the retail landscape. Here are six takeaways from their discussion: 

A comparison of the retail survivors and thrivers’ current stock prices.

1. Beauty has Been Redefined

There is an intensifying focus on holistic beauty reflected on retail shelves. “It’s about being well, it’s not cosmetic,” said Wissink. Mood-enhancing ingestibles have registered explosive growth. Sexual wellness and menopause-related products are also part of beauty retail’s evolution as is the rapid advance of sustainable ingredients and packaging. While Lamont expects clean-clinical skincare to continue to be popular, she said denoting products as “clean” will fall by the wayside as clean becomes virtually a required attribute of beauty. “You can’t ignore your responsibility as a brand or as a manufacturer to produce good-for-you, good-for-the-planet formulations,” she said. Retailers will cater to consumers’ deeper exploration of health to stay relevant. At stores and e-tailers, the health bent is manifested in over-the-counter medicine and cosmetics being lumped under one beauty and wellness umbrella. 

2. The Luxury Consumer Is Different 

If brands and retailers have a cookie-cutter idea of luxury consumers, they’re out of step. No longer simply older white women living in big cities, luxury consumers are increasingly diverse. “Age barriers have widened. Men make up almost a third of who this shopper is. Geographic lines have fallen away with the advent of online businesses,” detailed Lamont. She asserted the pandemic hasn’t diminished luxury consumers’ appetite for spending, but their interests have changed. For example, they’re more willing to try at-home devices. “Twenty years ago, the only device in your house might have been an electric toothbrush. Now, it’s microneedlers, laser or light therapies,” said Lamont. She mentioned other big-ticket beauty purchases like dermatological procedures and surgeries are swelling.

Shen Beauty is known for picking up breakthrough indie beauty brands. It launched Ilia and was the first retailer to feature Kosas. The boutique began offering in-store services such as facials due to customer demand.

3. Retail Partnerships Are On The Rise 

Last year, there was a steady stream of news about retail partnerships, including between Credo and Ulta Beauty, Ulta Beauty and Target, and Sephora and Kohl’s. Wissink explained the retail partnership fever is the result of a recognition that people are consolidating shopping trips. The one-stop shopping behavior is a product of the pandemic. Wissink said, “What Target is doing with Ulta is creating a very curated experience, and the reciprocal value is it’s a gateway to Ulta.” 

The fast pace of newness in the beauty category is distinct from the slower pace of newness in the home goods and grocery categories, making it challenging for non-experts to capitalize on hot beauty brands and trends, and possibly beneficial to bring in a retail partner with expertise in the beauty category. The partnerships are taking place while leading retailers still dedicate the majority of their beauty square footage to incumbent brands, but indie beauty brands have been grabbing shares of shelf space and consumer dollars from incumbent brands.

McCormack pointed out that, while Target has cache that Walmart and CVS lack, it doesn’t have the extensive history with trained beauty sales associates that is the differentiator for pure-play beauty stores. “It creates a more authentic experience, and they know, if they bring the Ulta shopper in, their basket will be a mix of inventory, not just Ulta beauty,” said McCormack. She added, “What’s going to be really interesting is if people start getting vaccines at Target and the like, what will that do for shopping?”

4. New Types of Independent Retailers are Emerging

Brittney Ogike founded BeautyBeez to merge the essentials of a beauty supply store with the customer service and expertise of a prestige beauty specialty retailer.

Niche retail players have taken strides to vary their businesses. As it accelerates e-commerce penetration, The Detox Market acquired e-tailer Clementine Fields. Beauty Heroes, which began as a subscription operation, has incorporated a physical store and curbside pickup. Shen Beauty encompasses products and spa services. Credo, The Detox Market and Follain have launched in-house brands to expand their reach. McCormack said, “They are very entrepreneurial while understanding that their means are limited in comparison to a Sephora, but they are utilizing their strengths to offer something new and fresh.”

Many BIPOC-owned e-tailers targeting women of color, including Sanctuaire, Aˈme-ke, Beautyocracy and Adaya Beauty, have emerged. They’re able to discover and swiftly onboard budding brands addressing specific demographics and needs. “Authenticity and responsibility are huge, and consumers have become more interested in making purchases aligned with their values, and these e-tailers offer that,” said McCormack. She elaborated, “People are always going to order from Amazon, but these brands and retailers build communities which Amazon does not have. Building community takes authenticity, and it’s hard, but the value is intangible.”

Multicultural representation is key for the retailers of the future, emphasized Lamont. In an Ipsos  survey, 70% of Black respondents relayed they feel beautiful when they see people their race or ethnicity positively depicted. Lament said, “This results in positive psychological association with a brand or retailer before they’ve even made a purchase.” 

5. Experiential Retail IS ESSEntial 

“Ultimately, retail isn’t dead, boring retail is dead,” declared Lamont. She singled out Apple, Peloton and Yeti as examples of companies that evoke a sense of community and status, and are able to pack stores based on their connections with customers. “Experience is critical. It needs to have delight factors and have something tangible that you take away,” advised Lamont. She predicts beauty brands that can create custom products like bespoke lip colors or special shareable moments will flourish. Lamont doesn’t think consumer clamoring for tailored products will ebb. She envisions customers inputting DNA information and buying face creams suiting that DNA, a phenomenon already beginning to happen. 

6. Financial Health Is Critical To Surviving Obstacles 

The retailers that survived and thrived in 2020 had ample stocks of cash available to navigate through the pandemic. On-hand capital provided the opportunity to invest in and, more importantly deploy, strategic advantages like delivering strong omnichannel experiences such as curbside and in-store pickup. Target, Walmart and Costco raised wages and doled out bonuses in addition to investing in their retail infrastructure rather than restructure debt sheets like many mid-level and prestige department stores were forced to do. “A healthy balance sheet gives your senior leadership team the permission to actually implement a strategy,” said Wissink, stressing, “If you don’t have the capital, the strategy really carries no value.”