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The America 28


wwd beauty inc

70% expect the cost of food to rise.


Anxiety Ga p 79% sho of ppe are rs pay i mo ng att re en to p tion ric e.

With the market fluctuating wildly—and the consumer confidence index along with it— the chasm between the haves and have-nots has never been so pronounced. By Jenny B. Fine

The Census reports there are 157.2 million women in the U.S. The number of women is expected to grow 9 percent by 2015. However, growth is not even across age groups, resulting in major implications for beauty marketers.

AGE 18-24 15,139,000


25-34 21,965,000

+10.9% -6.3%

35-44 20,549,000 45-54 21,943,000


55-64 20,996,000


65-74 14,410,000


75+ 11,885,000 +4.4% Source: Mintel/U.S. Census Bureau


he great recession of 2008 may be over, but for shoppers in America, it is by no means forgotten. The way we buy beauty products has changed fundamentally, and with the threat of a double dip looming, the transformation looks here to stay. Personal indulgence has given way to circumspection, splurging has been replaced by strategic savviness and the need-want balance is continually in flux. “The recession is over, but the behavior people have learned is not,” says Wendy Liebmann, chief executive officer and chief shopper of WSL Strategic Retail. “Shoppers have accepted the new reality, and whether they are affluent or lower income, they are determined to be smarter about how they spend.” “When people first implemented austerity measures, we all thought the pendulum would swing back and we would go back to a time when spending was more conspicuous,” says Kat Fay, senior beauty care analyst at Mintel. “That just isn’t happening. People have decided they are going to implement austerity measures for a longer time. Price, sale and promotion are very much top of mind.” No wonder. Even before the American debt crisis of late July and the stomach-churning roller-coaster ride of the stock market during the dog days of August, most Americans were still pessimistic concerning the state of the economy. A study by SymphonyIRI shows that 70 percent of consumers expect the cost of food is going to rise, 62 percent think utility prices will rise and 58 percent believe gas prices will rise. WSL’s research, conducted in December 2010, shows that 65 percent of women believe the recession will last three or more years and that one out of two women think it will be one to three years before their personal finances improve. (Another 38 percent said they had no idea.) “Consumers are very conservative, because they feel like things are either going to stay the same or get worse,” says Susan Viamari, editor of Times and Trends for SymphonyIRI. That conservatism has led to a permanent shift in values that is very clearly being manifested in how, where, when and why people are shopping. First and foremost, shoppers are smarter about how they’re spending money. While there is good news for beauty marketers—Kline Group expects beauty to post a sales increase in the low-single digits this year, while NPD Group reports that prestige sales in the first half of the year were up 13 percent—women are still approaching the category with caution. “Nobody stopped buying shampoo or Charts by

utilities to rise.

61% make shopping lists to avoid ove rspending.

of 50% ers p shop their say onal s per es will nc fina ke at rs ta a 3 ye e. 1 t leas mprov to i

of % 65 pers p sho y the n sa ssio e st rec ill la s. w ear y 3+

57% expect the cost of gas to rise.

38% of consumers expect their

home value to deteriorate

e 59% ar more willing to try ts produc that s. cost les shopping bag photo by Nuttakit Sukjaroensuk/123RF; Tags: tyler resty

the Female population in the u.s.

61% expect the cost of

the shopping mindset Still pessimistic about the economy, most consumers are exercising extreme caution when it comes to spending.

64% are looking online for the best prices before going to stores.

Retail rategic SL St W : e Sourc

Source: SymphonyIRI Group

shopping for beauty






10 pts 31

















Source: WSL Strategic Retail

Ulta Victoria’s Secret Mass merchandiser Web site Department store Web site Supermarket Web site Beauty 360 Beauty Control Other online retailer not listed above

Source: Mintel Beauty Retailing Report, April 2011

The Satisfaction Index 70%

Many shoppers who cut back during the recession are ready to come back to beauty.

65% 59%

54% 54%

56% 52%


45% 38

Cut back during the recession.



Satisfied spending less.

44% 39%

42% 42%

Not spending more yet, but want to.




