Forget Luxury: Value Retail Is Where The Beauty Boom Lives
Manny MUA, aka makeup artist Manuel Gutierrez, was downright giddy making his way to Dollar General, a store he had never previously visited, for a recent beauty haul. When he entered, he was pleasantly surprised to see national brands like Maybelline, Cover Girl, LA Colors and Wet ‘n’ Wild, but his main goal was to road test Believe Beauty.
Developed by Maesa, the incubator with the brands Hairitage by Mindy McKnight, Anomaly, Hey Humans and Flower Beauty in its portfolio, Believe Beauty is a Dollar General exclusive that debuted in 2019 with 144 stockkeeping units priced at $5 or less each. In the years since, it’s enlarged to more than 260 makeup and nail items and, in addition to being available in over 17,000 Dollar General stores, extended to the retailer’s new and buzzy concept pOpshelf.
Dollar General and Maesa declined to disclose sales estimates, but those familiar with Believe Beauty say it generates annual sales exceeding $25 million. Gutierrez’s reaction demonstrates why the brand has picked up steam.
“I am very, very impressed. I think most of you would say…that’s pretty great. I was shooken to my core,” the influencer, who dropped $115 on makeup, batteries and micellar water on his Dollar General trip, gushed. Believe Skin Finish Foundation was one of his favorite products from the brand.
Gutierrez isn’t alone in his approval of value store beauty. Beauty brands are taking notice, especially since the dollar channel weathered COVID-19 better than many retailers and is expanding as other retail sectors are shrinking. Statista conservatively counts 34,215 value stores—more than Starbucks and McDonald’s combined—in the United States last year, an increase of 3% from 2019.
Dollar General plans to open 1,050 stores during the 2021 fiscal year. There’s a Dollar General store within five miles of approximately 75% of the American population. In fiscal year 2020, its sales rose 21.6% to hit $33.7 billion, and same-store sales spiked 16.3%. By contrast, Target’s sales increased 19.8% in 2020 to reach $93.6 billion.
In addition to Dollar General, the roster of value stores ranges from small-town mom-and-pops to the swelling Five Below, which will open between 170 to 180 doors this year, to huge companies like Dollar Tree Inc., operator of 15,685 stores between Dollar Tree, Family Dollar, and Dollar Tree Canada. Dollar Tree’s fiscal year 2020 sales advanced 8% to $25.1 billion, and it’s same-store sales spiked 6.1%. Other players include 99 Cents Only, US Dollar Store, Tuesday Morning and Beauty Trendz.
The outlook for value stores has been amplified, according to Wendy Liebmann, CEO of consultancy WSL Strategic Retail, thanks to executives who honed their craft at major retailers. A case in point is Idalia Farrajota, SVP of merchandising for Five Below, who is credited with injecting excitement into retailers at past roles, most recently at Michaels. The burnishing of beauty, a known margin generator, can also be linked to Dollar General CEO Todd Vasos, a veteran of drugstores with stints at Longs, Phar-mor and Eckerd prior to joining the value retail chain in 2008.
“Low-income beauty and personal care shoppers present the highest opportunity to convert impulsivity.”
The executives are shaping value retail at a moment it could shine in beauty. According to a recent report from NielsenIQ, low-income shoppers are fueling beauty and personal care growth during a time in which economic stability remains uncertain. Throughout the pandemic, they’ve accelerated their online beauty and personal care spend by 69%, as much as 27 percentage points more than other segment, Nielsen data revealed.
Low-income shoppers are active on value e-commerce websites as well as in stores. “The low-income segment’s strong preference for online shopping will continue to develop even further as they become increasingly dependent on product comparison capabilities to search for the best deal,” Tara James Taylor, an SVP at NielsenIQ, wrote in the report.
She explained shoppers with limited budgets stick to essentials when purchasing groceries, but are wooed by beauty. “Low-income beauty and personal care shoppers present the highest opportunity to convert impulsivity,” Taylor said in the report.
For a myriad of reasons—dollar stores’ convenient setups for shoppers looking to get in and out, among them—some consumers favor value stores for cosmetics and personal care. “Demand for beauty has not gone away,” says Liebmann. “It may have shifted to eye from lip, but there are people not willing or not able to pay the prices in a drug or specialty store. So, we do see a groundswell of support for value retailers. You shouldn’t ignore them.”
Stores and brands aren’t ignoring them and, instead, are busy responding to value retail shoppers’ beauty interests. Beyond Believe Beauty, Dollar General recently announced Root to End, a clean haircare line that currently has 10 items in its selection, again all priced at $5 or less and in partnership with Maesa.
“Keeping the customer at the center of all we do, we worked to develop a clean hair care line for a broad range of customers’ haircare needs,” says Amanda Wilson, Dollar General’s senior buyer of beauty care. “The thoughtful creation of Root to End includes offering a line free of parabens, phthalates and mineral oil and that is equally vegan and cruelty-free.”
