Cosmetics marketers anticipate big changes

Beauty marketing in Canada could be getting a makeover....

Beauty marketing in Canada could be getting a makeover.

If industry buzz proves correct, French cosmetics giant Sephora will soon establish a foothold in Toronto. And its arrival will almost certainly help change the face of the category, Canadian experts say.

‘Sephora’s thrown out the rulebook,’ says Michael Szego, a retail consultant with Toronto-based J.C. Williams Group. ‘They continue to rewrite the category – and it was ripe [for change].’

While the demands and expectations of today’s time-crunched shoppers may be changing, cosmetics marketing in this country really hasn’t evolved. Szego says the major beauty brands still rely on the same generic, product-focused advertising that they always have. And they still look to the major department stores as a primary retail channel.

Sephora, however, pursues a different strategy. The company, which is owned by LVMH Moet Hennessy Louis Vuitton, operates an international chain of stand-alone retail locations, including more than 50 in the U.S. market. And its advertising emphasizes the store brand.

Radio spots that have aired in the States position the upscale retailer as offering an environment where customers can ‘touch, play and try anything,’ and where ‘salespeople know the difference between helping and pressuring.’

What Sephora has figured out, says Maureen Atkinson, another J.C. Williams Group consultant, is that the customer experience has an increasing influence on brand preferences within the beauty category – and in turn, on product purchase decisions. As other major cosmetics players cotton on to this philosophy, the business could well see a dramatic shift in marketing strategies.

Sephora’s presence in Canada is also likely to accelerate ongoing changes in cosmetics retailing.

Traditionally, most of the action in this category has been at department store beauty counters, where customers would be spritzed and groomed by ‘beauty technicians.’ And a lot of the major brands still seem to think that women have the time to do lunch, then pop over to a department store for a weekly makeover. But that’s just not the case anymore, Atkinson says.

These days, shoppers in search of lipstick or mascara are gravitating toward other retail channels – namely specialty stores, drugstores and the Internet.

Specialty retailers devoted to beauty products are growing in number. According to Statistics Canada, in June 1999 this country had 1,003 stores engaged primarily in selling cosmetics, beauty supplies and perfume. By June of last year, that number had increased to 1,169. And Sephora’s arrival would give this particular retail sector an added boost.

‘It will be tough for the department stores, because [Sephora] is quite a competitor,’ Atkinson says.

Stand-alone retailers have a decided advantage, Szego adds, because they have more control over their space and the merchandising of their proprietary brands than they do in a department store environment – and they’re better able to accommodate promotions and events.

Jane McKay, director of makeup artistry for Toronto-based M.A.C Cosmetics, agrees.

The Canadian cosmetics manufacturer just opened a new flagship store on Toronto’s Queen Street West in mid-December, and McKay says there are a number of in-store events in the works. ‘It can sometimes be more difficult [to do this kind of thing] in a department store,’ she says. (In all, 40 of M.A.C’s 230-odd North American locations are free-standing; the company plans to open a location in Athens, Greece next spring.)

Drugstores have also been making serious inroads in beauty retail. According to ACNielsen figures, cosmetics now represents the number one product category for Canadian drugstores, accounting for $296.8 million in sales over the 52-week period ending Jan. 1, 2000.

Shoppers Drug Mart, for one, has doubled its cosmetics sales in the past five years. Micheal Lovsin, vice-president of merchandising for beauty products with the Willowdale, Ont.-based retailer, says customers in this category are looking for the kind of convenient shopping experience that a drugstore can provide. ‘You don’t have to go to Holt Renfrew and deal with the frou-frou to get your black mascara. You can just come to Shoppers.’

One of the important steps the drugstore chain has taken on this front is a shift in its approach to the merchandising of beauty products. And in this, Shoppers has clearly followed the example set by Sephora.

Typically, department stores, drugstores and a lot of other retailers in this category have kept cosmetic powders and potions behind glass counters or in locked drawers. (The Body Shop is an obvious exception to the rule.) However, Sephora displays everything out in the open, organized by category, and invites shoppers to touch and smell whatever they like.

In August 1999, Shoppers Drug Mart began introducing a similar concept to its stores, moving cosmetics products out onto shelves and creating a more open environment. ‘The cosmetician used to sit behind the [counter], which didn’t create positive interaction,’ Lovsin says. ‘Cosmetics can be an intimidating prospect for some people.’

This new ‘open-sell’ concept has so far been rolled out in 26 Shoppers locations, and will be introduced to approximately 40 more stores in the coming year.

Atkinson says the idea is beginning to catch on in the department store realm as well. The Helena Rubinstein brand, for example, has its own store-within-a-store environment at the new Eatons, where all the product is out on display within customers’ reach.

