The 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Personal indulgence has given way to circumspection, splurging has been replaced by strategic savviness and the need-want balance is continually in flux.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 deter- mined 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 toothpaste. They are just more practical,” says Carrie Mellage, director of consumer prod- ucts 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 per- cent 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 popu- lar 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. Via- mari 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 pol- ish, 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.”
THE SHOPPING MINDSET:
Still pessimistic about the economy, most consumers are exercising extreme caution when it comes to spending.
• 79% of shoppers are paying more attention to price.
• 61% make shopping lists to avoid over-spending.
• 59% are more willing to try products that cost less.
• 50% of shoppers say their professional finances will take at least 1-3 years to improve.
• 65% of shoppers say the recession will last 3+ years.
• 64% are looking online for the best prices before going to stores.
• 70% expect the cost of food to rise.
• 61% expect the cost of utilities to rise.
• 57% expect the cost of gas to rise.
• 38% of consumers expect their home value to deteriorate.