Post on 23-May-2018
1
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
1) SurveydataandcompanyresultssuggestthatgrowthintheUSbeautymarkethasbeenpolarized,withlower-priceretailersandbeautyspecialiststoreshavingwonshare.
2) Millennials’frugalshoppinghabitsanddesireforqualityexperienceslooktobedrivingthistrend.
3) SurveydatafromProsperInsights&AnalyticssuggestthatWalmartandTargethavegrowntheirbeautyshoppernumbersinrecentyears.SephoraandUltahavegrownfast,too.
4) SurveysshowthatAmazonisthefifth-most-popularretailerforskincareandcosmeticsandthetoponlinedestinationforbeauty.
5) AkeylessonforbeautyretailersisonethatappliesacrossanumberofsectorsinwhichrivalsarecompetingwithAmazon:eithercultivateaconvincingcategoryspecialtyorfocusonlowprices.
Deep Dive: Channel Shifts in US
Beauty Retailing— Sephora, Ulta and
Amazon Carving Greater Share
Deborah Weinswig
Managing Director,
FGRT
deborahweinswig@fung1937.com
US: 917.655.6790
HK: 852.6119.1779
CN: 86.186.1420.3016
2
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
TableofContents
ExecutiveSummary.........................................................................................................................................3Introduction:ChangingShoppingHabits..............................................................................................................4ChartingChannelShifts:SpecialistRetailersOvertakeDepartmentStoresasAmerica’sFavoriteBeautyStores
................................................................................................................................................................................5WhereConsumersShop:Walmart,TargetandAmazonAreHighlyPopular.......................................................6
YoungConsumersOverindexatValueandSpecialistRetailers........................................................................8InFocus:UltaandSephoraDominateSpecialistRetailing.................................................................................11
UltaandSephoraGrowingStrongly................................................................................................................12
WhyConsumersShopatUltaandSephora.....................................................................................................13InFocus:E-CommerceandAmazon...................................................................................................................14
FocusingonAmazon,theMostPopularOnlineDestinationforBeautyandPersonalCareProducts...............16KeyTakeaways...................................................................................................................................................19FurtherReadingfromFGRT................................................................................................................................19
3
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ExecutiveSummaryIntheUS,youngerconsumersappeartobedrivingshiftsinthebeautyretaillandscape.
• Lower-priceretailerssuchasWalmartandTargethavegrowntheirshareofbeautyshoppers,accordingtosurveysbyProsperInsights&Analytics,andyoungershoppersaremuchmorelikelythanoldergenerationstoshopforbeautyproductsatTarget.
• SpecialistchainsSephoraandUltahavegrownsalesfast,too.Theyareincreasingtheirstorefootprintsandhaveuppedtheirshareofbeautyshoppers—andyoungshopperssignificantlyoverindexatthesechains.
TheseshiftssuggestapolarizationofgrowthintheUSbeautyretailmarket.
AccordingtoProspersurveys,lowerpricesareastrongmotivatorforshoppingforhealthandbeautyproductsatWalmart,TargetandAmazon,andpriceisthemostimportantfactoroverallwhenconsumersaredecidingwheretobuysuchproducts.Bycontrast,thetopthreereasonsconsumersshopforhealthandbeautyitemsatUltaareselection,qualityandpromotionsandthetopreasonstheyshopatSephoraarequality,selectionandbrandsavailable,accordingtoProspersurveys.
ThestrongpriceappealofAmazonsuggeststhatitcould,intime,disruptthegrowthinshoppernumbersthatlower-price,store-basedretailershaveenjoyed.Byshoppernumbers,Amazonisthefifth-most-popularretailerforskincareandcosmeticspurchases,accordingtoProsper,anditisthemostpopularonlineretailerforbeauty,perA.T.Kearney.
Surveydatasuggestthatsomedrugstoresanddepartmentstoresoverindexamongoldershoppers.Toattractyoungershoppers,theseretailerscouldconsiderstrengtheningtheirentry-levelbeautyranges,introducingorbolsteringbeautyloyaltyprogramsand,wherepractical,offeringin-storebeautyservices.