% 13% 14

HaiR caRe

37% %



The Body Shop

SKin caRe




6% 5% 3% 2% 2% 2% 1% 1% 1% 1% 10%

Drugstore Web site



3 pts

4 pts


Mary Kay

6% 6% 4% 3% 3% 3% 2% 2% 2% 1% 7%

57% 42% 15% 17% 14% 5% 6% 4% 6% 4% 4%


Gain in online shopping (’09-’11)



hat being said, trust is a key component of convincing people to open their wallets. “In 2007, we saw a group who were more adventurous and willing to take risks with brands that have limited awareness, such as niche brands,” says Karen Grant, vice president and global beauty industry analyst at NPD. “They are less apt to do that today. People are looking for brands they trust and recognize. It is about the more meaningful purchase. While price is important, it is secondary.” The desire to find a deeper meaning is also evident in how people spend their time. Americans are spending more time at home with friends and family, and less out socializing and shopping. That has led to a direct rise in online sales, say the experts. NPD’s data shows 14 percent of women are shopping online, a 3 percent increase in the past 12 months. “Online is being driven by ease, convenience and return policies that are a lot less prohibitive,” says Grant, noting that the top sites in terms of awareness are Avon, Bath & Body Works and Sephora; the top sites in terms of where people shop for beauty are Sephora, Amazon and Avon, and that Amazon, Sephora, and Ulta rank highest in terms of online conversions. “What’s interesting is that none of the big retailers come up,” says Grant. “It’s the pure plays and Sephora. The Internet is an area where the bigger retailers have a real opportunity.” Grant notes that Wal-Mart is conspicuously absent from the list (although if you segregate out the 18- to 24-year-old age group, it does rank third in terms of awareness, behind Target and Avon), a fact that underscores the retailer’s current troubles. Although the majority of women across all income levels still buy their beauty products there, the retail behemoth has posted eight quarters of negative comp-store growth. In August, WSL

Department store like Macy’s or Nordstrom

Skin Care

skin care

SaLOn SeRViceS


With consumers staying home more, online shopping is gaining in popularity.

Drugstore like CVS or Walgreens

38% 26% 27% 23% 26% 20%


haIr CarE

Online Shopping

Mass merchandiser like Wal-Mart or Target

57% 45% 23% 18% 16% 12% 11% 8% 8% 8% 6%

skin care

Skin CARe

Source: The NPD Group

Where have you purchased beauty products in the last six months?




I’ve switched to less expensive brands.



I’ve shopped around more to compare prices.

saLon sErVICEs


I’ve bought a lot more special offer/promotional/discounted products.

haIr CarE


I’ve made no real changes.

Skin CARe



I have made mostly replacement purchases and avoided “splurge” products.



I actively look for sales and try to only buy products on sale.


Spending by REGION


skin care

saLon sErVICEs

$75,000 or more

haIr CarE

$45,000 to $74,999

Skin CARe

$25,000 to $44,999

39% 27% 27% 25% 24% 21%

Color Cosmetics


$144 $92 Overall average $116 $133 $185

Under $25,000



Spending by Income

Which of the following changes have you made in the last six months when you’re buying beauty products?

saLon sErVICEs

A look at the average annual spend on beauty, by income and geography, among women 18 and older.

toothpaste. They are just more practical,” says Carrie Mellage, director of consumer products at Kline Group. “They don’t have 12 mascaras anymore. They are using products to the last drop, and they expect products to perform. Our research shows that consumers don’t want to see newness just for the sake of newness.” “We see a much more deliberate approach to shopping,” agrees Viamari. “Consumers are taking the time to study before they go into stores: 69 percent make a list before they go to a store and use a variety of tools to identify the best prices, including online, store circulars and coupons.” When BeautyStat, the market research firm, queried its online community if they are still buying the same products and brands, or whether they’ve traded up or down, 54 percent responded their spending has stayed the same, 33 percent have traded down and 13 percent have traded up. “Even though the economy is down, my skin still requires higher quality products,” says respondent Lisa P. “While I haven’t traded down, I look for the best deals. If Sephora has a coupon over Ulta, I’m there. My brand loyalty is still there, but not my store loyalty.” SymphonyIRI’s data shows that the drugstore channel has had a significant uptick in share across a number of consumer segments, including beauty, which had gains of a half a share point or more. Grocery has gained as well, however supercenters and the club channel have decreased. “Gas prices are a good 30 percent higher than a year ago, so consumers are going to drugstores more, which tend to be closer, particularly for fill-in trips,” Viamari says. “In terms of beauty care, there’s also more promotional activity in the drug channel, and the retailers are working hard to protect and grow their share.” Price consciousness has also led to an increase in private label product usage. While the migration first happened in the over-the-counter category as a result of recalls for popular products like children’s Advil and Tylenol, it has spread to beauty. Kline reports sales of private label cosmetics and toiletries were up about 6 percent, versus total industry growth of 2 percent. Notes BeautyStat member Patricia S., “I’ve noticed that some generic brands work the same way and contain the same ingredients.” At-home products are increasingly popular, too—no surprise, given that 48 percent of consumers are going to a salon or spa less often, according to SymphonyIRI. Viamari says that standout product performers currently include L’Oréal Paris Healthy Look hair color and Sally Hansen’s Complete Salon Manicure 5-step-in-one nail polish, and that the data is showing strong growth in antiaging skin care, but less in color cosmetics. “The beauty mass market is being bolstered by innovation,” she explains. “Consumers will spend up if you bring to market products that give more professional results. But in the color category, where we saw more aggressive promotional strategies to encourage folks to buy, the results were mixed.”

