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Despite the trend for elaborate services and in-store customer consultations, there is a definite market for quick and easy

beauty buys. This convenience factor is one reason for the emergence of vending machines for beauty.US-based online subscription company Birchbox sought to add

a fun factor to the equation with its vending machine in Paris train station Gare Montparnasse. The miniature products sold by Birchbox through the machine are not only intended as a solution for consumers who forgot to bring their lip balm or moisturizer on a trip, but are a real-world way for commuters to try out a new

product they may not have thought about before. While waiting for a train they are likely to have the time to make the purchase and the limited offer may mean less confusion about what to buy. In addition, the price of just €4 for a pack containing two products doesn’t seem like much of a financial risk. Vending machines, of course, are nothing new, but for the most part they have not

really taken off for beauty. And in truth, Birchbox’s effort is more about building company awareness offline than selling products. However, installed in the right place (high-traffic train stations seem ideal) and with the right products, vending machines could well begin to attract the non-perfumery, non-department–store shopper to beauty. We would like to take this opportunity to wish you a peaceful and prosperous New Year

and we look forward to bringing you more news, commentary and analysis in 2015.

Quick and easy The buzz 2News roundup

Netwatch 6Beauty blogger review

Interview 7Estée Lauder Companies group president international Cedric Prouvé

Insight 9US prestige market

Show review 13Cosmoprof Asia

Store visit 15Birchbox, Paris

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry Dec 18, 2014 - Jan 7, 2015 #103

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n Shiseido announces new growth strategy

n Kiko sells bonds to fund expansion

n Interparfums Inc signs Abercrombie & Fitch license

n Sephora opens flagship store in Australia

Strategy

Shiseido has outlined its new growth strategy, called Vision 2020. Between 2015 and 2017, the Japanese beauty group will focus on growing its business in China, where it will “rebuild” its brand portfolio, in greater Asia and in the travel-retail and e-commerce channels. These initiatives are forecast to result in a CAGR of between 3 to 5% by fiscal 2017 and 5 to 7% from fiscal 2018 to 2020. The new strategy will also include introducing new brands, developing in emerging markets and “unexplored areas”, as well as potential mergers and acquisitions.Shiseido also aims to expand marketing and R&D investments, and will continue to

make structural reforms for the next six years to reach operating income of ¥100bn ($853m) in 2020 and consolidated net sales of ¥1trillion ($8.5bn). The group will segment its brand portfolio into four divisions: Prestige, Cosmetics,

Personal Care and Professional, and create six regional hubs. The Prestige division will include the company’s global brands: Shiseido, BareMinerals,

Clé de Peau Beauté and Nars, and will focus on growing the business in Asia (especially Japan and China), the US, Europe, and in travel retail.For the Cosmetics division, Shiseido said it will position the Elixir brand in China and

other Asian countries in the medium-to-high price segment. The Za brand will be an entry-price product for younger consumers, mainly in emerging markets in Asia and in China. Online sales will also be a focus, especially in Japan and China.The Personal Care division will reposition its brands in each category and reinforce its

presence in-store, while the Professional business will focus on its core brands in Asian markets: Shiseido Professional and Joico.Shiseido says it will invest the capital generated by these reforms into marketing

initiatives, with an aim of investing ¥100bn ($853m) beginning in fiscal 2015. There will also be R&D investments, including the creation of a Global Innovation Center in Japan and expanded research teams in the US, Europe, Southeast Asia and China.

Budget Italian cosmetics chain Kiko has sold bonds worth €100m in a private placement deal, a move that is intended to finance its international expansion. The bonds will expire in December 2020 and will be listed on the Irish stock exchange. Kiko, owned by the Percassi group, operates more than 600 stores in Europe and recently launched in the US.

US-based Interparfums Inc has signed a beauty license with fashion retailer Abercrombie & Fitch. The seven-year agreement is for fragrance and fragrance-related products for the Abercrombie & Fitch and Hollister brands. The first scents are to launch in 2016. n n n


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n n n French skincare brand Ioma has launched in Russia in 90 Ile de Beauté stores. Three locations will be positioned as flagships—two in Moscow and one in St. Petersburg. These stores will house the Ioma Sphere 2 diagnostic tool on a permanent basis, while Ioma Factory, which creates personalized skincare formulations, will be in store for specific animations. Ioma will also have dermatologists on hand for certain events.

Fragrance house Givaudan has launched a website devoted to patchouli sourcing, called The Journey of Patchouli, at www.givaudan.com/patchouli. “We wanted to provide our clients, the media and the end consumer with a didactic tool that allows them to discover this ingredient, where it comes from, how it is harvested and how it is used in fine fragrance,” a Givaudan spokesperson tells BW Confidential. She adds that depending on the success of this first initiative, the company could launch additional sites for other fragrance ingredients.

Retail

LVMH-owned retailer Sephora opened its first store in Sydney, Australia at the beginning of December. The flagship store is located at Sydney’s Pitt Street Mall. Sources say Sephora plans to open up to 20 stores in the country next year.