Source:iStockphoto
4
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Introduction:ChangingShoppingHabitsConsumersarechangingwheretheyshopforbeautyproducts—andnotjustbecausee-commercehasgrownandprovidedthemwithmorechoices.Inthisreport,weoutlinethepolarizationofgrowthinstore-basedbeautyretailing,whichissimilartothetrendwehaveseeninothersegments,suchasfashion.Consumersurveysindicatethatvalue-positionedretailerssuchasTargethavepickedupshoppers,whilespecializedretailerssuchasSephorahavegrownsalesstrongly.
Akeytakeawayforthoseretailerssellingbeautyproductsisaconceptthatisapplicableacrosscategories:eitherspecializeconvincinglyorfocusonlowprices—becausethemiddlegroundisincreasinglyservedbyAmazon.
Figure1.US:PolarizationofGrowthintheBeautyMarket
Source:FGRT
Weperceiveyoungerconsumersasdrivingtheseshiftstowardvalue-positionedandspecialistretailers,fortwomainreasons:
• Millennialstendtobefrugalshoppers,shoppingaround,lookingfordealsandcuttingcouponstosavemoney.Asaresult,theytypicallyspendlessperpersononbeautyandpersonalcareproductsthandooldergenerations.Atthesametime,manyyoungerconsumersappreciatequalityshoppingexperiences,andSephoraengagesverysuccessfullywithyoungerconsumers.Wecoveredtheseissuesinapreviouslypublishedreport,MillennialsSeries:MillennialsandBeauty.
• DrugstoressuchasCVSandWalgreensremainprominentretailersforbeautyproducts,butolderconsumersaremuchmorelikelythanyoungeronestobuybeautyitemsatthesestores.
Inthefollowingsectionsofthisreport,weanalyzethechannelshiftswehaveseenintermsofbeautypurchases,examinewhereconsumersshopforbeautyproductsandwhy,explorethegrowthofSephoraandUlta,anddiscusstheriseofe-commerceandAmazoninbeauty.
Consumersurveysindicatethatvalue-positionedretailershavepickedupshoppers,whilespecializedretailershavegrownsalesstrongly.
StrongValueCredendals:
Walmart,Target
ConvincingSpecializadon:Sephora,Ulta
Amazon
5
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ChartingChannelShifts:SpecialistRetailersOvertakeDepartmentStoresasAmerica’sFavoriteBeautyStoresWebeginbychartingthebroadviewofsectorshareintheUSbeautyandpersonalcaremarket.Thisillustratesthegrowthofe-commerce,butalsotheriseofspecialistretailers,suchasSephoraandUlta,between2011and2016.
• Beautyspecialiststoresgrewtheirtotalmarketsharefrom12.0%to14.3%between2011and2016.Thespecialistsectorlookstobeonthecuspofovertakingdrugstorestobecomethesecond-biggestchannel,behindsupermarkets.
• Internetretailing’smarketsharegrewfrom5.6%to8.4%overthesameperiod.Thisfigureincludesbeautyandpersonalcaree-commercesalesmadebyalltypesofretailers.Thedataforthevariousotherchannelschartedbelowrepresentofflinesalesonly.
Figure2.US:SalesDistributionofBeautyandPersonalCareGoods,2011vs.2016(%)
AllInternetretailsalesareincludedintheInternetretailingfigures.Source:EuromonitorInternational
Drillingdowntothecorebeautycategoryofcolorcosmetics,beautyspecialistretailersgrewshareconsistentlyinthefiveyearsended2016.Thespecialistsectorovertookdepartmentstoresintermsofsalesvaluesin2015andnowaccountsformorethanone-fifthofcolorcosmeticssales.
