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The inside view on the international beauty industry

Inside

CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

The buzz 2News roundup

Netwatch 7Beauty blogger review

Interview 8Printemps head of beauty collections Delphine Hervé-Turro

Insight 11Russia

Store visit 14Beauty Avenue, Hong Kong

l China Beauty Expo, Shanghai, May 7-9 l TFWA Asia Pacific, Singapore, May 11-15l Luxe Pack New York, May 14-15l Beauty World Middle East, Dubai, May 27-29l World Perfumery Congress, Deauville, June 10-12 l MakeUp in Paris, June 12-13

Meet the BW Confidential team at:

Oonagh PhillipsEditor in [email protected]

More big acquisitions could be on their way. News emerged last week that Korean group LG Household

& Healthcare was considering making a bid for Elizabeth Arden. This was followed by reports that Arden had hired banker Goldman Sachs to discuss a potential sale. Although Arden has suffered over the past year, due

to weaker-than-expected sales in North America, what it called poor commercial execution in its international business and errors in implementing the revamp of its namesake brand, the company would be an interesting

buy for many. The Arden brand enjoys enviable brand equity and its strong skincare component is also a plus. In addition, there are not that many acquisition targets of this size available in the market, meaning Arden is likely being looked at by many potential buyers. (Is it thought that Coty would be interested in such a deal.)If LG were to buy Arden, the Korean company’s international dimension would

reach an entirely new level and it would, in effect, become a major global luxury beauty player. Such a deal would also be another clear sign of how many groups from Korea and other parts of Asia want a bigger piece of the international market, and how they may become more of a household name on a global basis in the near future.

Big deals

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South Korean group LG Household & Healthcare is said to be considering a bid for US company Elizabeth Arden. News agency Reuters reported that LG is looking for large domestic and overseas acquisitions, and that it has made 12 purchases since 2007.Buying Elizabeth Arden would be LG’s biggest deal to date and would see the Korean

company become a global luxury beauty group. LG’s share price rose 3% on the news. LG is ranked number-two in the Korean cosmetics market.

UK-based fragrance company Designer Parfums has acquired US-based brand DDF Skincare from Procter & Gamble. DDF Skincare was founded in 1991 by cosmetic dermatologist Howard Sobel, and was designed for skin concerns, such as anti-aging and acne. The brand was taken over by P&G in 2007. This is Designer Parfums’ first move into skincare. The company, part of the Shaneel

Enterprises Group, markets fragrance brands, such as Jean Patou, Ghost, Scherrer and Aigner Parfums. It recently took on the Porsche Design fragrance license.

Brazil-based Grupo Boticário has become the market leader in fragrance in Brazil, according to new figures from Euromonitor International. Natura previously held the number-one ranking in the country. Brazil’s fragrance market was worth R$15bn (US$6.7bn) last year. Grupo Boticário also announced that it has invested R$155m (US$64.9m) in a new

distribution center in São Gonçalo dos Campos city in Bahia state, Brazil. The new 3,000m2 (278.7ft2) center will cater to the north and northeast regions of the country.

US-based internet beauty subscription site Birchbox has raised $60m in funding. The funding was led by Viking Global Investors and will be used to pay for a marketing push and further expansion. Birchbox was founded in 2010 and has more 800,000 monthly subscribers. In addition

to its subscription business, it sells full-size beauty products on its website. The company also plans to open a brick-and-mortar store in New York this year.

Strategy

n LG Household & Healthcare considering bid for Elizabeth Arden

n Designer Parfums acquires skincare brand DDF

n Grupo Boticário becomes market leader in fragrance in Brazil

n QVC to launch in France in 2015

Stay informed with our daily news headlines on www.bwconfidential.com

ResultsJapanese group Shiseido moved back into profit for its fiscal year ending March 31, 2014, reporting a net income of ¥26.15bn ($256.35m). This compared to a net loss last year of ¥14.68bn ($177.87m), largely due to an impairment loss on goodwill for n n n