Money photo by valzan/shutterstock; mouse: urfin/shutterstock; Target:; calculator: Mike Flippo/shutterstock



Already spending more. Source: WSL Strategic Retail

wwd beauty inc


herever they reside, the affluent are likely feeling “frugal fatigue,” says Kraus, noting that this factor is most likely behind the increase in luxury goods and prestige beauty sales. “We see a direct correlation between the Dow and the luxury markets,” he says, noting that the Dow Jones Industrial Average has risen 40 percent since the so-called end of the recession, when it hovered in the 7,000 or 8,000 range. “Even with the recent slide, it’s up 35 percent,” Kraus says, “so if you have $1 million invested in the market, that’s an extra $350,000.” While the affluent are willing to spend—witness the double-digit growth year to date in prestige beauty sales—the way they are shopping has changed considerably. “People do feel a little more free with their money, but they want something that speaks to value. In the stock market, people are looking for safe, blue chip stocks,” Kraus says, “and the same thing is happening with spending. When people are treating themselves, they want something that is of very high quality.”

affluence by region: Where the money is

The south has the largest concentration of affluence, driven by Florida and Texas. Virginia also plays a key role, where three counties—Fairfax, Loudoun and Falls Church—have the highest median incomes in the U.S.










Source: Digitas/Ad Age Insights

annual income over $100,000

Compared to 2008, those with a household income of $45k to $74k had a decline in beauty spending, while households with $75k plus had an increase in spending for the same period, widening the gap between the two.

1% Rich







$200 $100,000-199,999 Aspiring/ Emerging


$150 $100 $50

12.4% 68.3%

Emerging (Under 35 y.o)

Aspiring (35 y.o and Up)

$0 Source: Digitas/ Ad Age Insights

they buy—across all categories.



$42 $134


Affluents spend 3.2 times more when


Source: Ipsos Mendelsohn


“Twice as many affluent shoppers (household income $100K+) are now

‘buying more than they used to’ compared to less


$1 million or more



Household income

Shopping Patterns

spending patterns


A recent Mendelsohn survey showed that when it comes to beauty, the Affluents gravitate to brands including Nars and Fresh; the Wealthy to Laura Mercier, La Mer and La Prairie, and the Rich to Orlâne, La Mer, La Prairie and Jo Malone. The experiential side of the purchasing equation is equally important. “Boy, do you have to take care of them. The Affluents won’t put up with any nonsense, especially if you want them to pay full price,” says Liebmann. “You have to make sure the experience is of the highest quality to justify why they are shopping. That is a really big moment—the recognition that you’re not going to get as many feet in the door, but the ones you are going to get are the ones who you really want.” Being on the cutting edge of technology is crucial with this group as well. “The more affluent you are, the more digitally engaged you are,” says Scribner. “Getting technology right is crucial for the younger emerging consumer, who won’t take you seriously unless you’re digital, and the richest customer, who is buying technology as a sign of their sophistication and an enabler of their mobile and global lifestyle.” Scribner also notes that the rich pride themselves on being early adopters and experts in myriad areas, a fact he says is underleveraged by marketers today. “The rich love to share what they’ve learned and what they know,” he says. “They index very high on questions like, ‘People often ask my advice about...,’ whether it’s about fashion, finance or health care. We’ve noticed this dynamic when interviewing premium travelers. Because they fly a lot, they feel like experts and insiders. So they want to be treated that way, not as passive passengers, but as fellow professionals,” he continues. “There is something interesting in acknowledging the sophistication and expertise of your consumer.” At the opposite end of the spectrum lies the Hispanic population. The sheer figures—the number of Hispanic Americans has grown 40 percent since 2000—and their propensity for beauty makes it a group impossible to ignore. However, it’s also a community that has been adversely impacted by the recession. “The Hispanic spending dollar is tremendous, but with larger families and overall lower household income, they’ve been hit hard by the increase in housing prices,” says Fay. “But Hispanics and Blacks do tend to over-index on apparel and beauty. They don’t necessarily spend more dollars than other people, but they are probably spending more of their income.” Rich or poor, one thing is clear: Consumers will continue to shell out for beauty products—as long as retailers and marketers meet shoppers on their terms. “Americans are great at blurring the line between need and want,” says Fay. “As long as they don’t feel like they’re being taken advantage of, women will continue to buy the products that make them look and feel good.” ■

About 20 percent of Americans have a household income of $100,000-plus, representing 70 percent of total U.S. consumer wealth. Despite the recession, the number of affluent households has increased from 50 million in 2007 to 58 million in 2010. Happily for marketers, many are shopping again. While women across all income levels have come back to beauty, those with higher household incomes are significantly outspending everyone else.