13.4 11.8
6.7 6.1
5.6 8.4
9.9 9.9
14.1 13.5
12.0 14.3
15.1 14.5
23.2 21.5
2011 2016
GroceryRetailers
Drugstores
BeautySpecialists
MassMerchandisers
DepartmentStores
InternetRetailing
DirectSelling
AllOthers
Beautyspecialistslooktobeonthecuspofovertakingdrugstorestobecomethesecond-biggestbeautyretailchannel,behindsupermarkets.
Withinthecorebeautycategoryofcolorcosmetics,thespecialistsectorovertookdepartmentstoresintermsofsalesvaluesin2014.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Figure3.US:SalesDistributionofColorCosmetics,SelectedChannels(%)
AllInternetretailsalesareincludedinInternetretailing.*OfflinesalesonlySource:EuromonitorInternational
WhereConsumersShop:Walmart,TargetandAmazonAreHighlyPopularInthissection,weturntospecificretailers,andwechartdatafromProsperInsights&Analyticsthatshowwhereconsumerssaytheyshopmostoftenforskincareandcosmeticsproducts.Itshouldbenotedthatrespondentscouldchooseonlyoneoptionandsothesedatadonottakeintoaccountsecondarydestinationsusedforadditionalortop-upshopping.
• WalmartisbyfarthetopretaileramongconsumersaskedbyProsperwheretheyshopmostoftenforskincareandcosmetics.
Source:Walmart.com
20.5
18.0
10.7
6
8
10
12
14
16
18
20
22
2011 2012 2013 2014 2015 2016
BeautySpecialistStores* DepartmentStores*
InternetRetailing
WhenaskedbyProsperwheretheyshopmostoftenforskincareandcosmetics,surveyrespondentsnamedWalmartmuchmoreoftenthananyotherretailer.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
• Drugstoresarepopularskincareandcosmeticsshoppingdestinations,too,althoughtheyaremorepopularamongolderconsumers.
• NeitherSephoranorUltafeatureinthetopfiveretailersnamedbythoseaskedwheretheyshopmostoftenforskincareandcosmetics,perhapssuggestingthattheyareasecondarydestinationforsomeconsumers.Asweshowlater,theseaveragefiguresconcealsignificantlyhigherratesofshoppingatSephoraandUltaamongyoungerconsumers.
Figure4.US:RetailersShoppedatMostOftenforSkincareandCosmeticsProducts,July2017(%)
Base:7,266USInternetusersages18+.Respondentscouldselectonlyoneoption.Source:ProsperInsights&Analytics
Source:iStockphoto
Trenddataforthe2010–2017periodbearouttheconceptofapolarizationinUSbeautyretailing,withlower-priceplayersandspecialistsseeinggeneralupwardtrends:Target,SephoraandUltahaveeachseentheirshoppernumbersgrowsignificantly,accordingtoProsper.Weexclude
27.6%
8.4% 8.2%5.7%
3.3% 2.8% 1.9% 1.7% 1.5% 1.4%
Target,SephoraandUltahaveeachseentheirshoppernumbersgrowsignificantly.
8
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Walmartfromthegraphbelowbecauseitsscalerelativetotheotherretailersshownprovesoverbearing,but,accordingtosurveydata,Walmartgrewfrombeingthemost-often-shoppedstoreforskincareandcosmeticsfor24.3%ofconsumersin2010to27.6%in2017.
Figure5.US:SelectedStoresShoppedatMostOftenforSkincareandCosmeticsProducts(%)
Base:Between5,653and9,009USInternetusersages18+surveyedinJulyofeachyear.Respondentscouldselectonlyoneoption.Source:ProsperInsights&Analytics
ThenatureofgeneralmerchandiseretailerssuchasWalmartandTargetmeansthatwedonothaverobustcategory-levelsalesdataforthem.Intheabsenceofsuchindicators,wethinkconsumersurveydatasuchasthoseshownabovearethebestguidetoperformanceatgeneralmerchandisers.However,accordingtoTABSAnalyticsdatapublishedinMarch2017,Walmartenjoyeda19.4%shareofthepersonalcaremarketandTargeta12.8%share.