Online sales of beauty products, meanwhile, are expected to take off in 2001, further intensifying competition within the category. Two of the current top 10 Web retailers in the U.S. – PlanetRx.com and Drugstore.com – are peddlers of makeup, Szego notes.

So far in Canada, there’s no online cosmetics retailer with that kind of sales clout. The challenge, Szego says, is finding a way to build awareness and draw site traffic His suggestion? Hook up with established Web-based retailers in non-competing categories, such as Indigo.ca or HMV.com. They attract visitors who are already comfortable shopping online, and might be willing to try purchasing moisturizer or blush over the Web.

The Body Shop Canada, for example, partnered with Yahoo! Canada in October, and now draws significantly increased numbers to its site (www.thebodyshop.ca). ‘We’ve increased visibility because of Yahoo’s customer base,’ says Sorya Ingrid Gaulin, director of marketing for The Body Shop. ‘The average sale online is about five times what it is in-store.’

The key to successful online beauty retailing is to offer an experience that shoppers can’t find offline, says Natalie Melling, president of Toronto-based Web strategies firm OpenCorporation.

San-Francisco-based Reflect.com, for example, offers customized products specially formulated for each individual shopper, based on her responses to a series of questions about her beauty regimen and colouring. ‘The lotion we create for a Canadian is different from the one we create for a customer in Florida,’ says Hannelore Schmidt, director of marketing for Reflect.com.

Customers, of course, can’t be entirely sure that what they’re ordering online is indeed the ideal product for them. Reflect.com gets around this concern by sending out free samples, so people can test the goods before paying. Shipping is also free – and if a customer buys and isn’t satisfied, the company will tweak the product until she’s happy. Best of all, the customer never has to send anything back. In the first year alone, Schmidt says, Reflect.com’s revenues increased at a rate of 50% a month.

Canadian cosmetics players need to step up their own online efforts, or risk being left behind by smart operators like Reflect.com, Szego warns. ‘How many women even know The Body Shop sells online? The ball’s in the court of the established players in our country to turn it up a notch.’

Sidebar: Reporter puts makeup e-tailing to the test

Keen to ferret out the truth about 21st century cosmetics retailing, Strategy’s intrepid Lisa D’Innocenzo embarked on a quest that took her to the farthest reaches of the Internet, and the uncharted wilds of the new Eatons. Here are some exclusive excerpts from her personal beauty diary.

Wednesday, 2:09 p.m…

Can’t stand braving the cold to buy face powder. Can do that at maccosmetics.com. Hey, there’s RuPaul! She zooms in and out, in and out. Whoa, getting dizzy. Concentrate on the links. ‘M.A.C Pro’ – what’s that? Click. A weirdly deformed 3-D starburst takes me to a page where little animated people cavort. At the bottom, words scroll by rapidly. ‘Tips and techniques’? Forget it. Too annoyed to check.

30 seconds later…

Under ‘M.A.C Products,’ categories roll past faster than you can say ‘Viva Glam.’ It’s a game – if you can catch an option with your cursor, it freezes. Grrr. Click on ‘Powders.’ Ooh, blobs of colour! How exciting! Oh, wait – those are supposed to be jars of product. Somehow it seems risky choosing face powder by computer.

Another 30 seconds later…

I opt for lipstick. How do I like my lips? Satin? Matte? Cream? Frost? Sheer? Glaze? Tone? Clear? Duh, I dunno. Cream promises ‘maximum colour payoff’ and smooth, glossy puckers. Hmph! Hues are out of focus. Vino looks safe. Add to basket. Costs $14.50. Checkout.

20 seconds later…

Waiting…

10 seconds later…

Whaaat?? Shipping is $7.50? It’s only $4.90 for a book from Chapters.ca. Cancel! Where’s my coat?

Wednesday, 4:03pm…

Ooh, the new Eatons has Helena Rubinstein. Normally equate department store cosmetics brands with blue-haired grannies. But hey, Chantal Kreviazuk wears it.

Two minutes later…

Push through the crowds. Can smell perfume a mile away, which gives me a headache. Hmph! Lost in a maze of makeup counters, with beauty technicians guarding them like Checkpoint Charlie.

Four minutes later…

Finally see Helena Rubinstein along far wall. Not just a counter – a chic little store-within-a-store setup. Everything’s accessible. Check out product samples. Saleswomen are chatting.

Four minutes later…

Finally one of them bothers to say hello. Ask about lipsticks. She explains. Matte sounds OK. Finds a neutral that matches my skin tone. Costs 30 bucks, but it’s ‘long-lasting.’ Although not, apparently, ‘long-wearing.’ Huh? Don’t understand, and very tired of shopping. I tell her I’ll think about it. Maybe I’ll just go to Shoppers Drug Mart instead. For some Advil.