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the Bare Escentuals brand. Operating profit rose 90.6% to ¥49.6bn ($486.22m), due to higher sales and foreign exchange factors. Net sales for the year were up 12.4% to ¥762bn ($7.47bn). Overseas sales grew by 26.4% to ¥384.77bn ($3.77bn), while domestic sales were up just 1.1% to ¥349.72bn ($3.43bn). The group said that the market in Japan is seeing a moderate recovery and that it

benefited from a surge in demand ahead of the VAT increase, which came into effect in April this year. For its domestic market, Shiseido is focusing on key brands in its portfolio. The company also increased marketing investment behind the Shiseido brand and clé de peau Beauté in Japan. In its overseas business, the group reported business conditions were improving in

China, growth remains solid in the US, and business in Europe continues to be tough. For fiscal 2015, the group expects sales to grow by 2.4% to ¥780bn ($7.64bn) and net

profit to rise 45.3% to ¥38bn ($372.44m). However, it said that operating profit will drop by 15.4% to ¥42bn ($411.67), due to increased marketing expenses and labor costs.

Sales at Switzerland-based Art & Fragrance’s perfume division increased by 7% in 2013 to SFr52.6m ($60m). EBIT fell by 29% to SFr8.8m ($10m), due to costs related to the acquisition of filling and logistics company Cosmetics Perfumes Services. (The company has since been renamed Art & Fragrance Services). The company says that its Lalique and Bentley fragrance brands offset slower sales from

classic scents, such as Cabotine by Parfums Grès. Lalique fragrance sales rose by 33%. Jaguar Fragrances saw just 1% sales growth in the period, while Parfums Grès (-37%) suffered from falling sales of its Cabotine scent. Parfums Samouraï reported a 16% drop, due to a difficult market in Japan, the brand’s main market. For the group as a whole, sales last year increased by 7% to SFr118.7m ($135m).

P&G saw net profit for the third quarter of its fiscal year 2014 rise 2% to $2.61bn. Net sales were flat at $20.6bn, although on an organic basis, sales were up 3%. Beauty sales declined 2% (organic sales grew 2%). The group said it had seen decreases in its salon professional business and its skincare sales in Asia.

Anglo-Dutch group Unilever saw first-quarter sales fall 6.3% to €11.4bn, reflecting a negative currency impact of 8.9%. The group’s underlying sales growth came in at 3.6%. Although underlying sales in emerging markets rose by 6.6% in the quarter, the company reported that growth in these markets continued to slow, especially in South Asia and Southeast Asia. However, Unilever said its emerging-market strategy remains unchanged.Unilever saw its personal-care division sales grow by 4.5% to €4.2bn.

Japanese group Kao Corp saw its net profit more than double to ¥25.2bn ($224.8m) in the first quarter of the year, mainly due to a surge in demand for products before the anticipated VAT increase, which came into effect in Japan in April. Net sales for the quarter rose 18% to ¥341.2bn ($3.32bn). The company’s beauty care

division saw sales grow by 11.9% to ¥144.4bn ($1.40bn).

France-based Interparfums SA saw sales fall 49% to €74.8m for the first quarter of 2014, due in part to an unfavorable comparison with the same period last year, when revenues included the Burberry brand. On a like-for-like basis, sales were up 16.2% for the quarter. Montblanc sales were strong, up 32% to €20.2m, while the Boucheron

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(+53%) and Van Cleef & Arpels (+14%) brands also reported good growth.Sales for Lanvin, however, were down 19% to €15m, due to a downturn in Russia and

a tough comparison with last year’s quarter, which saw the launch of Lanvin Me and high orders from Éclat d’Arpège. Jimmy Choo sales fell 28% to €12.7m, also due to a difficult comparison with 2013, when the company launched the Flash line. Currently in the launch phase, Karl Lagerfeld fragrances had nearly €10m in sales. Interparfums is maintaining its annual sales target of €280m for 2014.

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[email protected]@bwconfidential.comBW Confidential is published by Noon Media513 746 297 RCS NanterreCopyright © 2014. All rights reserved. Reproduction in whole or in part withoutpermission is strictly prohibited.

US-based home-shopping network QVC is to launch in France, in the second quarter of 2015. The content, in French, will be available online at QVC.fr, on mobile devices, major satellite TV, cable TV and IPTV services, as well as on social platforms.QVC expects to create around 200 jobs in France within the first two years.According to the retailer, QVC is the second-largest mobile commerce player among all

multi-category retailers, behind Amazon.com.Outside of the US, QVC is present in the UK, Germany, Italy, China and Japan.