YoungConsumersOverindexatValueandSpecialistRetailersYoungerconsumerslooktobedrivingtheswitchtovalueretailersandspecialists.Prosper’sdatashowthat18–34-year-oldsaremuchmorelikelythanolderconsumerstoshopmostoftenforskincareandcosmeticsatTarget,SephoraandUlta.Inaddition:
• YoungerconsumersareturningtoMacy’sinsmallernumbersthanolderagegroupsare.
• Yetitisapparentthatyoungerconsumersarenotswitchingawayfromgeneralmerchandiseretailersoverall:WalmartandTargetareverypopularamong18–34-year-oldbeautyshoppers,confirmingthatmanymillennialsoptforlow-priceretailersinthebeautycategory.
• OlderconsumersaremorelikelythanyoungerconsumerstoshopmostoftenforskincareandcosmeticsatdrugstorechainssuchasCVSandWalgreens.
5.3% 5.7%
6.8%7.7%
8.7%7.7%
8.4% 8.2%
0.5% 0.6% 0.8% 1.2% 1.2%1.7% 1.7%
2.8%
0.7% 0.8% 0.6% 0.6%1.0% 1.4% 1.5% 1.5%
(1.0%)
1.0%
3.0%
5.0%
7.0%
9.0%
10 11 12 13 14 15 16 17
Target Ulta Sephora
WalmartandTargetareverypopularbeautyshoppingdestinationsamong18–34-year-olds,confirmingthatmanymillennialsoptforlow-priceretailersinthebeautycategory.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Figure6.US:StoresShoppedatMostOftenforSkincareandCosmeticsProducts,byAgeGroup,July2017(%)
Base:7,266USInternetusersages18+.Respondentscouldselectonlyoneoption.Source:ProsperInsights&Analytics
So,whydoconsumerschoosetheseretailers?Below,wechartthetopfivereasonsshopperscitewhenaskedwhytheyshopmostoftenforhealthandbeautyproductsatvariousselectedretailers(notethatthisquestioncoversabroadercategorythanthebeautysurveycitedabove):
• PriceisastrongmotivatorforshoppingatWalmart,TargetandAmazon,anditisthemostimportantfactoroverall.
• ThestrongappealofpriceatAmazonsuggeststhatitcould,intime,disruptthegrowthinshoppernumbersthatlower-price,store-basedretailershaveenjoyed.
28.0%
7.1%
11.2%
4.6%
3.6%
3.8%
1.2%
1.6%
3.1%
1.6%
28.2%
8.7%
8.4%
5.1%
3.2%
3.0%
2.3%
1.8%
1.2%
1.5%
26.8%
9.1%
5.5%
7.4%
3.0%
1.9%
2.1%
1.7%
0.5%
1.2%
Walmart
CVS
Target
Walgreens
Amazon
Ulta
Macy’s
RiteAid
Sephora
Kroger
18–34 35–54 55+
PriceisastrongmotivatorforshoppingatWalmart,TargetandAmazon,anditisthemostimportantfactoroverall.
Source:iStockphoto
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
• SelectionisamajordriverforshoppersatTarget,Amazon,UltaandSephora.
• OnlyUltaandSephorastandoutintermsofthe“brandsavailable”option.
• WechartfullerdatalaterinthisreportforUlta,Sephora,AmazonandWalmart.
