Beauty Will Be Big This Holiday Season: Why Macy’s Will Be A Contender But Ulta Will Struggle

Beauty Will Be Big This Holiday Season: Why Macy’s Will Be A Contender But Ulta Will Struggle

The splendor of splendor is that it's miles a excessive-margin, vacation spot category for the duration of the holiday season. In fact, maximum splendor manufacturers and retailers deliver about one 0.33 in their total annual sales during those very valuable six weeks between mid-November and Christmas, regardless of the records factors and apocalyptic headlines that set investors’ and insiders’ hair on fire at some stage in the preceding ten and a half of months of the yr.

If you were to listen to the financial media headlines in the last several months, you would think that mall-based retail is over, Gen Z girls are not wearing makeup and perhaps never will, and the consumer is strong, but a sort of pre-recession is/is not upon us. Even more puzzling is that the softness in prestige makeup, reported by NPD this year, dominates the beauty narrative—yet this segment only represents about 6% of the entire beauty category here in the U.S.

My narrative is completely different heading into this holiday. As is my point of view on who the surprise victor may shape up to be in beauty this holiday in terms of top line sales and (re)-claimed market share growth.

The opportunity that beauty provides to retailers, inside and out of the mall, heading into excursion is large. Here’s why:

The overall beauty class is up in 2019…and skincare (the highest AUR segment of splendor) is leading the price. Prestige perfume is showing symptoms of existence (+five% consistent with NPD this year), and regardless of what set of records you join, make-up is bursting with a new authority across all fee factors and channels. There are numerous $300 million to $500 million brands that did now not exist even some years ago (Fenty, Huda Beauty, Morphe), illustrating the possibility that still exists within the section, even at some stage in years of product hangovers and innovation lulls. Beauty M&As are thriving, the riskiest and maximum debatable of all going on just this week with Coty buying a 51% stake in Kylie Cosmetics for a whopping $600 million.

The client has never been extra emotionally engaged inside the beauty class. How she engages with beauty throughout charge points and channels has evolved due to the fact industry executives placed clients into definitely specific containers that described how people selected and bought products: “mass,” “prestige,” “branch” and “drugstores.” Analyzing phase and channel developments in those silos method little or no nowadays because they mean not anything to the patron. Step again and permit the gravity of timely thoughts like “well-being,” “self reputation” and “comfort” truely seep in and then recollect how these values and priorities translate into real deal shopping conduct. Instantly the photo may be very optimistic and the splendor pie larger than ever.

Kits are on fire. Kits are containers with a bunch of stuff in it that retail for a cost rate factor and make very handy gifts for every person on the customer’s listing. Not for the reason that early Y2Ks have we visible such ranges of creativity, stock funding, and enthusiasm around this very incremental and holiday-pushed products category.

So what does all of this suggest to the splendor possibility for retailers in holiday 2019? First off, shops who balance the possibility presented via skin care enthusiasm with the proper blend of interesting makeup and fragrance gift units will win. Doing so is a unique blend of old college merchandising, trained income human beings with deep product know-how, and factor of sale execution that does not leave one dollar on the table.

Next, right here’s a touch mystery on the triumphing, bottoms-up excursion system from a former vending govt: Beauty brands and stores spend all 12 months lengthy trying to nail a few huge launches so that after the holiday client visits in December, she or he buys a lot extra than what’s on their purchasing lists. This is a fundamental evergreen strategy that holds true nowadays, despite the distraction of virtual experiential improvements. So whilst it comes time to evaluate the capacity of a beauty store at some stage in any given excursion, a lot of the solution lies within the achievement and sustainability of its previous year launches.

Lastly, that is the instant while the rubber meets the road in phrases of strategic omnichannel investments. Quick and easy is now a given for the client and nirvana is offering the holiday consumer an opportunity to check off a number of boxes in anyone shot. Whether it’s on line or in-shop, casting off a variety of “to-dos” is a fantastic feeling after checkout.

Here are my top five picks for who will win in beauty this holiday and why:

1. Sephora: “Best in class” customer experience across all of retail, the most exclusive new brands with traction and big holiday volume potential, and the busiest store in the mall on any given day of the year. Holiday is no exception.

2. Bath and Body Works: The best-comp-trend-in-the-mall story that just keeps on giving. While this retailer continues to do what is does best without feeling stale, CEO Nick Coe is also living up to his September investor meeting promise of offering more new fragrance choices for his devoted and expanding customer base. We see a strong mix of new and crowd-pleasing product here, along with cash wrap lines that feel like late December.

3. Macy’s: Assortment expansions (from Mario Badescu to SKII), intense labor investments, and the addition of free services across the department shows us that Macy’s is locked and loaded on the beauty front. Store renovations all year have prioritized beauty and this is now paying off. Regaining market share in this category is clearly a priority for taking back much of what this retailer has lost during Q4 during the last decade. My pick for the “Totally Back” Beauty award of 2019.

4. Target: New beauty departments, a revamped loyalty program now open to all customers, a purposeful gift set assortment and merchandising strategy, traction in private label brands, and expanded impulse areas makes this a strong contender for Q4 2019. Not to mention that the rest of the store is on fire, so beauty will naturally benefit from the increased traffic (+3.1% in Q3).

5. Ulta: The least exciting on my key player list was about two weeks behind its competitors on gift-giving themed marketing. Holiday specific gift assortment feels same-old in the store for 3 years running, and last weekend’s Beautyfest was an execution debacle that disappointed customers across the country. Still a makeup destination, especially for Gen Z, but without the benefit of a big exclusive launch earlier in the year, this retailer feels at risk to other competitors thus far.

Deliberately missing from my picks: Amazon (less of a holiday player, more of a go-forward beauty category discussion) and Nordstrom, whose beauty business appears to be falling off a cliff, along with the rest of the store. Sephora is best positioned to grab this share as the death spiral continues.