It’s been a tough market for retailers. In just the past few months, Toys R Us and Bon-Ton have both filed for Chapter 11 bankruptcy. In 2017, there were more than 8,000 retail store closures, according to Business Insider. Many news outlets called 2017 the “Retail Apocalypse.” But despite all the store closures and negative headlines, this doesn’t quite tell the whole story.
Beauty brands have been thriving amidst the flurry of store closures and bankruptcies, consistently posting sales growth, announcing new store locations and adding new product lines. Beauty retailers have found a winning formula that others have yet to successfully replicate.
The Growth of Beauty Brands by the Numbers
Ulta Beauty, one of the most successful beauty retailers today, boosted overall square footage by approximately 10% in 2017. They plan to open 100 stores this year and grow sales by 6-8%, according to the International Council of Shopping Centers (ICSC). These new stores add to their 1,097 stores worldwide, with 807 located in major malls and shopping centers in North America, according to Directory of Major Malls | ShoppingCenters.com data (DMM).
Perhaps most revealing is that J.C. Penney, once a highly profitable anchor store, recently revealed their plan to hire 6,500 stylists for their burgeoning hair salon business across the U.S. Marvin Ellison, CEO of J.C. Penney, said one of the key components of their strategy moving forward is their unique partnership with Sephora. At the end of 2017, J.C. Penney’s beauty offerings outperformed all other product offerings.
Sephora is the golden standard in retail innovation and, like Ulta Beauty, they are thriving. They have 2,300 stores across 33 countries, and DMM data shows 525 of these are located in major malls and shopping centers in North America. Sephora plans to open new stores styled in a new, smaller boutique format through the next few years, continuing their strong growth while other retailers struggle.
2 Reasons Why Beauty Brands are Thriving
Beauty retailers are posting strong growth while others disappoint for two main reasons: they provide a great in-store experience, and they’re quick adopters of technology to constantly stay on the forefront of innovation.
Sephora and Ulta Beauty are, once again, shining examples of experiential retail. Ulta in particular understands customers’ desire to try on cosmetic products before making a purchase, especially at the high-end price range. Their in-store experience is entirely focused around accessibility. They carry an enormous line of beauty products with space for customers to test just about anything they want. Some Ulta locations have salons where customers can get their makeup done by experts or get a quick tutorial in applying certain types of makeup. Each of these gives customers a compelling reason to visit Ulta stores while making the products, as well as the actual appearance the customer truly desires, easily accessible. In this way, Ulta makes intelligent use of the in-store experience not just to drive foot traffic but to incentivize sales.
Sephora is also a trailblazer in experiential retail, but they take a much more technological approach, even taking the Sephora-experience outside of their physical locations. Sephora recently launched an augmented reality mobile application that lets users try on over 50 different shades of lipstick without leaving their homes. They can also scan their faces to get a Color IQ, which is essentially a reference number to find beauty products that match their skin tone. Sephora even offers digital classes for consumers to learn things like contouring cheekbones. Their technological approach dramatically expands the customer’s experience while keeping them at the forefront of innovation. Being an innovator is one of the best ways to safeguard against downturns in the retail market and stay top of mind among consumers.
Both Ulta and Sephora deliver great experiences for their customers. Beauty retailers are uniquely positioned to do this as buying cosmetic products isn’t always about the products themselves. Customers are already searching for an experience – the experience of looking a certain way – and beauty brands can work to effectively deliver a small taste of this experience.
Other retail verticals such as drugstores and big box retailers, like Walgreens and Target, are beginning to implement beauty demonstrations and concierges in an effort to replicate the success of beauty retailers. But the truth is many retailers are struggling to find their own way to deliver this same type of value to their customers. Sephora and Ulta certainly provide a roadmap with their use of cutting-edge technology and in-store offerings. Retailers in other categories will have to find unique methods of serving their customers.
Beauty brands have been thriving in a tough retail market. They’ve found a winning formula and other retail verticals need to take notice. Even as bankruptcies and store closures continue, beauty brands will be redefining the way retailers serve their customers.
This blog was partially informed by data from Directory of Major Malls | ShoppingCenters.Com. For more data like this, see how online access to Directory of Major Malls database informs retail strategy.