Figure7.US:ReasonsforShoppingMostOftenatSelectedRetailersforHealthandBeautyAids,November2016
Base:7,206USInternetusersages18+Source:ProsperInsights&Analytics
36.9%
51.5%
52.2%
44.0%
26.4%
52.1%
74.5%
65.4%
24.9%
32.0%
46.2%
60.1%
76.6%
51.2%
52.7%
30.7%
27.1%
64.7%
9.2%
79.3%
31.1%
32.8%
63.8%
60.1%
79.9%
26.5%
20.5%
56.4%
50.7%
90.4%
24.6%
27.2%
48.3%
48.5%
68.7%
BrandsAvailable
Quality
Selecdon
Locadon
Price
AllAdults18+ Walmart Target AmazonUlta Sephora Macy’s
11
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
InFocus:UltaandSephoraDominateSpecialistRetailingTheUSbeautyspecialistsectorishighlyconcentrated,withUltaandSephoraholdingdominantpositions.LBrands’Bath&BodyWorksisinthirdplace,butitsofferingfocusesmoreontoiletriesandpersonalcarethanonbeautycategories.
WeestimatethatSephorageneratedbetween$4.4billionand$4.9billioninUSrevenuesin2016.Theseestimatesarebasedoncompanyfilingsand2016statementsbyLVMHmanagement(LVMHownsSephora)thatSephoracontributed“around40%”and“about45%”ofthecompany’stotalUSrevenues.Attheupperendoftheseestimates,SephorawouldbebroadlyinlinewithUlta,whichgenerated$4.85billioninrevenuesintheyearendedJanuary2017.
Figure8.US:NetRevenuesofLeadingBeautySpecialistRetailers,2016
USDBil.
Ulta* $4.85
Sephora(Est.) $4.4–$4.9
Bath&BodyWorks* $3.85
*FiscalyearsendedJanuary2017Source:S&PCapitalIQ/companyreports/FGRT
Source:iStockphoto
TheUSbeautyandpersonalcarespecialistsectorishighlyconcentrated.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
UltaandSephoraGrowingStronglyAswechartbelow,Ultahaspostedveryimpressiverevenuegrowthinrecentyears,withtotalsalesgrowthsupportedbydouble-digitcompsandnewstoreopenings.Thegeneraltrendsinceearly2015hasbeenforrevenuegrowthtostrengthen.
Figure9.Ulta:TotalandComparableSalesGrowth(%)
Source:Companyreports
Banner-leveldisclosureislimitedforLVMH-ownedSephora,butLVMHhassharedthefollowingdetails:
• Initsfirst-half2017earningscall,LVMHmanagementnoteddouble-digitsalesgrowthforSephoraworldwide.
• Inthefirstquarterof2017,LVMHnoted“particularstrength”forSephorainNorthAmerica.
• LVMHpointedtoSephora’s“particularlyremarkableperformance”intheUSin2016.
• Initsfirst-half2016earningscall,LVMHmorespecificallynoteddouble-digitcompsforSephoraintheUSmarket.
SephoraandUltaarebothcapitalizingongrowingdemandtoexpandtheirphysicalpresence:
• Sephorahas357stand-aloneUSstores,accordingtothecompany’swebsite(accessedonJuly28).Inaddition,Sephorahas574shopsinsideJCPenneystores,againperthecompany’swebsite.InApril2017,JCPenneyannouncedplanstoopenafurther70Sephorashopsinitsdepartmentstoresandtoexpand32existingshops-in-shops.
• SephoraopenedaflagshipstoreinBostoninthefirsthalfof2017anditwillopenastoreattheWorldTradeCenterinNewYorkinthesecondhalfoftheyear.
• Ultahad990storesattheendofthefirstquarterof2017(latest);thefigurewasup12%yearoveryear.Across2017,Ultaplanstoopenaround100newstoresandremodel11others.
21.6
19.4
22.121.1
23.7
21.9
24.2 24.622.5
11.410.1
12.8 12.5
15.214.4
16.7 16.6
14.3
10
12
14
16
18
20
22
24
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Total Comps
13
August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
WhyConsumersShopatUltaandSephoraEarlier,wediscussedthetopreasonsconsumersciteforshoppingatarangeofbeautyretailers.Inthissection,welookinmoredetailatthereasonstheyshopforhealthandbeautyproductsatSephoraandUlta,usingdatafromtheProspermonthlyconsumersurveyconductedinNovember2016:
• Priceranksrelativelylowasaconsiderationforshoppersateachchain,incontrasttoitbeingthetopconsiderationforhealthandbeautyshoppersoverall.