US-based Victoria’s Secret has opened a new beauty and accessories store in Toronto Pearson International Airport, in partnership with travel retailer Nuance. The 700ft2 (65m2) store is located in the airport’s Terminal 1 Domestic. The boutique offers a range of the brand’s fragrances, bodycare products and lip glosses, as well as accessories. Last year, Nuance and Victoria’s Secret opened new stores in Toronto

T1, Singapore, Gothenburg, Lisbon, Hamburg and, in 2012, in Las Vegas. A new store in St. Petersburg is also slated to open in the near future.

Estée Lauder-owned make-up brand Bobbi Brown is to open its third boutique in Paris in June. The 75m2 (807ft2) store will be located in Paris’ 17th arrondissement. The store will feature a make-up workshop table at its center, where shoppers can test products and ask make-up artists for advice, as well as large screens featuring videos of fashion shows. On the upper floor, there will be a private beauty room for make-up lessons; the space can also be used for workshops or events. A range of both complimentary and pay-for services will be offered at the store.This is Bobbi Brown’s fifth store in France.

Nocibé opened its second Les Bellista by Nocibé store, the French perfumery chain’s retail concept devoted exclusively to its private-label offer, on April 30th. A first location opened in Leers, France in January. The second store is located in Evry, a suburb of Paris. Like the first boutique, the new

location will cover 100m2 (1,076ft2) and offer 1,000 skus from Nocibé’s own brand of accessibly priced make-up, skincare, bath and body products and beauty accessories. Services on offer include hair styling, makeovers and manicures, while waxing and

express facial and body treatments are offered in private treatment areas.Nocibé, which was acquired by German perfumery chain Douglas in February 2013, has

said it will open two more Les Bellista by Nocibé stores this year.

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Thierry Mugler (Clarins) launched a new limited-edition fragrance for Angel last month. For the new scent, called Eau Sucrée, Mugler teamed up with French culinary brand

Fauchon, which created an Angel eclair based on ingredients used in the fragrance. Eau Sucrée, created by Dorothée Piot from

Robertet, is described as a fruity gourmand with red berry sorbet, caramelized meringue, and patchouli and vanilla accords.

Clarins Fragrance Group president France Philippe Perrin said that the group’s objective for Angel in France is to move up to a number-four ranking. He added that Angel has been in the top five since its launch 22 years ago, and that from the beginning of the year until February, Angel saw growth of +8%, according to NPD. Another key objective for the group this

year is to reinforce Mugler’s Alien franchise. The group recently launched Alien Eau Extraordinaire, backed by a TV ad campaign. Perrin said that Alien is ranked number 12 in prestige fragrances in France and he is hoping to push it into the top 10 this year. Eau Sucrée launched in April and retails at

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Launches

Direct-to-consumer sales of prestige fragrance in the US grew 10% to reach $285m in the 12 months ending February 2014, according to NPD Group. The company said that although small, direct-to-consumer (which includes products sold on department store websites, in key online-only beauty retailers, and through TV/home shopping retailers) is a bright spot, given that the fragrance industry saw a 2% decline during the same period.Gift sets, representing 46% of direct-to-consumer prestige fragrance sales in the US,

grew 9%, while men’s fragrances in the channel were up 19%. NPD also found that fragrances sold in 5-ounce sizes (150ml) or larger saw a 26% sales increase during the period, compared with 12% sales growth for this size in prestige department stores.

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The Estée Lauder Companies has appointed svp and gm global of Aramis and Designer Fragrances. Davis was formerly vp and gm of Aramis and Designer Fragrances, Smashbox, Bumble & Bumble and Ojon in the UK. She will manage the business across all regions, including travel retail.ELC also appointed Christopher Giglio vp corporate global communications. Giglio was

most recently evp corporate and crisis communications at marketing company HL Group.

BW Confidential reports on what the bloggers are saying about beauty

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ch Beauty blogger review

The launch of US beauty brand Tarte on QVC UK created a storm on Twitter and reportedly sold out within minutes of being featured on the home-shopping channel. British bloggers were said to have been keen to try the eco-chic brand and its Amazon-inspired, super fruit-infused formulas, including Amazonian Clay Foundations and LipSurgence Lip Shines.

