COLOR COSMETICS

A Whole New Makeup World

Social media, influencers and online threats change how retailers approach cosmetics
By Debby Garbato

Walgreens debuted in-store Birchbox beauty sections in December.
I
n the 1990s, glossy magazines and
supermodels were the trendsetters in
beauty and fashion. Young women
emulated — or at least aspired to emu-
late — the clothing and color cosmetics
looks dominating the runways. There were
few other choices.
Food, drug and mass channels echoed this
mantra. They offered a handful of dominant
cosmetic brands supported by mega ad cam-
paigns featuring the same looks and super-
models. This left little room for smaller
players, who normally lacked the funds to
support top talent and big ad budgets.
Today, supermodels and major brands
no longer call all the shots in beauty. The
advent of the Internet, social media and
beauty influencers from YouTube and
Instagram are providing myriad choices in
color cosmetics and purchasing channels. A
growing cadre of online beauty subscrip-
tion services also let women regularly test
new makeup from brands large and small.
The degree to which millennials indulge
in makeup, what they buy, what they spend,
and where they get suggestions on looks
and styles are up to them alone.
“There’s no one-fits-all in beauty,” said
Pooja Agarwal, vice president of operations
at Birchbox, an online subscription beauty
company. “There’s a trend towards person-
alization. Before, everyone saw the same
assortment. Consumers still care about
beauty and feeling their best. But they don’t

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 need a supermodel to tell them what that is.
Technology has changed the game.”
The new rules of the game are threaten-
ing food, drug and mass, where color cos-
metics generate some of the highest profits
per square foot. According to Nielsen, con-
sumer spending on beauty has shifted online
faster and more significantly than in nearly
every other CPG category. Almost 1-in-3
U.S. dollars spent on beauty is spent online.
In total, Americans spent more than $12
billion online for beauty and personal care
over the past year. That represents 30%
of dollars flowing through online chan-
nels, up from 24% the year before. It also
signifies the biggest shift among major
FMCG categories.
“These retailers are competing against
online players,” said Matt Sargent, senior
vice president of retail at consultancy Frank
N. Magid Associates. “We’re facing a major
change in how convenience purchasing is
addressed. Cosmetics can’t exist in its cur-
rent structure and expect to have sustain-
able business in these channels. If they don’t
figure out a different way, the cosmetics
category will die there.”
Mass retailers are fighting back. In addi-
tion to offering smaller brands, a growing Rite Aid’s new nail bar features a high-quality nail selection.
number are partnering with online-only
labels. They also are employing in-store consultants, they are not commissioned, to try products or buy a higher-priced item
consultants to advise shoppers on product employed by cosmetic manufacturers or with an application or purpose they were
use, while featuring exclusive lines that tap assigned to leased departments. unsure of. Consultants also provide an
into new trends and differentiate them from Nor do they primarily target beauty afi- experience unavailable online.
their online and offline competitors. cionados. Hooked on the latest trends, “They’re raising the bar on what a
“Keeping cosmetics relevant in food, drug enthusiasts frequently visit department and drug store is,” said Joann Marks, founder
and mass is incredibly important,” Sargent specialty stores and make major invest- and CEO of Cosmetic Productions.
said. “People come for cosmetics and shop ments in high-priced cosmetics. Mass chan- “Consultants make stores more interac-
other categories. While price is a differenti- nels tend to attract more casual customers tive. A consumer may not know which con-
ator, you can’t have that alone. They can’t who want to fill a specific need, purchase cealer is best. They also want to touch and
out scale Amazon or carry the same assort- cosmetics for a special occasion or have a feel. Anything that lets people try on colors
ment as Jet.com. Part of what’s happening limited budget. helps. These consultants are highly trained
is a threat and part is an opportunity. They “The Walgreens customer isn’t going on everything from proper skin care to how
must figure out a model they can effectively to spend an hour seeing everything,” said to apply eyelashes.”
scale to deliver an experience that doesn’t Birchbox’s Agarwal, whose company CVS Pharmacy’s BeautyIRL pilot offers
feel boxed away.” recently launched special sections there. custom makeovers, braids, manicures and
“She’s purpose-driven — she needs a lip- hair blowouts at four Florida, Connecticut
On-Site Beauty Advisors stick or tips for a special occasion, versus and Massachusetts locations via a part-
In recent years, such chains as Walgreens, people who go to a specialty retailer to nership with Glamsquad, an on-demand,
CVS Pharmacy, Target and H-E-B have explore and see what’s new.” in-home beauty provider. Additional loca-
begun employing beauty advisors, or con- While they do not push specific brands, tions for the format are planned in 2019.
sultants, in major markets during prime advisors’ ability to answer questions and The BeautyIRL concept stores also have
shopping times. Unlike department store solve problems often encourages consumers “Mini Must-Have” boutiques, where