• UltanarrowlybeatsSephoraonselection,promotionsandprice.Ulta’sstrengthinpromotionsmayreflectitsverypopularloyaltyprogramanditsbonuspointsoffers,whileitsstrengthinpriceislikelydueinparttoitsentry-levelproductofferings.
• Sephoraenjoysaleadintermsofqualityandbrandsavailable—perhapsreflectingdemandforSephora’sownbrand.
Figure10.US:ReasonsforShoppingMostOftenatUltaandSephoraforHealthandBeautyAids,November2016
Samplesize:Sephoracustomers:N=101;Ultacustomers:N=148Source:ProsperInsights&Analytics
18.0%
20.0%
13.2%
16.0%
28.3%
17.4%
32.3%
26.7%
21.0%
52.1%
24.9%
32.0%
32.9%
74.5%
65.4%
11.9%
13.8%
14.4%
16.2%
18.9%
20.0%
23.4%
26.2%
30.6%
46.2%
51.2%
52.7%
58.0%
60.1%
76.6%
StoreExperience
EasytoNavigateWebsite
StoreLayout
KnowledgeableSalesPeople
TrustworthyRetailer
StoreAppearance
Service
UniqueProducts
FrequentShopperCard
BrandsAvailable
Locadon
Price
Promodons
Quality
Selecdon
Ulta
Sephora
UltanarrowlybeatsSephoraforselection,promotionsandprice.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
InFocus:E-CommerceandAmazonE-commerce’sshareofbeautyandpersonalcaresaleswillriseto8.9%in2017from8.4%in2016,accordingtoEuromonitorInternationalestimates.E-commerceisahigh-growthchannelforbeautysales,butitcapturesalowershareofsalesinbeautythanitdoesinapparel,totalnonfoodretailingandeventotalretailing.Wecharte-commercepenetrationdataforanumberofcategoriesbelow.
Weseebeautyunderindexingonlineduetoanumberofreasons:
• Thelowpurchasepricesforeverydayproductsmaynotjustifyshippingcosts.
• Consumersmaywanttotestandtrybeautyproductsbeforebuyingthem.
• Somebeautyandpersonalcarepurchasesaremadeaspartofgroceryshoppingtrips—ande-commercehascapturedonlyatinyshareofthegrocerymarket.
Duetothisrelativeunderindexing,weseegreaterlong-termgrowthopportunitiesinbeautye-commercethaninsomemorematuree-commercecategories.
Figure11.US:E-Commerce’sEstimatedShareofRetailSalesinSelectedCategories,2016(%)
*Excludingfoodservice,motorvehiclesandparts,andautomotivefuel**Basedonstrippingoutfoodandbeveragesalesonly;othergrocerycategorieswereincluded.Source:KantarWorldpanel/USCensusBureau/USBureauofEconomicAnalysis/EuromonitorInternational/FGRT
1.4
8.410.8
14.6 15.5
E-commercecapturesalowershareofsalesinbeautythanitdoesinapparel,totalnonfoodretailingandeventotalretailing.
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DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Theminorshareofbeautycategorysalescapturedbye-commercedoesnotreflectlowonlineshoppingparticipationrates,accordingtoProsper’sJuly2017survey,as:
• Some45%ofUSconsumerssurveyedsaidthattheybuythecorebeautycategoriesofskincareandcosmeticsonline.
• Among18–34-year-olds,thatpercentagerisesto60%.
• Some48%of35–54-year-oldsbuyskincareorcosmeticsproductsonline.Thesharefallsto29%amongthoseaged55orover.