Search engine Yahoo attracted the attention of bloggers after it named make-up artist Bobbi Brown editor-in-chief of its beauty section. Although writers said they like Brown’s natural approach to beauty, many, including fans of the brand, expressed surprise at the move, given her position as brand founder of Bobbi Brown.

South Korean make-up brand Etude House’s Sweet Recipe Dear My Jelly Lips Talk has whet the appetites of Western bloggers, who like its candy-like, jelly texture, scents and moisturizing formulas. Bloggers also expressed surprise at the highly pigmented shades, which change color when applied.

A selfie posted by Gwyneth Paltrow wearing no make-up to mark World Water Day created a flurry of comments among bloggers. The photo prompted a new round of shots featuring celebrities with no make-up and polls asking readers how they felt about the no-make-up look. The majority of respondents found that no make-up was more attractive than the made-up look.

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

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Skincare insightFigures, retail initiatives & trends

Fragrance insight An analysis of market data, trends and new opportunities

Make-up insightColor makes a comeback


Beauty insight

Make-up


Market watch China, Japan, Korea

Luxury insightWhat’s changed and what’s to come?

Insight: Haircare How prestige is set to develop

Fragrance insightData, trends & retailer views

Make-up insightWhat’s next for the category?

Skincare insightWhat’s next for the category?

Insight: Fragrance Creation Trends, opportunities & challenges

Insight: Fragrance Ups, downs & new directions

Make-up insightWhat’s in store for 2013?

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Printemps Haussmann store, Paris

l Beauty area on ground floor: 2,500m² (26,910ft2)

l Category sales ranking: 1. Skincare

2. Fragrances3. Make-up

Printemps head of beauty collections Delphine Hervé-Turro”

There has been strong growth in premium skincare over the past year. We are also seeing a good progression of sales in rare perfumes […] For 2014, it looks like [make-up] will be calmer

Printemps head of beauty collections Delphine Hervé-Turro

French department store Printemps has set out to reinforce its La Belle Parfumerie concept on the ground floor of its Paris flagship store and has replaced the first floor beauty area with a lingerie department, reducing the size devoted to beauty from 4,000m2 to 2,500m2. Printemps head of beauty collections Delphine Hervé-Turro explains this new strategy

Fine-tuning the offer

Why did you replace the beauty offer on the upper first floor with lingerie? The first floor beauty area was an initiative created in 2003, which revolved around organic and natural skincare, and it worked well at the time. But the natural market is stronger in the pharmacy channel and specialist stores, and our sales on the floor were getting more difficult. At the same time, the parapharmacy and pharmacy channel has seen strong growth, competing with our [parapharmacy offer], which had less added value for us. So last year, we decided to change the first floor and concentrate on our La Belle Parfumerie concept [on the ground floor], which highlights some beautiful, rare brands, and to focus our energy on our luxury and differentiation positioning.

Have you made changes on the ground floor to accommodate brands previously sold on the first floor? There is already a fragrance space on the rue d’Havre side of the ground floor, for more accessible purchases. Here, we added about eight skincare brands and created an entire stand for the Leonor Greyl brand: a boutique-style space with a window display. We kept Dr Hauschka for customers who like natural products; Pure Altitude and brands like Esthederm, Payot and Carita; brands based on the Orient, like MarocMaroc; and Radical Skincare, which is exclusive to Printemps. Of course, we have skincare brands that were already on the ground floor, with advice, tools and services, like diagnostics and advisor appointments. We want to work more with prestige skincare brands, which is what our customers look for, and as a result we have reduced the middle-range offer.

What will happen to the Kiehl’s and Nuxe first-floor spaces? We have kept Nuxe and Kiehl’s, which both have very nice spaces on the first floor. We closed the treatment rooms on the first floor, but will open two new Printemps treatment rooms on the ground floor, which brands can invest in each week to offer clients treatments. This month, we also opened a treatment room on another floor in the store.