At dollar stores, beauty is increasingly not a category entered into deal to deal. It’s rather a planogrammed department associated with building baskets and store loyalty. Each retailer has a slightly different focus for the category and pricing with it. Five Below and Dollar General are generally considered the most advanced in beauty.
Five Below pushed the beauty category from the center of the store to a planogram on the perimeter in several stores. Wet ‘n’ Wild, LA Colors and Freeman are brands featured at Five Below. There is a grab-and-go array of items priced between $2 and $5 like hand sanitizers, pumice stones, sunscreens and makeup brushes.
“There are people not willing or not able to pay the prices in a drug or specialty store. So, we do see a groundswell of support for value retailers.”
“Five Below surprise and delights. They use merchandising vehicles as containers and acrylic and glass jars that make stores fun and colors pop,” says Tracy Holland, executive chairman and co-founder of incubator HatchBeauty Brands. HatchBeauty Brands owns the brands Beauty Essentials and Remi Rose that are sold in value doors. “There’s a big opportunity, and we’ve had success with getting to know this business,” says Holland.
Dollar General embarked on major upgrades to its beauty presentations about five years ago with improved fixtures and assortments. And it’s been making headlines with pOpshelf, a roughly 9,000-square-foot format aimed at suburban shoppers that kicked off with two stores in the Nashville area last year. The target customers are women with incomes of $50,000 to $125,000 per year.
POpshelf sells beauty products, home decor, party supplies and other discretionary products, with most items priced under $5. Plans call for up to 50 pOpshelf stores to open this fiscal year. Today, there are a total of six stores in Georgia, Tennessee and North Carolina. Holland says, “POpshelf is modern, hip and well-laid-out.”
At the debut of the first pOpshelf, chief merchandising officer Emily Taylor cited Dollar General’s approach to beauty as an example of the concept’s uniqueness. “It is one of the really fun areas in the store when you first come in. We focus on beauty in the sense of helping customers pamper themselves,” she said. “We have cosmetics, but it’s really more about hoping to make the format a treat-yourself destination.”
Dollar General also operates DGX stores in vibrant urban markets that have an emphasis on beauty. Family Dollar and Dollar Tree are looking to leverage their joint strength in co-branded stores. The combination stores started quietly in 2019, and there are now more than 50 units of the merged model that melds the higher prices of Family Dollar with the bargain $1-only tickets at Dollar Tree.
“Compared to other Family Dollar stores in similar markets, combination stores are delivering a same-store sales lift of greater than 20% on average and are more productive with high gross margins and better expense leverage,” said Mike Witynski, president and CEO of Dollar Tree.
Beauty at Family Dollar is driven by personal care. Makeup consists of brands such as Maybelline, Cover Girl and LA Colors. With a concentration on household brand names, do indie brands have a wedge into the booming dollar store industry? There are a few beauty product segments, says Liebmann, where shoppers might not want to take a risk on a brand they don’t recognize. In categories like nail polish, there is less of a gamble.
HatchBeauty’s Holland believes smaller brands can make a mark in feminine care at dollar stores, a market niche in which they’ve already become known for innovations. “What hasn’t been touched yet is in vaginal care and vaginal wellness along with natural products for feminine care,” she says. “There are plenty of indies in that.”
- Due in large part to economic uncertainty and inequity in the United States, dollar stores are emerging as a bigger force on the beauty scene.
- Statista counts 34,215 value stores—more than Starbucks and McDonald’s combined—in the United States last year, an increase of 3% from 2019.
- Dollar stores have fared better than other retail sectors amid the pandemic and the rise of e-commerce. In fiscal year 2020, Dollar General's sales rose 21.6% to hit $33.7 billion, and same-store sales spiked 16.3%. The chain plans to open 1,050 stores during the 2021 fiscal year.
- Dollar General kicked off a concept called pOpshelf aimed at suburban shoppers with two locations in the Nashville area last year. This year, plans call for it to expand the concept by 50 units.
- In addition to Dollar General, the roster of value stores ranges from small-town mom-and-pops to the swelling Five Below, which will open between 170 to 180 doors this year, to huge companies like Dollar Tree Inc., operator of 15,685 stores between Dollar Tree, Family Dollar, and Dollar Tree Canada.
- According to a recent report by NielsenIQ, low-income shoppers accelerated their online beauty and personal care spend by 69% during the pandemic, as much as 27 percentage points more than other segment.
- The incubators are at work directing products to the value retail channel. Maesa has developed the cosmetics line Believe Beauty and clean haircare brand Root to End for Dollar General. HatchBeauty Brands plays in dollar stores with the brands Beauty Essentials and Remi Rose.
- While value retailers typically stock their beauty sections with household name brands, there are opportunities for emerging indie players, particularly in niches such as nail polish and feminine care.