Rather,theoveralllowsharecapturedbye-commercereflectsthefactthattheonlinechanneltendstoaccountforaminorityoftotalspendingamongonlineshoppers.Thechartbelowshowshowmuchrespondentssaytheyspendonlineoutoftheirtotalskincareandcosmeticsspending.Wepickoutthe18–34-year-oldagegroup,asitisthemostimportantsegmentforonlinebeautyretailing.Almosthalfof18–34-year-oldspurchasebetween1%and50%oftheirskincareandcosmeticsonline.Only14%ofthatagegroupmakesmorethanhalfoftheirpurchasesonline.
Source:iStockphoto
Figure12.US:ProportionofSkincareandCosmeticsProductsPurchasedOnline,July2017(%)
Base:7,266USInternetusersages18+Source:ProsperInsights&Analytics
Theoveralllowsharecapturedbye-commercereflectsthefactthattheonlinechanneltendstoaccountforaminorityoftotalspendingamongonlineshoppers.
13.3%11.0%
9.3%
5.4%
3.0% 2.5%
15.7%16.8%
13.5%
7.9%
3.5%2.5%
1%to10% 11%to25% 26%to50% 51%to75% 76%to99% 100%
AllAdults18+ 18–34
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
FocusingonAmazon,theMostPopularOnlineDestinationforBeautyandPersonalCareProductsSo,howbigisAmazonintheonlinebeautyspace?Itisaquestionmanywillwantananswerto,buttherearefewconcreteindicatorsofUSretailers’onlinemarketshares.InFebruary2017,researchfirm1010datapublisheditsestimatesofonlinebeautymarketshares,andtheresearchplacesAmazon’smarketplaceofthird-partysellersasbyfarthebiggestonlinesellerofbeautyproductsin2016.ThecombinedonlinemarketshareforAmazon’sthird-partyandfirst-partysaleswas35.5%in2016,accordingto1010data.Macy’sandSephorawereinsecondandthirdplaces,respectively.
Figure13.US:Retailers’SharesofOnlineBeautySales,2016(%)
Marketsharebasedonthefragrance,facemakeup,eyemakeup,lipmakeupandnailcarecategories.3P=third-partysellers;1P=first-partysalesSource:1010data
Whilethesefiguresmayprovidesomeguidanceastoretailers’onlinemarketshares,wethinkthattherearereasonsfortreatingthemwithsomecaution:
• ThestatedshareforUltalookssomewhatlowtous.1010dataputsthe2016onlinebeautymarketsizeat$1.2billion,andUltareportedtotale-commercesales(includinganynonbeautycategorysales)of$345millionin2016.Evenifonly50%ofUlta’sonlinesaleswereinthecategoriesincludedin1010data’sdefinitionofthemarket,theretailerwouldhaveenjoyedanapproximate14%shareofthe$1.2billiononlinemarketlastyear.Infact,justoverhalfofUlta’stotalrevenuescamefromcosmeticsintheyearendedJanuary2017;furthersharescamefromadjacentbeautycategoriessuchasfragranceandskincare.
• EuromonitorpeggedUSonlinesalesofcolorcosmeticsaloneat$1.7billionin2016,versus1010data’sestimationof$1.2billionforthetotalonlinebeautymarketsize.
1.5
2.7
2.9
3.5
3.9
8.2
14.4
15.0
17.4
21.1
Clinique
NeimanMarcus
Walmart
MACCosmedcs
Nordstrom
Ulta
Amazon1P
Sephora
Macy’s
Amazon3P
ThecombinedonlinemarketshareforAmazon’sthird-partyandfirst-partysaleswas35.5%in2016,accordingto1010data.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
IndicationsofcategorygrowthratesatAmazoncomefromanalyticsfirmOneClickRetail.Forthefirstquarterof2017,thefirmreportedthat:
• AmazongrewitsUShealthandpersonalcaresalesby30%yearoveryear.
• Thefastest-growingbeautycategoryforAmazonUSwasskincare,whichwasup90%yearoveryear.
• IntheUK,shavingandhairremovalproductswerethehighest-growthbeautycategories,withsalesup90%yearoveryear.