How are sales performing at the store? Mid-range brands, in our store at least, don’t necessarily need service. But for us, we have a clientele that is looking for something n n n

Chanel + Les ExclusifsDior Guerlain Sisley Lancôme

Printemps Haussmann store Top 10 niche brandsRank Brand1 Diptyque2 Jo Malone3 By Kilian4 Creed5 Editions de Parfums

Frederic Malle6 Art Selection

7 Annick Goutal8 Acqua di Parma9 Serge Lutens10 Caron

Printemps Haussmann store Top beauty brands

Source: Printemps

Source: Printemps



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“Printemps head of beauty collections Delphine Hervé-Turro

Printemps head of beauty collections Delphine Hervé-Turro”

The beauty area on the first floor was created in 2003 and revolved around organic and natural skincare, which worked well at the time. But the strength of the organic and natural market has been through the pharmacy channel and specialist stores; our sales on the floor were getting difficult

more prestigious; they are looking for premium brands and they come to the store for advice and service. This includes a more international clientele, but the local clientele today is also captivated by these brands, which is what contributes to our growth.There has been strong growth in premium skincare over the past year. We are also

seeing a good progression of sales in rare perfumes [27% of perfume sales are niche fragrances]. Make-up has been progressing well, but has been slowing because we have done so well with nail products, and there have been some very interesting initiatives, like lip pens or certain eye products. For 2014, it looks like [make-up] will be calmer.

How does Printemps differentiate itself from other stores? First, by our brand selection. We work hard with brands to be more innovative, whether it be through tools like iPads or diagnostics, analytical tools, or make-up simulations and make-up studios; it is the service that counts. The main objective is to offer an exceptional shopping environment: the consumer is entering a luxury space where she can sit and take her time. A client does not come to us looking for the least expensive product or for speed. They come for our selection of brands, service, advice and the in-store experience.

Are you affected by more consumers buying beauty on the internet? Are you seeing a showrooming effect? We have not seen this. We see that the consumer is more aware of what she is looking for; she reads blogs and the press, is aware of products and trends, and can look up product descriptions and claims. But I haven’t particularly seen a showroom impact. Clients come to us for personalized advice, to learn how to apply products, to consult with experts, and perhaps learn about new treatments. You can’t compare this [type of service] to the internet or mobile. We have a clientele who is looking for premium beauty and this consumer is not looking to compare prices. Environment is a big factor—we are offering an environment and service that people are not going to get online.

How do you plan to develop digital and combine it with luxury positioning? We don’t sell anything on the internet at the moment—we use it to inform clients about new products and events—but we are working on the digital side for the future. There will always be the need to buy beauty online, but it will mainly be for regular purchases, like a lotion you already buy that is on sale—it is more complicated to express the idea of a product online.

What is the return on events at the store? There is a lot of return on events. You need to publicize them to a wide-enough audience. We created a highly successful conference series with perfumers in January. We had about 15 conferences, which filled up very quickly, surpassing our expectations. As a result, we are currently planning an annual program, with three conference cycles on perfumery. We are developing an entire educational program around the values of the ‘belle parfumerie’ with our brands, and making it available to the public. And that is a part of our history and the La Belle Parfumerie concept. n

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s Printemps’ ground floor beauty space now includes a dedicated Leonor Greyl stand that resembles an individual boutique

www.creative-beauty-paris.com

9. 10. 11.2014

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”Euromonitor International analyst for Eastern Europe consumer markets Yulia Polishchuk

Promotional actions that drive down the average prices of premium product are having the strongest impact on the market slowdown. Special price offers are arranged both at the initiative of the manufacturers or cosmetics chains

BW Confidential analyzes the state of the beauty market in Russia

A bear marketRussia

A slowing economy, rampant inflation, a falling ruble and fierce discounting are taking their toll on the Russian beauty market. In addition, the current political situation

following Russia’s annexation of Crimea has some foreign companies worried about risks to their business there. The total market saw sales grow by just 2% in 2013, according to Euromonitor International. The premium beauty sector did better than the overall market, with sales up 5%. Value sales have been hit by strong discounting campaigns. Indeed, with the major