UK-based luxury-goods retailer Harvey Nichols is to open a store in Doha, Qatar in the first quarter of 2017. The venture is in partnership with Qatari business group Saleh Al Hamad Al Mana. The 80,000ft2 (7,432m2) store will be located in Doha Festival City mall. This store will be the retailer’s eighth outside of the UK. Harvey Nichols has locations in

Dublin, Riyadh, Hong Kong, Dubai, Istanbul, Ankara and Kuwait. French department-store operator Galeries Lafayette is to open a new store in the Carré Sénart shopping complex in the suburbs of Paris in 2018. The store will cover 6,000m2 (64,583ft2) on two levels.

Hypermarket operator Carrefour is testing a new beauty concept at its store in Vitrolles, France. Called Pro’s & Co, the shop-in-shop offers the retailer’s own brand Pro’s, as well as third-party brands L’Oreal Paris, Gemey, Rimmel, Essie and make-up tools from Babyliss. Pro’s & Co has beauty advisors on staff and is open from December 11–31.

French fragrance brand Maison Francis Kurkdjian has opened its second Paris standalone store, five years after its first boutique opened in the French capital. Located in the Marais district, the new store is initially opening in a pop-up format for two months and will then close for renovation and re-open in May 2015.The boutique offers the brand’s entire range, as well as a collection of perfumed leather

goods that launches in December exclusively at the boutique. Created in partnership with saddle maker Atelier Renard, the line is debuting with Twin Set, two bi-color slim hand-sewn cardholders that fit together, made of calf leather or crocodile skin. The items come in two scents, created exclusively for the collection. “We’re testing the waters with Twin Set and will later expand the range to include other

items, such as notebook holders,” explains brand founder Francis Kurkdjian. Prices for Twin Set range from €525 to €1,165. n n n

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Shiseido president and ceo Masahiko Uotani has taken on the additional role of head of human resources and corporate cultural reforms. Jean-Philippe Charrier, chief officer of the Professional Business Operations division, is now responsible for Asian Strategy, a role formerly held by Yu Okazawa, chief officer of China Business Division and general manager of marketing development China. Yoshiaki Okabe, general manager Prestigious Cosmetics Business division at Shiseido China, has been named general manager of International Marketing department and general manager of Marketing Strategy Group, International Business division. Mamoru Watanabe, manager of Asia Pacific Sales department, International Business division, has been appointed managing director of Shiseido India. All appointments go into effect on January 1, 2015.

Drugstore group Walgreens Boots Alliance president and ceo Greg Wasson, who assumed his position in August, will step down after the completion of the merger between Alliance Boots and Walgreens. Shareholders are to vote on the second phase of the merger on December 29. Following his departure, Walgreens Boots Alliance chairman James Skinner will become executive chairman, while Stefano Pessina, currently executive chairman, will take on the role of ceo until a replacement is found.

Estée Lauder Companies (ELC) has named Patricia Lopez senior vice president general manager Estée Lauder and Aerin Beauty North America. Lopez was previously chief marketing officer at Avon Products. ELC has also named Jenny Belknap svp global marketing for Clinique. She replaces Agnes Landau, who was named svp and global gm for Darphin in September.

L’Oréal USA has named Marc Toulemonde as president of the Active Cosmetics division, with responsibility for the SkinCeuticals, La Roche-Posay, Dermablend, and Vichy brands in the US. He was most recently global general manager of SkinCeuticals. Leslie Harris, formerly SkinCeuticals vice president of global product development and marketing, will take over as global general manager for the brand.

Launches

French skincare brand Clarins is relaunching its Super Restorative Total Eye Concentrate, first introduced in 2006. The brand claims the product’s revamped formula is more effective than retinol. The plant-based formula includes harungana extract, which is said to have regenerative properties, and guarana to reduce puffiness in the n n n


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n n n under-eye area. The eye-contour cream will retail for €67 and targets women over 50.Clarins is also introducing a new lip balm in January, called Daily Energizer Lovely Lip

Balm. The balm comes in the form of a lipstick and gives a sheer rosy tint to the lips while providing hydrating properties, the brand says. Daily Energizer Lovely Lip Balm retails for €13.90. The packaging is entirely made of cardboard, making the item easily recyclable.

Estée Lauder Companies-owned brand Darphin is to launch a line next spring, which it says takes a new approach to skincare based on managing, rather than fighting the aging process. Called Exquisâge, the line comprises a serum and a cream and incorporates a cocktail of four ingredients dubbed the CelluVie Complex, which is said to stimulate collagen production and reduce wrinkles.The serum claims to revitalize skin and improve elasticity and luminosity, while the cream protects the skin. Exquisâge will launch in March, with the serum retailing at €90 (30ml) and the cream priced at €78 (50ml). In other news, Darphin announced it has collaborated with Paris-based Antoinette

Poisson, specialists in period patterned wallpaper, to create a handbag in the Darphin colors. The hand-made leather bag features a domino print. Only 10 will be created and each one will be numbered. The bag will be sold exclusively at Darphin’s Paris beauty institute, priced at €3,800.

