When Steve Stoute was mapping out the launch strategy for Mary J. Blige’s upcoming scent, he decided almost immediately against department stores—the traditional go-to option for such a project. Instead, the scent will launch in late July on the home-shopping TV channel HSN, bypassing brick-andmortar retailers all together—for the time being at least.
Separately, though not unrelated, luxury hair care guru Frédéric Fekkai recently announced his brand’s expansion into select mass market stores, unveiling a strategy that he and parent company Procter & Gamble hope will allow the brand to comfortably straddle mass and prestige distribution.
Explaining his decision to explore cross-channel opportunities, the always well-turned-out Fekkai said at the time of the announcement: “I love to go to Target and Whole Foods—as well as Hermès.”
He’s not alone. Consumers today have made their willingness to shop across multiple channels very clear. In fashion, for example, Isaac Mizrahi decamped from the catwalks of New York City to Target and back again, racking up more than $100 million in sales at the mass giant and sparking a legion of imitators, from Karl Lagerfeld and Jean Paul Gaultier at H&M to Stella McCartney at Gap. Then there’s Wolfgang Puck, whose culinary company started with Spago restaurant in tony Beverly Hills, and has since expanded into an empire consisting of upscale restaurants in California, Las Vegas and Minneapolis; casual franchised eateries in airports across the country, and a line of food, books, tools and appliances that are sold on HSN, among others.
So, while many in the beauty industry may still define brands solely by where they are sold (Sephora, for one, dropped Fekkai from its assortment shortly after the announcement), the consumer clearly doesn’t.
“You can no longer let the box define the brand,” says Stoute, lead investor and chairman of Carol’s Daughter, referring to big-box retailers, whether mass or prestige. “The brand has to define the box. Because of the Internet, no one buys channel anymore. They can go on Bluefly.com and buy Gucci—they don’t have to buy it at Neiman Marcus or Saks,” he continues. “Channel distribution is breaking down. The lines are blurring.”
Lyn Kirby, chief executive officer of Ulta, agrees. “Increasingly, brands are coming to grips with the reality that this distinction between mass and prestige is a distribution-centric paradigm,” she says. “It is not an experience-centric paradigm. Customers don’t know the difference between distribution channels. They’re not marketing strategists. They are focused on what experience they’re getting in the store.”
Forget trading up. Shoppers are trading up, down, across and every which way. “Today’s consumer is looking for great specialization and not shopping at one retail outlet for all of her beauty needs,” says Bob Seidl, president and ceo of H2O Plus, which is sold in its own stores, in department stores and in more than 1,000 chain and specialty stores including Ulta and Beauty 360. “We are in the prestige arena, but that arena is being redefined and is broader and appeals to a changed consumer.”
While the recession is a large reason why the consumer is different, the recovery isn’t expected to significantly alter her new behavior patterns. The Dow may have hit 11,000 in April, causing jubilation in Washington and Wall Street, but Main Street’s mentality is far from celebratory. “Eighty-nine percent of women are saying the recession isn’t over, even when economists are saying it’s over,” says Wendy Liebmann, founder and ceo of WSL Strategic Retail, citing statistics from her firm’s recent “How America Shops” survey. “When you look at affluents, $150,000 plus, 58 percent say the recession will last one to two more years, and 29 percent say three to five more years.”
Moreover, though the affluents can well afford to spend, they don’t want to—particularly in an upscale environment where temptation lurks around every corner. “Women don’t want to be tempted to overspend,” says Liebmann, “so they stay out of stores where that might happen. There is an avoidance thing. So with Fekkai, for example, [customers] may be staying out of department stores because they don’t want to be tempted to go to the shoe department. But if they see the brand in a more mass environment, even though it’s not a better deal in terms of price, they’ll still purchase it because they’re not tempted to overspend on other stuff.”
The new cross-channel strategy encompasses more than brands widening distribution from prestige to mass—it’s about broadening the availability for all brands that resonate with consumers. “The next wave is integrating some of the interesting brands that are sold only online or via electronic retailing into vertical distribution,” says Melisse Shaban, ceo of Chrysallis. “We are talking $100 million businesses for some of those brands,” she continues. “How do you create an incentive for them to want to go bricks and mortar?”
The result is a democratization of distribution, a world in which consumers no longer attach any special significance to where they’re buying something. “The customer is willing to buy today in a much more democratic way,” says Michelle Feeney, ceo of St. Tropez, who was formerly vice president of international global communications at MAC Cosmetics. “I always used to say customers would buy MAC out of the trunk of a car, they liked the brand so much.”