published a report, “Where Did the Wal-Mart Shopper Go?” and the results were startling. “Wal-Mart has lost is credibility for everyday low prices,” Liebmann says. “During the recession, everybody learned how to compete against price. And while there are still a lot of shoppers in the store, they don’t have as much money to spend, they are not shopping as often and they’re not buying everything at Wal-Mart.” There is a group that does have a lot of money to spend, and seems to be shopping again, however: the affluent. NPD data shows that the average spend on beauty for those earning $75,000 and over is $185. That group is coming back and is more important than ever. “The value of the affluent shopper can not be overstated,” says Liebmann. “They are the people with money who are comfortable enough—despite the roller coaster of the stock market, gas prices and unemployment—to shop. They’re not blithely throwing away money, though. They, too, are making a list and checking it twice.” When it comes to defining rich, the recession has resulted in a new ceiling of true affluence, widening the divide between the haves and the have-nots. The era of mass affluence is gone. Whereas prior to 2008, marketers generally classified those with household incomes of $75,000 and above as being affluent, today the number has risen dramatically. When George Scribner, the senior vice president of people planning at Digitas, realized that the old classifications no longer produced reliable results, he tasked a team with redefining the affluent and their lifestyle. In terms of household income, Scribner found that statistically speaking, today a household income of $200,000 marks the beginning of true affluence. His group identified five tiers of affluence: The Aspiring, those age 35 and over, with household incomes (HHI) of $100,000 to $199,00. (This is the group least likely to move into true affluence.) The Emerging, those 35 and under with HHIs of $100,000 to $199,999. (This group is very likely to move into true affluence as they get older.) The Affluent, those with HHIs of $200,000 to $499,000; The Wealthy, with HHIs of $500,000 to $999,000, and The Rich, with HHIs of $1 million or more. According to Steve Kraus, vice president and chief research and insights officer of Ipsos Mendelsohn, the research firm upon whose data Digitas created its new classification, about 20 percent of the population (44 million people) in the U.S. has a household income of $100,000 or more, but they represent 60 percent of the income and 70 percent of the net worth. One of Digitas’ major findings was that marketing is no longer a numbers game. “We can’t think about scale any longer simply by head count,” says Scribner. “We need to think about scale according to where the assets exist, and they exist among the 8.5 million people who represent the top three tiers of affluence, not the 30 million people who belong to the aspiring or middle class.” Scribner had another “aha!” moment when he analyzed the geographic breakdown, which showed that the south has the largest population of affluence, driven by Florida and Texas but with Virginia also playing a strong role. According to recent census data, Scribner says, the state’s Fairfax, Loudoun and Falls Church counties have the highest median incomes in America.

Spotlight on THE AFFLUENTs

Champagne Photo by Johan Swanepoel/Shutterstock


affluent shoppers— 13% vs. 7%.”


Source: WSL Strategic Retail

Source: The NPD Group

Where have you bought beauty in the last six months? $100K-$149K

54% 52% 34% 19% 7% 16% 14% 8% 11% 7% 5% 4% 5% 5% 2% 6% 4% 2% 4% 2% 0% 9%

Color Cosmetics

Mass merchandiser like Wal-Mart or Target Drugstore like CVS or Walgreens Department store like Macy’s or Nordstrom Supermarket Avon Sephora Ulta Mass merchandiser Web site Department store Web site Victoria’s Secret Drugstore Web site Mary Kay The Body Shop Supermarket Web site Beauty 360 Beauty Control Other online retailer not listed above


37% 42% 27% 18% 15% 17% 15% 5% 8% 5% 10% 5% 10% 3% 7% 2% 2% 3% 0% 3% 0% 12%


53% 44% 22% 26% 9% 5% 4% 11% 6% 8% 6% 6% 5% 3% 4% 4% 4% 2% 1% 2% 4% 14%

Skin Care

Mass merchandiser like Wal-Mart or Target Drugstore like CVS or Walgreens (instore) Drugstore like CVS or Walgreens Supermarket Department store like Macy’s or Nordstrom Avon Mass merchandiser Web site Mary Kay Ulta Drugstore Web site Sephora Department store Web site Victorias Secret Victoria’s The Body Shop Supermarket Web site Beauty 360 Beauty Control Other online retailer not listed above


40% 36% 11% 21% 17% 6% 2% 9% 9% 9% 9% 11% 0% 4% 2% 2% 2% 2% 0% 0% 2% 21%

Source: Mintel Beauty Retailing Report, April,2011

WWD: The Anxiety Gap  
WWD: The Anxiety Gap  

Infographics within arcticle