Niche brand Odin New York has launched The White Line, a collection of three floral unisex EdPs: Efflora, Milieu Rosa and Vert Reseda. “We wanted to create floral scents that had a different approach from the classic powdery florals that are common on the market today,” Odin New York co-founder Kelly Kovack tells BW Confidential. Efflora features notes of mandarin orange, Turkish rose, grapefruit blossom and oak moss. Milieu Rosa’s juice includes notes from three different types of roses, vetiver and raspberry, while the third fragrance, Vert Reseda, has notes of Reseda leaf, peony gardenia and sandalwood. The scents were created by Drom perfumer Jean-Claude Delville. The outer packaging was created by paper designer Matthew Shlian.The White Line launched exclusively at Barney’s in New York, Liberty in London and at

Colette in Paris late November. Each 100ml EdP retails for €175.

Trade shows

Exhibitors and visitors expressed enthusiasm over the first edition of MakeUp in São Paulo, the color cosmetics trade show for the South American market. The show, which took place in São Paulo on December 3-4, welcomed more than 620 visitors and 15 exhibitors. Organizers expect the show to grow along the same lines as Make-Up in New York. That event also welcomed 600 visitors when it launched four years ago, while this year’s edition attracted 2,300 visitors. Highlights at MakeUp in São Paulo were the conferences, including a session hosted by João Carlos Basilio, president of Brazil’s association Abihpec, and an event where make-up schools competed in creating looks. MakeUp in São Paulo is the fourth color cosmetics trade show organized by Paris-based

Beauteam (the others are MakeUp in Paris, MakeUp in New York and MakeUp in Seoul). Beauteam founders Sandra Maguarian and Jean-Yves Bourgeois say this latest event reinforces the strength of the show’s concept. “These four annual events in Europe, North America, Asia and South America offer the make-up industry unique opportunities to reach four huge markets directly,” commented Bourgeois. n

BW Confidential reports on what the bloggers are saying about beauty

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The inside viewon the internationalbeauty industry

www.bwconfidential.com N°16 November-December 2013

ISSN: 2104-3302

InterviewCoty ceoMichele Scannavini

Travel retailData, digital &the CIVETs

Market watch: BrazilThe ins & outs of doingbusiness in the country

PackagingSector outlook &luxury trends for 2014

Insight: FragranceGlobal market analysis

The inside view on the international beauty industry

BWCONF_oct2013-def2.indd 1 24/09/13 18:00

www.bwconfidential.com N°17 March-April 2014

ISSN: 2104-3302

InterviewGuerlain ceoLaurent Boillot

Travel retail:Brazilian travelersHow they shop & how to reach them

Market watch:What’s next for Mexico,Argentina & Colombia?

PackagingDecoration techniques& trends

Insight: Make-upDoing color better


BWCONF_fev2014.indd 1 06/02/14 15:16

www.bwconfidential.com N°19 September-October 2014

ISSN: 2104-3302

InterviewFerragamo Parfums ceoLuciano Bertinelli

Travel retail: EuropeHow the region is faring &the continent’s top airports

Market watch: AfricaThe potential & challenges ofthe next big region for beauty

PackagingHow make-up packsare evolving

Insight: fragrance creationWhat’s next for the industry?


BWCONF_septembre2014.indd 1 22/07/14 12:04

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...TFWA World Exhibition Cannes • Beauty World Middle East Dubai • PCD Paris Cosmoprof Worldwide Bologna • China Beauty Expo Shanghai • HBA Global Expo New York Duty Free Show of the Americas Orlando • Intercharm Moscow • Exsence Milan Luxe Pack Monaco • Beyond Beauty Paris • Luxe Pack Shanghai • In Cosmetics Paris Luxe Pack New York • Cosmoprof Asia Hong Kong • Pitti Fragranze Florence • Make Up in Paris Elements Showcase New York • Mondial Spa Beauté Paris • TFWA Asia Pacific Singapore...

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The new Tom Ford lipstick collection, Lips & Boys, has been a hot topic in the blogosphere. Bloggers are intrigued by the inspiration for the line—all products are named after men who have been important in Ford’s life—and praise the design and color palette. The exclusively online launch strategy has also incited comments about the brand’s desire to reinforce its presence on the web.

A new sub-category in the haircare segment, hair primer products, are “launching everywhere”, say bloggers. However, judging by comments online, consumers are not always sure what these products actually do or whether they are necessary. Bloggers also question the efficacy of multi-functional haircare products inspired by BB creams. Sephora France’s fragrance bottle recycling campaign has seen positive feedback. Bloggers are interested to see if the concept—the initiative offers a 20% discount on new purchases in exchange for used bottles—will be expanded to other categories.

News that US mass merchandiser Target will expand its niche beauty offer has been well received by bloggers. They say they like the idea of being able to shop more hard-to-find or foreign natural beauty brands at Target. The new offer includes French skincare brand Nuxe, which launches online at Target next year.