Giventhepaucityofconcreteonlinemarketsharedata,consumersurveysareamongthemorereliableindicatorsofvariousretailers’popularity.Bynumberofshoppers,AmazonisbyfarthemostpopularretaileronlineforbeautyandpersonalcareproductsintheUS,pera2016surveybyA.T.Kearney,chartedbelow.SephoraandUltaholdstrongpositions,too.Asnotedearlier,Amazonisthefifth-most-popularretaileroverall(onlineoroffline)forskincareandcosmetics,perProsper’sJuly2017survey.
Figure14.US:MostPopularRetailWebsitesforSearchingforandPurchasingBeautyandPersonalCareProductsOnline,October2016(%)
Base:800onlineshoppersSource:A.T.Kearney
Finally,ProspersurveydatacanshowusthereasonsconsumersopttobuyhealthandbeautyproductsfromAmazon.Forcomparison,weincludedataonWalmart,too.Price,selectionandtheconvenienceofitswebsitearethetopreasonsshopperschooseAmazon.Thenext-most-popularoptionscited—brandsavailableandeasy-to-navigatewebsite—appeartobesimilaroptionstotheselectionandconvenienceofwebsitechoices.
17
17
25
25
33
33
36
37
41
69
eBay
JCPenney
CVS
Walgreens
Target
Macy’s
Walmart
Ulta
Sephora
Amazon
AmazongrewitsUShealthandpersonalcaresalesby30%yearoveryearinthefirstquarterof2017,accordingtoOneClickRetail.
Price,selectionandtheconvenienceofitswebsitearethetopreasonsshopperschooseAmazon,accordingtoaProspersurvey.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Source:Amazon.com
Figure15.US:ReasonsforShoppingMostOftenatAmazonandWalmartforHealthandBeautyAids,November2016
Samplesize:Amazoncustomers:N=246;Walmartcustomers:N=1,975Source:ProsperInsights&Analytics/FGRT
0.6%
50.7%
14.2%
3.9%
10.0%
10.9%
5.6%
2.3%
19.0%
20.5%
3.6%
26.5%
3.3%
56.4%
90.4%
6.0%
9.2%
12.8%
15.1%
16.8%
20.2%
21.4%
23.9%
26.8%
27.1%
28.1%
30.7%
39.0%
64.7%
79.3%
ProductSubscripdonService
Locadon
Promodons
UniqueProducts
No-HassleReturnPolicy
TrustworthyRetailer
Service
SecureWebsite
Open24Hours
Quality
Easy-to-NavigateWebsite
BrandsAvailable
ConvenienceofWebsite
Selecdon
Price
Amazon
Walmart
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
KeyTakeawaysWehaveseenanapparentpolarizationofgrowthinthebeautymarket,withsurveydataandcompanyreportssuggestingthatlow-priceretailersandconvincingbeautyspecialistshavewonshare.Weseemillennials’thriftybehavioranddesireforqualityexperiencesasdrivingthistrend.
Surveydatasuggestthatsomedrugstoresanddepartmentstoresoverindexamongoldershoppers.Ifthesetypesofretailerswanttodrawinmillennials,whatcantheydo?Wesuggestthattheyconsiderstrengtheningtheirentry-levelranges,bolsteringtheirbeautyloyaltyprogramsandintroducing,wherepractical,in-storebeautyservices.
FurtherReadingfromFGRTReadersmayalsobeinterestedinthefollowingreports:
TheMillennialsSeries:MillennialsandBeauty
DeepDive:GenZandBeauty—theSocialMediaSymbiosis
DeepDive:GlobalBeautyE-Commerce—aHighlyAttractiveMarket
DeepDive:ActiveM&AintheBeautySpaceFuelsFutureGrowth
BeautyLoyaltyPrograms:Sephoravs.Ulta
The21st-CenturyDrugstore:USDrugstoresFightingforShareinaShiftingBeautyMarket
Surveydatasuggestthatsomedrugstoresanddepartmentstoresoverindexamongoldershoppers.
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August19,2017
DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst
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