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customers can assemble a personalized bag
of miniature beauty products, and a “Test-
and-Play Hygiene Bar” to safely try products.
Alyson Fischer, senior associate at
Chicago consulting company McMillian
Doolittle, said beauty departments in
BeautyIRL stores are double the usual size
and feature additional brands and acces-
sories in special brand boutiques. “It’s all
about service and in-store experience.”
In-Store Events
Retailers also drive traffic and sales with
in-store events. In addition to makeup tips,
shoppers can watch demos and receive
coupons and gift bags, Marks said. Her
company works with retailers and suppli-
ers to orchestrate these occasions by pro-
viding samples, coupons and testers. This
strategy generates “higher than average
rings.” Walgreens, for one, stages events
twice monthly. Loyalty program custom-
ers receive extra points for purchases made
during these times, furthering the sales lift.
Some events are seasonal. This past fall,
Cosmetic Products worked with Rite Aid
to stage back-to-school and Halloween
demo events in its top 200 locations, pro-
viding toolkits and beauty experts. Around
the same time, Kokie Cosmetics also con-
ducted Halloween makeup demo events,
working with online makeup subscription
company Ipsy.
“We’re creating excitement, working
with our supplier partners creating in-store
beauty events in key markets,” said Cathy
What Influences Beauty?
Digital influencers have overtaken celebrities and are now the No. 1 preference in talent choice for representing beauty brands
SOURCE: CELEBRITYINTELLIGENCE.COM SURVEY
98%
Ninety-eight percent of the Influencer marketing budgets
beauty industry thinks influencer are set to increase for 70% of
marketing is effective. the beauty industry.
088_090_091_092_dsn_01_08_19.indd 91
Furtado, Rite Aid’s category manager of
skin care, sun care and general cosmetics.
“They create great buzz around new items
and sampling.”
Sheila Keating, national sales manager
and vice president of sales at Kokie, said
demos are definitely having an impact in
that 25% of Rite Aid’s cosmetic purcha-
sers are new customers.
At mass, Walmart used demos during the
first half of 2018 to showcase new Hard
Candy cosmetic items at 365 locations.
Events included personalized makeup con-
sultations and tips on creating day and night
looks. Demos emphasized five new collec-
tions containing items retailing for under
$10. Walmart became the exclusive retailer
of the former prestige brand in 2009.
This type of aggressive pricing is key
when targeting millennials. “People discuss
millennials as one big cohort,” said Maria
Steingoltz, managing director at LEK
Consulting. “But there are older millenni-
als in their late 20s, early 30s and younger
ones, who are much more constrained
from an income standpoint. This explains
the success of such brands as e.l.f., which
offers affordable products — that’s their
whole positioning.”
According to recent estimates, about
25% of millennials live with parents, far
more than previous generations.
The Korean Influence
Korean-style makeup, natural ingredients
and cruelty-free cosmetics increasingly
70% 78%
In 2018, Instagram was the
resounding channel of choice for
78% of the beauty industry.
COLOR COSMETICS
have become important. Sometimes, ingre-
dients emulate popular food and beverage
trends involving such healthy fare as avo-
cados or green tea.
“There’s a tie between what people eat
and put on their faces,” said Laura Maclay,
project manager at New England Consulting
Group. “If you want to know what’s hap-
pening in cosmetics, look no further than
the restaurant industry. Ingredients are very
important and people want to know where
they come from.”
Rite Aid is featuring facial masks with
ingredients that include lemon, avocado
and sugar. Masks are merchandised on a
spinner. And Target, Fischer said, eventually
wants to eliminate certain chemicals from
all beauty products.
Korean-influenced products are made
from traditional ingredients like pearl
powder, snail secretions, starfish extract,
bee venom, ground bamboo, seaweed and
Tremella mushrooms. Research group
Kline said U.S. K-beauty sales totaled $225
million in 2016, up 30% over 2015.
Ingredients have been popular in Korea
for years, but growth of social media
brought them worldwide attention. Today,
CVS Pharmacy features a K-beauty section
in 2,000 stores. Products are affordable,
easy to use and have eye-catching, color-
ful packaging.
“K-beauty, which emphasizes skin care
and effective natural ingredients, merges
health and beauty, which is at the core
of our mission,” Maly Bernstein, CVS
73%
Nearly three-quarters of the
industry said Generation Z pushes
them to be more transparent.
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 COLOR COSMETICS