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Estée Lauder Companies’ Cedric Prouvé talks about China, developments in retail and acquisitions

Driving growth

Are you seeing any improvement in growth of same-store sales in China? In China, most of our brands are growing very well, including at a same-store level. It is a bit different now for Estée Lauder, as it is the biggest brand in China, so we are struggling a little bit on like-for-like door growth, but we are still expanding distribution. For China, we are taking a long-term view, and we know there will be bumps in the road and issues with growth. The economy is growing at 7.3% and we are still seeing a lot of runway in our expansion of distribution into tier-three and tier-four cities. The core business is Estée Lauder and we are launching Re-Nutriv Ultimate Diamond

Dual Infusion in the super prestige arena. We are broadening our franchise portfolio, as we are a little over-dependent on Advanced Night Repair, so we have to diversify and push other categories.Fundamentally, I agree that China is slowing down, but I think we have been less

affected by the restrictions on gifting, as cosmetics are more affordable. There is a general movement for the government to boost local consumption of Chinese brands. We haven’t seen that much in cosmetics, but we think it will come eventually. But by that time, we hope we will almost be considered a local brand.

How do you see your retail strategy in China evolving, especially in third- and fourth-tier cities? Right now we are in almost 100 cities in China and we think we could be in several hundred cities down the road. Some third-tier cities are very impressive and the [retailers there] usually leapfrog tier-one and tier-two cities in terms of quality. Department stores will still be our main channel, but they will grow more slowly than

others, particularly online. We opened [on Alibaba-owned website] Tmall for Clinique, Estée Lauder and Origins, and will probably introduce other brands to Tmall. When we look at online development overall in our company, it is the fastest-growing

channel along with travel retail. Online is close to 6-7% of total sales this year, and in markets like the US and the UK it is above 10%. Our online business in China is still in the low single digits, but is growing fast and has the potential to reach 10% fairly quickly. Another piece of the strategy is retailer dot-coms, but in China there are no big players at the retail level yet, and the market is still quite fragmented. The other thing that is evolving fast in China is direct-to-consumer via freestanding stores, and we have around 30 standalone stores in the country. There are very good quality malls developing in China and we are opening more freestanding stores. We are looking at other initiatives, such as transportation hubs, railway stations, airports

or tourist destinations within the country, as a lot of Chinese consumers want to discover their country first before they travel internationally. n n n

”Estée Lauder Companies group president international Cedric Prouvé

[In terms of distribution in China], we are looking at other initiatives, such as transportation hubs, railway stations, airports or tourist destinations within the country, as a lot of Chinese consumers want to discover their country first before they travel internationally

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w Estée Lauder Companies group president international Cedric Prouvén n n You announced the acquisition of Le Labo. What else is being done on the M&A front, and will the size of future buys resemble that of Le Labo? [following the interview, ELC purchased Rodin Olio Lusso and Editions de Parfums Frédéric Malle]We are very active and we have a lot of cash, but we are not going to go for targets just for the sake of buying something. The targets have to be in line with our strategy. Le Labo is right on our strategy in terms of being bespoke and prestige, although it’s still at an early stage of development. In the fragrance pyramid it is at the niche end—we are not comfortable with the bottom of the pyramid with commodity fragrances. We are not looking at high-scale targets, but at brands we can make bigger and where we can get a good return. Le Labo is exceptionally small, so it’s not going to be that material right away in terms of integrating it into the group. But we started with a lot of brands that were very small, such as Tom Ford and Smashbox. We’re not so much looking at how big the brands are today, but more at how big they can become tomorrow.

How will your free-standing store network evolve?It is no secret that we are a retailer now. We operate over 1,000 stores around the world. In Europe we are our own biggest retailer. The shift to freestanding stores is happening in Europe, where we are getting into a significant mix of what we call direct-to-consumer, whether that be freestanding stores or online. With standalone stores, we can express the brand and have the right service and merchandising; profitability is also quite good. It doesn’t cause conflict with retail partners. With brands like MAC, Bobbi Brown and Jo Malone, our stores create more awareness, so classic distribution benefits from it.

Would you open more stores for brands that don’t have a free-standing store model, such as Estée Lauder or Clinique? In more developed Western European markets this would be more difficult as we have thousands of doors. We might, but more for awareness rather than as a distribution strategy per se, and it won’t be huge part of our distribution mix. We are doing it in emerging markets, for example with Clinique in India and Brazil. It depends on the market; where we don’t have a choice in terms of distribution we go with freestanding stores.

You opened a boutique with World Duty Free at Detroit airport that only sells brands from the Estée Lauder group. Will you open others? It is more a tactical play; I don’t think you’ll see this as a core strategy of the group. We do it where it makes sense pragmatically. We did multi-brand stores in a few countries where we had no options at the beginning, such as in Poland, the Czech Republic and Hungary.