chains now basing their strategies heavily on a discount component, consumers have changed their shopping behavior and now hold off on making purchases, preferring to wait for a price promotion. “Promotional actions that drive down the average prices of premium product are having the strongest impact on the market slowdown. Special price offers are arranged both at the initiative of the manufacturers or cosmetics chains,” comments Euromonitor International analyst for Eastern Europe consumer markets Yulia Polishchuk. Given these practices, some high-end brands have even sought to pull out of the market, due to worries over their brand image.However, on the price issue, there are fears that further declines in the ruble will see

premium brands raise their prices. Perfumery chain Ile de Beauté said that it will be the only retailer not to change its prices in line with exchange rate fluctuations, at least until the summer. But the volatile currency will mean that some prestige brands will be 20% cheaper than in duty-free stores or in other parts of Europe.

Retail: discounting and differentiationOn the retail front, Russia’s biggest chain L’Etoile, with more than 880 stores, has been criticized for its massive discounting operations. Some industry watchers now say that it is acting more like a mass-market chain, while others have gone so far as to say that L’Etoile’s actions, especially its discounting, are “destroying brands”. However, some analysts say that all chains are discounting and it is just because L’Etoile is the biggest player that its actions are more noticeable. L’Etoile is also going through organizational changes. n n n

Russia beauty market by category 2013** $bnCategory Sales

$bn*% change 2013/2012

Skincare 2.30 +2.2%Haircare 2.01 +1.4%Fragrance 1.98 +3.5%Color cosmetics 1.56 +0.6%Men’s grooming 1.02 +1.4%

Source: Euromonitor International*Retail sales price **Forecast

credit: stock.xchng



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The company’s owner Maksim Klimov died last year and the business is now being run by his wife, Tatyana Volodina.Other retailers are looking to better differentiate themselves by selling exclusives

or niche products. This has seen more expensive items take a larger share of some retailers’ assortments, while space devoted to more masstige items has been reduced. One example of this is perfumery retailer Rive Gauche, which opened a new store concept devoted to niche fragrance brands called Rivoli Perfumery in St. Petersburg in late 2013. The boutique carries brands such as Nasomatto, Sospiro, Xerjoff and By Kilian, as well as the complete range of Guerlain’s exclusive collection in Baccarat crystal bottles. At the same time, Rive Gauche is continuing to rebrand the Douglas Rivoli stores, which it acquired in 2010. To date, the company has renamed 26 stores, and only six are now operating under the Douglas Rivoli brand. Dmitry Kostygin, Rive Gauche co-owner, says that not all Douglas Rivoli stores will take on the Rive Gauche name. It plans instead to rebrand some stores under the Rive Gauche Exclusive nameplate. These stores will have a larger share of premium beauty brands (the number has not yet been announced). In addition to wanting to preserve the premium positioning that was occupied by

Douglas Rivoli, Rive Gauche had to satisfy the needs of shopping malls so it would retain commercial space. “Shopping malls have various footholds in the market: some need standard Rive Gauche, while others need Rive Gauche Exclusive,” adds Kostygin.The Ile de Beauté chain has also been looking to add new brands to its assortment. In

April, it launched fragrance brand Escentric Molecules. Sephora’s shop-in-shops in Ile de Beauté stores are also said to be doing well. Despite these efforts at differentiation, most chains now carry the same products and

the competitive edge has become the price. This has intensified with the rise of the internet and online shops, offering lower prices and a wider range of products. As for the future, over the next five years, the premium cosmetics and perfumery

market is not expected to see substantial gains. According to forecasts from Euromonitor International, the premium market will show a CAGR of only 0.1% between 2013 and 2018 in value terms (not taking inflation into account)—hardly the high growth associated with a dynamic emerging market.