Pharmacy’s senior director for divisional

merchandising, beauty care, told the
Pittsburgh Post-Gazette when the com-
pany rolled out its K-Beauty offering. “It
was a natural extension. Customers have
been providing great feedback, and the
program has exceeded expectations.”
Rite Aid also is bullish on K-beauty. In
November, Kokie Cosmetics became an
in-store exclusive. Developed by a Korean
beauty executive, Kokie’s fun, colorful
packaging sports elephants, following the
millennial trend towards using animal
designs on packaging —“Kokie” means
“elephant” in Korean. Cosmetics are
cruelty-free and affordable. “Millennials
don’t want their mother’s makeup,”
Keating said.
At the same time, Rite Aid launched
Cake Beauty, another in-store exclusive
Birchbox Curates Walgreens Beauty Sections
featuring vegan, all-natural hair and body Walgreens is creating in-store Birchbox beauty sections designed around how millennials shop.
products. Also cruelty-free and certified by The first six opened in December in New York, Chicago, Los Angeles and Minneapolis. In early
PETA, the company’s motto reads, “Beauty
2019, these will be joined by five more in Chicago and Los Angeles, as well as in Dallas and Miami.
without bunnies.”
“Both brands offer something our com- These 400-to-1,000-sq. ft. dedicated sections are differentiated from Walgreens’ existing
petitor doesn’t,” Furtado said. “We’re cap- beauty departments by special signage and elevated design elements. A curated assortment fea-
italizing and moving quickly on trends like tures skin care, hair and makeup products from 40-plus prestige brands marketed by Birchbox,
the new nail bar, which offers best-in-class which specializes in online subscription beauty. Birchbox-trained Walgreens beauty consultants
nail selection. We are also creating a new are available to assist shoppers.
beauty shopping experience by adding Announced in October, the deal also involved Walgreens’ purchasing a small interest in Birchbox.
large focal cutouts, way-finding within the In addition to its strong millennial following, Birchbox brings prestige beauty to Walgreens and a
beauty aisles.”
style of marketing and merchandising that suits the chain’s casual beauty customer.
Both new Rite Aid lines started as online-
only labels. Keating said Kokie’s popular- “The addition of Birchbox to our growing beauty offering is a big step in delivering on our
ity was fostered by 600 online influenc- promise to differentiate and elevate the beauty experience,” said Richard Ashworth, Walgreens’
ers, a strategy developed when the brand president of operations, in announcing the partnership.
was launched four years ago. “It’s all about Products, said Pooja Agarwal, vice president of operations at Birchbox, include what she called
engagement, which drives in-store sales. “approachable” basics — not the stuff coveted by beauty junkies. “We have a section of basics,
With millennials, old ways of promoting of simple routines, including one called ‘night out,’” she said. “It’s less about trends.”
products aren’t working.” Merchandise is organized by end use, not brand, simplifying the experience. “It’s hard to com-
When it comes to differentiating mass
pare products merchandised by brand,” she said. “We make it easy and show how products work.
beauty departments, changes did not begin
yesterday. Retailers have been experiment- We don’t give shoppers too many choices, so it’s not overwhelming. Millennials want options to do
ing with new models for several years. it their way.” Brands include Sand & Sky, Wander Beauty, Huxley and Davroe.
Some have worked, some have not. Yet it is Rather than push products, consultants try to make the right “fit” by asking customers how
crucial these channels continue testing and important beauty is to them, how often they use cosmetics and how cosmetics fit their lifestyle.
reinventing themselves to gain and main- In-store events focus on such techniques as five-minute, get-out-of-the-house-quickly makeup
tain consumer momentum. routines — “not about how to do the perfect cat eye,” Agarwal said.
“The experiments you’re seeing are import- Stores also will offer Birchbox subscriptions and the “Build Your Own Birchbox” experience, a
ant,” Sargent said. “This is a crucial cate-
signature element of the online brand’s two physical flagship stores in New York and Paris.
gory for driving margins. With the conve-
nience component usurped by e-commerce, —Debby Garbato
they must do things differently.” dsn

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