Given the softness in Europe, how can you better position yourself?France is slightly negative, but overall we are growing. In Spain the market is still negative but we are pretty much flat, and we’re growing in Greece where the market is negative. Where conditions are tough, we try to go for market share. We’re also optimizing our portfolio, so some brands that were less material before in our results are becoming more significant. For example, brands like La Mer, Tom Ford, Jo Malone, Aveda and Bobbi Brown are taking a greater share of the pie. n

”Estée Lauder Companies group president international Cedric Prouvé

[For acquisitions], we are not so much looking at how big the brands are today, but more at how big they can become tomorrow

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s ELC is looking to widen its brand offer in China with the launch of Re-Nutriv Ultimate Diamond Dual Infusion



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The US prestige market is impacted by shaky consumer confidence, but strong color cosmetics sales and new retail concepts are giving the market a boost

Uncertain timesUS prestige market

Judging by the figures, the US prestige beauty market is holding up reasonably well. Prestige beauty sales rose by 6% to $2.4bn in the third quarter 2014 compared

with the same period last year, according to NPD Group. Make-up saw the strongest growth, with sales up 10% to $1bn, while fragrance sales rose 4% to $543m and skincare sales reported a 2% increase to $840m. However, beauty consumers are increasingly conscious of how they spend, largely

due to uncertainty over the economy. “Consumers are asking themselves every time they spend if the purchase is a smart use of their money. That filter is being applied not just by mass consumers, but by affluents as well. Consumers are less willing to pull out their credit card and this poses a challenge to prestige brands; the days of launching a new and improved product priced $5 higher doesn’t work anymore,” explains WSL Strategic Retail president Candace Corlett. In addition, impulse purchases for high-priced items have slowed.Skincare and make-up both reported increases of 7%

in 2013, while fragrance sales were flat. As this year unfolded, however, the numbers began to shift. By June 2014, skincare sales, the market’s growth engine over the past five years, had grown by only 2%. Even formerly high-growth items like serums have n n n

US prestige beauty sales 2013Category Sales

$bn % change 2013

vs 2012Make-up 4.12 +7Skincare 3.62 +7Fragrance 2.99 0Total Beauty 10.73 +5

Source: The NPD Group

s Saks Fifth Avenue and Macy’s (top) have launched new concepts and revamped beauty areas, and specialty retailers Sephora and Bluemercury (bottom) are growing their footprint. Online, Amazon launched its Luxury Beauty store this year



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n n n seen a sales slump. A lack of innovation in the category is one reason given by analysts for the decline. Consumers are also turning to make-up items like alphabet creams and illuminators for quick fixes and more immediate results. Despite this, facial oils and masks are seeing robust growth. Sales of prestige facial

masks were up 60% in the year to June 2014, compared with the same period in 2013, says NPD. New launches have helped sustain the category. Department-store retailers report that premium items, such as Sisley’s Black Rose Precious Face Oil, Dolce & Gabbana’s new Aurealux skincare line, La Prairie Cellular Eye Essence Platinum Rare and Chanel’s Sublimage L’Essence have performed exceptionally well. Make-up is the market’s undisputed champion this year and the category continues

to gain ground, with 8% growth in the first quarter and a 10% increase in the second quarter. Entry-level items, such as brow products, are seeing strong increases—the sub-segment’s sales grew by 28% in the 12 months ending March 2014. Innovation in the category in the form of new textures and stronger color statements are also in play.

A contrasted fragrance marketPrestige fragrance sales saw growth of 4% in the third quarter, but the category is still tough. However, premium scents continue to do well. “High-end luxury haute perfumery brands such as Jo Malone, Kilian, Bond N°9, Creed and Le Labo are currently driving the business, as well as exclusive launches like Viktor & Rolf’s BonBon,” Saks Fifth Avenue senior vice president beauty, intimates and swim Kate Oldham tells BW Confidential. Laurice Rahme, president of Bond N°9, says that this year started out well, but has become more difficult in the second half. “We were seeing a really good rebound in the market up until October, which was flat. However, luxury perfumery brands at the high end of the market are still showing great results,” she says. NPD Group global beauty industry analyst Karen Grant confirms this view. “Higher price point items are still doing better than the overall market. Consumers may be spending on fewer things, but they’re spending on those that matter more to them,” she says. Sales of fragrances priced $100 and over grew by 30% last year. Niche fragrances are also widening their presence beyond luxury department stores

and indie boutiques. “Niche has matured into a real business and retailers are taking these brands more seriously. Sephora has brought in niche products like Comme des Garcons, Atelier Cologne and Martin Margiela’s Replica line,” says US-based Brand Growth Management partner Kelly Kovack.Celebrity fragrance sales, meanwhile, have taken a nosedive. The category reported

sales of $100m in 2013, according to NPD, down about 30% from 2012. Some of this, says Parlux president Don Loftus, was down to “shockingly bad product”. Loftus told BW Confidential earlier this year that the industry needs to “raise the bar”, and that retailers need to be more selective. “If the industry offers mediocre product, it’s up to retailers to push back,” he said.