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s In late 2013, Rive Gauche opened a new store concept devoted to niche fragrance brands in St. Petersburg, called Rivoli Perfumery

Despite efforts at differentiation, most of the chains now carry the same products and the competitive edge has become the price. This has intensified with the rise of the internet and online shops offering lower prices and a wider range of products

Russian beauty: what’s doing well Despite the economy’s current woes, premium cosmetics are still a big draw for Russian consumers. “The demand for premium cosmetics is growing steadily in Moscow and St. Petersburg because these cities have a solid market for luxury goods. We are seeing demand for new, mainly premium, brands in the market. Consumers in St Petersburg are willing to spend large sums of money on fashion, accessories, premium cosmetics and perfumery. Luxury product sales are growing 2% faster than the market as a whole,” says independent analyst agency Investcafe expert Darya Pichugina. In segment terms, make-up is still a strong n n n



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category, although sales were up by just 0.6% last year. “Nine out of 10 Russian women use make up. On average, they start using make-up five years earlier than other Europeans, while over 80% of Russian women use make-up every day,” says MAC Cosmetics Russia and CIS art director Ekaterina Ponomareva. Clarins sees much potential in color cosmetics. “We set a goal to enter the top-five luxury make-up brands in Russia. Of course, it is hard to compete with Chanel or Dior, but we are ready to challenge other brands. In just three years, our make-up sales have more than tripled. We have invested 20% of our budget in advertising to create brand awareness,” explains director general Clarins Group Russia Edgar Shabanov. He also points to a growing trend for men’s products and says the share of male

grooming sales in Russia is almost twice that of Europe’s—that is, 9.8% versus 4.5%.Clinique marketing director Maria Kudryavtseva confirms this trend. “More Russian

men are using grooming products. The middle class generation of young men and women with a sound income is expanding. Today, it is mainly women who buy male cosmetics (60%), but the share of men buying for themselves is steadily growing,” she comments. “Shaving products, aftershaves and basic skincare lead, but at the same time I see a strong interest in express cosmetic products, including rollers to treat under eye bags, or acne spot gels,” she adds. n

n n n Russian beauty: what’s doing well



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Beauty Avenue, Hong Kong

l Location: Mong Kok, Hong Kong

l Size: More than 20,000ft2 (1,858m2)

l On offer: 54 branded counters, complimentary

and pay-for services

Luxury goods and retail group Dickson Concepts opened its first Beauty Avenue standalone prestige beauty store in November 2013 in Hong Kong and is now on the road to expansion.

The first Beauty Avenue store spans more than 20,000ft2 (1,858m2) across two floors and is described as a beauty megastore with a branded focus. “The concept is about providing brands with large-scale counters, which is the key differentiator from other concepts like Sephora. This is very much about brand image and the service that brands provide,” notes Beauty Avenue ceo Sarah O’Donnell. There are a total of 54 branded counters at the store.The ground floor houses premium brands such as Dior, Guerlain, Shiseido, MAC and

Sulwhasoo, while more accessible brands like L’Oréal Paris, Origins and Biotherm are housed on the second floor. Some brands, like Benefit, have two counters—one that offers only product, on the ground floor, and a brow bar that also sells products, on the upper floor. The store also features both pay-for and complimentary services. While each counter is staffed with brand-specific beauty advisors, there are also general BAs throughout the store.The retailer is looking to offer a wide range of product categories. “Local consumer tastes

are changing in terms of product assortment and brands—they are looking beyond just the top-sellers and are also becoming more interested in make-up, rather than just skincare,” comments O’Donnell. Beauty Avenue is located in Mong Kok, an area that O’Donnell says was “previously tier-

two”. “Retail growth in Hong Kong is shifting from very grade-A locations like Causeway Bay and Pacific Place to areas such as Mong Kok. Locals are looking to shop closer to home, while PRC customers, who make up nearly all of the tourist spend, are branching out and are now shopping in different areas,” O’Donnell explains. She adds that skyrocketing real-estate costs in Hong Kong is encouraging smaller format stores, as opposed to multi-category department stores.Beauty Avenue is focusing expansion in Hong Kong and mainland China. A second store will

open in Hong Kong and Macau is also on the radar. In mainland China, O’Donnell says a store will open in at least one tier-one city in 2015, but tier-two and tier-three cities are the priority, as growth is stronger there and operating costs are lower. “Our expansion is very location dependent. The one consistent thing is to have traffic. We want to be profitable right away, so we look at projects that will generate traffic very quickly,” she concludes. n

Prestige retail concept Beauty Avenue will inaugurate its second store in Hong Kong this year. The retailer plans to expand to mainland China in 2015

Standalone beauty



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s The Beauty Avenue store boasts around 54 branded counters

s The store offers a range of pay-for and complimentary services

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