Online and upwardOnline sales continue to move upwards. Direct-to-consumer sales increased by 19% in 2013 over 2012 says NPD. Market research company L2 reports n n n

US prestige beauty sales third quarter 2014Category Sales

$bn% change Q3

2014 vs Q3 2013Make-up 1.0 +10

Skincare 0.84 +2Fragrance 0.54 +4Total beauty 2.4 +6

Source: The NPD Group

”NPD Group global beauty industry analyst Karen Grant

Sephora is still at the forefront, but it isn’t the only one vying for attention. There are so many sources to go to today—we see tremendous online activity, subscription box sites like Birchbox, and little brands emerging on platforms like Instagram. It’s a feeding frenzy

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n n n that online beauty sales have outpaced total industry growth since 2010, with specialty beauty retailers like Sephora reaping the benefits. “Online is very strong. Dot-com has taken off to such an extent that we’ve had to put a bit more focus on our bricks-and-mortar business [to keep the consumer coming in],” says Israeli skincare brand Ahava US senior marketing manager Devon O’Neill. Saks’ Oldham agrees: “The customer is better educated and aware of availability of product, so it is more important to show the consumer the value of coming into our stores by offering best in class services.”When it comes to online, Amazon’s prestige beauty store, which launched in

October 2013, is being closely watched. Most prestige brands, says L2, have kept Amazon “at arm’s length”—either due to demands from their existing prestige retail partners or for fear of tainting their prestige image. Some brands that started out selling on the site have withdrawn due to pressure from their traditional retail partners. Many others are taking a wait-and-see approach. “Amazon is very much a work in progress and there is a real debate among brands about whether they want to be there, but I’m not getting wind of a real buzz about it,” comments NPD’s Grant.In the specialty-store segment, Sephora continues to do well. As of October, the

LVMH-owned retailer operated 356 free-standing stores and 489 Sephora Inside JC Penney shop-in-shops in the US. “I have yet to see a retailer who can compete with Sephora. It is always five steps ahead of everyone else and is very agile,” remarks WSL Strategic Retail’s Corlett. However, other formats are attracting consumers. “Sephora is still definitely at

the forefront, but it isn’t the only one vying for attention. We see tremendous online activity, subscription box sites like Birchbox, and little brands emerging on platforms like Instagram, for example. It’s a feeding frenzy,” says NPD’s Grant. One former LVMH beauty executive adds: “More consumers are going online to sites like [Michelle Phan’s] Ipsy or Birchbox to learn about the latest launches and trends. Sooner or later, Sephora will have to react”. New entrants like Italian budget make-up

brand Kiko, which is said to have ambitious plans, are also set to shake up the market. Kiko has opened six stores in New York and New Jersey and one in Miami and plans to expand its footprint nationwide.Beauty retail chain Ulta also continues to grow.

As of September 2014, Ulta had 715 stores and opened 100 new locations in the year. It aims to open 100 additional stores in fiscal 2014.Smaller prestige beauty retailers like

Bluemercury are also ones to watch. The Washington DC-based chain has said that it aims to expand its number of doors from n n n

Holiday forecast: ‘Tis the season?Given its gifting potential, fragrance is forecast to perform better over the holidays this year, especially the women’s and high-end segment. NPD reports that fragrance is the fifth most-popular purchase of the season, all consumer-goods categories combined. Make-up gifting is said to be making a comeback, with eye and lip items predicted to drive sales this year. Entry price point items, like single-use facial masks, small-format fragrances, eyeliners and brow products, are also expected to do well. Skincare, however, isn’t projected to provide

much of a boost to the market. “The category can’t overcome the softness in top sub-segments like facial moisturizers, age specialists and gifts,” says an NPD report. “However, smaller sub-categories will help keep skincare afloat this season.”Leading up to the holidays, some 60% of

consumers plan to do at least some of their shopping online this year, making the web the leading channel for holiday shopping.

”Brand Growth Management partner Kelly Kovack

Department stores continue to push brands for exclusives, but if you have a global brand, you can’t give exclusives to every retailer. I believe this will encourage brands to take more control of their distribution

“



Insi


n n n 65 to around 100 boutiques in the short-term. As for niche-focused chain Space NK, it now has 17 Bloomingdales locations

with its shop-in-shop format, and five standalone stores. However, the UK-based chain is reportedly having trouble gaining traction in the market, and some say the concept is not tuned in to the US consumer. Despite this, industry watchers say it’s likely that the US will see new players emerge in the niche segment in the next few years.

Department stores look to the futureThe department-store front has seen its share of changes over the past year. In 2013, Canadian retail group HBC acquired Saks Fifth Avenue and luxury retailer Neiman Marcus was sold to private-equity group Ares Management and Canada Pension Plan Investment Board. In terms of expansion, many department-store operators are prioritizing their

outlets, rather than full-line stores (outlets stores generally only sell personal-care items and do not stock not full beauty offers). HBC, for example, has said that it will “prioritize and significantly increase” OFF 5TH, Saks’ value format.Beauty has, however, been a priority for Saks Fifth Avenue this year; the

retailer launched a new area devoted to designer fragrances at its flagship Fifth Avenue store in New York City called The Fragrance Library, which offers an edited assortment of “signature” designer fragrances, rather than a brand’s entire offer. The area is staffed by a Fragrance Librarian, described as a “scent stylist”. “We’ve expanded the concept to eight additional stores this fall, and we’re monitoring the success in the out-of-town stores. We will confirm the additional roll-out strategy after the holidays,” says Oldham. Saks also launched Beauty on 5 in November, a beauty service concept on the

contemporary fashion floor featuring a nail bar, makeover station and brow bar. Oldham says it plans to open a new Apothecary concept in some stores.The market’s biggest player, Macy’s, revamped its beauty floor at its flagship

store in New York City last year. The space now houses premium brands including Tom Ford, Hermès and La Mer, and has a Fragrance Bar offering prestige and luxury perfumes. It also houses a Kiehl’s shop-in-shop and Macy’s niche concept, Impulse Beauty, as well as a host of beauty services and a men’s area.Meanwhile, mid-market department store retailer JC Penney, in the second

year of its turnaround plan, continues to grow its partnership with Sephora. JC Penney announced that it would continue to expand its Sephora inside JCPenney locations through 2017; there are currently 489 Sephora Inside JC Penney shop-in-shops. From a brand perspective, many bemoan that US department stores have

become even more focused on exclusives. “Department stores continue to push brands for exclusives, but if you have a global brand, you can’t give exclusives to every retailer. I believe this will encourage brands to take more control of their distribution,” says Kovack. But this demand for exclusivity is unlikely to ease, as retailers look for a point

of difference to drive consumers into their stores—something that is becoming increasingly difficult due to the rise of the web and the uncertain economy. n

“

”WSL Strategic Retail president Candace Corlett

Consumers are asking themselves every time they spend if the purchase is a smart use of their money. [...] This poses a challenge to prestige brands—the days of launching a new and improved product priced $5 higher doesn’t work anymore



This year’s Cosmoprof Asia show was the biggest ever in terms of exhibitor numbers and size. The show welcomed 2,362 exhibitors, up 9% from 2013,

on a show floor covering 81,500m2 (877,259ft2). In terms of country pavilions, the largest was Korea’s with 336 exhibitors, reflecting the strong influence that brands from the country are having on the region and beyond. Some 60,000 visitors attended the show this year. Many exhibitors commented

on the strong international profile of buyers and distributors attending. “It is a great show because we see a mix of Asian, European and US customers,” commented pack decoration company Seram managing director Cyril Guigon. Metal components manufacturer ACME president and ceo Michael Roughton added: “We expected to meet essentially Asian clients, but what surprised me is the number of American clients here. This show is really a worldwide platform.”The show’s success is in part down to the development of the Asian region for

beauty. And although growth is slowing in parts of the continent and especially in China, the market is still dynamic, according to Cosmoprof Asia director and executive vice president UBM Asia Michael Duck. “China’s growth is around 7.5%, which is still high, and the country has massive potential in its second- and third-tier cities. Other Asian countries also offer growth opportunities, such as Indonesia, the Philippines and Vietnam, so there is strong confidence in the future of the beauty market,” Duck told BW Confidential. He added that the importance of trends from Asia also attracts executives. “Asia is the global trend-setting place for beauty, and Hong Kong is the epicentre.” To highlight key trends this year, the show introduced several new areas,

including Spot On beauty, which showcased 146 innovative brands from 17 countries. Another new area was Prestige Avenue, which hosted 10 high-end brands in an open-lounge format. Hot trends seen at Cosmoprof Asia were anti-aging in skincare and make-up,

green and organic products—an area where there is still strong demand—and multi-functional products.

Seen in showUS-based brand Sormé Cosmetics presented a make-up base with anti-aging benefits. The Fresh Start Anti-Aging Make-up Base is a light, fast-drying formula that claims to smooth the skin’s texture and fill lines and wrinkles to provide better overall coverage and a more natural look. The formula contains green tea, grape seed extract and pomegranate. n n n

BW Confidential reports on what was seen and heard at Cosmoprof Asia, which took place in Hong Kong from November 12-14

Bigger and better

Cosmoprof Asia

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”Cosmoprof Asia director and evp UBM Asia Michael Duck

Asia is the global trend-setting place for beauty, and Hong Kong is the epicentre

“

Cosmoprof Asia Took place: November 12-14 Exhibitors: 2,362, +9% vs 2013Visitors: 60,000


www.bwconfidential.com - Dec 18, 2014 - Jan 7, 2015 #103 - CONFIDENTIAL CONFIDENTIAL CONFIDENTIALCONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

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n n n JD Beauty showcased the Selfie Brush. The product (pictured) is a paddle hair brush with a mirror that slips onto a smartphone, so users can easily comb their hair before taking a selfie. It has a handle (like a hairbrush), which the company says also makes a cell phone easier to hold for a better picture. The product is specially designed for the iPhone 5, iPhone 6 and Samsung S4 and S5. It first launched in the US and UK in October and is now rolling out internationally.

New Korean brand a;t fox presented its products (pictured), which are based on the tea ceremony concept. The company markets skincare and make-up, which comes in gourmet shapes (cupcake-shaped skincare, chocolate-bar shaped soap for example) and is based on three kinds of tea leaves. The brand has a café in Korea based on the afternoon tea concept, where it serves tea and desserts and sells its cosmetics range. It has just launched a new product called Tea Toc Water, which is a clear tablet containing tea for facial cleansing. a;t fox will open two stores in Shanghai, China in March next year.

Spanish organic skincare brand Naobay, which is Ecocert-certified, revealed that it has expanded its product lineup from 29 to 40-plus skus. New products in the range include facial-care items, organic spa products and a men’s line.

Korean brand Kicho showcased a range of natural creams and shampoos, which target sensitive and problem skin.

Swiss company Mila d’Opiz presented The Skin Whisperer (pictured). The product features a new anti-aging complex that is said to stimulate the skin’s collagen and elastin production to boost firmness.

US-based Atzen, which claims to blend organic plants and vitamins with high-tech ingredients, showed a new skin lightening cream. The product is hydroquinone-free and claims to use safe and natural brightening actives. The company says that the product responds to consumer demands for non-toxic whitening ingredients.

French brand Melchior & Balthazar, which was founded in 2012, showed its Argan Oil for the face, body and hair. The brand is based on the concept of using only high-quality raw materials produced by artisans around the world for its products. n

Industry soundbites on Asia

“Korea is where we all want to be. In Korea, companies are very fast and creative and they work around concepts. They don’t just do lipstick, they invent concepts around the lip and change the attitude towards a product. International brands have to realize that in countries like Japan, China and Korea the offer is very domestic. Global brands need to watch out there, otherwise local brands will take an even bigger share of the market.”Intercos president Dario Ferrari

“The Chinese market is changing very fast so we need to adapt quickly. What is specific to China in particular is the importance of online sales. Regulations have changed and we can now sell online directly through a Hong Kong-based company, which is a good way to test the market. But in terms of volume, it isn’t a viable business model and in the long run, we will need to register the products. Our biggest challenge is finding a good distributor.”Alvend Laboratories export manager Marjorie Boudaud

“Things are starting to move after the slowdown and I am confident that we are entering a new cycle. We need to find growth again and I feel things are happening.”Coverpla president Bruno Diepois

“I see a big influence of Asian trends and products in Europe, like the snail cream, sheet masks and BB creams. The awareness of Asian brands in Europe is getting bigger, but European niche brands can also seduce consumers in Asia, as they will always benefit from the European cachet.”Qiriness co-founder & marketing director Vivian Marton



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Birchbox Paris Pop-up store

l Open: December 4-24

l Size: 100m2 (1,076ft2) l On offer: Boutique

offering bestselling products from Birchbox’s French

website, La Fabrique make-your-own box area,

pay-for workshops and beauty services

A year and a half after launching its online beauty subscription box offer in France, US-based Birchbox is out to build awareness by developing its real world presence.

The company opened a pop-up store in Paris early December, which was followed up with the launch of Birchbox on the Go, a branded vending machine at the French capital’s Gare Montparnasse train station. There may also be a permanent retail location on the cards. Birchbox Europe general manager Quentin Vacher told BW Confidential that the pop-up store is testing the waters for a potential brick-and-mortar store in Paris. (Birchbox opened its first store in New York City in July.)The 100m2 (1,076ft2) pop-up, located on the rue Turbigo in central Paris, is open until

December 24 and features three areas: a retail boutique, “La Fabrique” (the factory, in French), where shoppers can compose their own beauty box, and Backstage, a space offering pay-for workshops and beauty services. The retail offer is comprised of bestsellers and exclusive products and brands gleaned

from Birchbox’s online shop in France. Birchbox encourages browsers to test products, and all items can be sampled before purchase. In the La Fabrique space, consumers can choose five sample-sized products to create their own box. The Backstage area offers a series of workshops and beauty services, including hair

styling, make-up application, skincare rituals, manicures and hand massage. The services last between 10 to 25 minutes and cost from €5 to €20. Birchbox On the Go, the company’s vending machine launched in Paris’ Gare

Montparnasse train station, will be on site for five months. The vending machine offers a range of beauty packs, which contain two miniature/travel-sized products and cost €4. Each pack is based on a specific theme, such as ‘last minute weekend’ or ‘evening with friends’. To support the launch, Birchbox hosted beauty workshops at the train station on Saturday December 13. Birchbox has said that it aims to expand the vending machine concept to other high-traffic areas, such as hotels and nightclubs. n

The beauty box specialist opens a pop-up store and launches a vending machine concept in Paris

Birchbox builds offline presence in France

Birchbox On the Go vending machine

l Location: Montparnasse train station, Paris

l Open: December 2014-April 2015

l On offer: Packs of two miniature/travel-sized

beauty packs retailing at €4



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s Birchbox’s pop-up store in Paris sells products and allows shoppers to curate their own beauty boxes

s In addition to its Paris pop-up (storefront pictured left), Birchbox has also launched the On The Go vending machine (pictured right), a way for the brand to create a buzz in high-traffic areas

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