The ‘lipstick index’ is back – and retailers are scrambling to cash in

The 'lipstick index' is back - and retailers are scrambling to cash in
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Target has added new brands to its beauty department. A growing number of stores also have mini Ulta Beauty stores with prestige brands.

Melissa Repko | CNBC

As prices rise, some people decide to buy new clothes, delay or cancel big purchases like televisions. Netflix accounts.

But they still strive for beauty.

The beauty category has become a rare bright spot for retailers as people hold back on spending amid rising inflation. Apparel, often seen as an affordable luxury, is the only discretionary retail category with unit sales growth in the first half of the year, according to NPD Group, which tracks categories including apparel, technology and toys, as well as specialty and beauty products. department stores.

“You might not be able to go out, but you can buy yourself a lipstick,” said Olivia Tong, an analyst at Raymond James.

This spring, Target even called her beauty sales force cut the profit forecast in half for the year. Walmart while also investing in the category and introducing new beauty displays to hundreds of stores warnings that shoppers skip arbitrary categories like apparel.

Other factors also work in favor of the industry. Weddings and parties became hot again. More people are returning to the office and can no longer hide behind them zoom filters. And during the pandemic, some people have gotten into the habit of pampering themselves with facial masks, hair treatments and other beauty products at home.

Larissa Jensen, beauty analyst for NPD, called the comeback“lipstick index” — a term popularized by chairman Leonard Lauder Estee LauderExplaining the rise in cosmetics sales during the recession of the early 2000s.

Jensen said lipstick sales are up as consumer sentiment declines. This growth has spilled over into other beauty products as well. Sales of makeup, including lipstick, are up 20% in the first half of the year, skin care is up 12%, fragrance is up 15% and hair care is up 28% – and they’re all growing in units as well as dollars. he said.

Much of the beauty category’s growth is coming from households earning more than $100,000 a year, and Jensen said discounters may have a harder time capitalizing on the trend. Still, beauty’s resilience could provide some cushion during a slowdown for big-box retailers — if they can figure out how to cash in.

Beauty $3, $5, $9

Walmart and target Both of they lowered their profit forecasts after being forced to lower the prices of clothing, household goods and other unsold products. However, both companies are revamping their beauty departments and adding new brands to attract customers.

Target started a year ago opening hundreds of Ulta Beauty stores Inside their stores, including MAC Cosmetics and Clinique. The company plans to add more than 250 stores this year and eventually open stores in 800 locations, about 40% of its U.S. footprint.

And after seeing perfume become the biggest sales driver in prestige beauty last holiday season, it also added popular fragrance brands to Ulta stores, including Jimmy Choo Man, Juicy Couture and Kate Spade New York.

Since January, Target has introduced more than 40 brands to its stable of beauty products, including “clean” products that are free of certain ingredients and brands owned and founded by Black.

In an earnings call in mid-May, CEO Brian Cornell said beauty saw double-digit growth in comparable sales in the fiscal first quarter compared to the prior period. This came out of other categories except food and beverage and essential products, which saw a noticeable slowdown.

Walmart has added dozens of prestigious beauty brands to choose from in its stores. It has signed a deal with British beauty retailer Space NK to add to its product range and develop a private label.

Melissa Repko | CNBC

At Walmart this summer, the company’s 250 locations set up new beauty displays featuring Mario Badescu, Patchology and other brands typically found at specialty beauty stores or department store makeup counters.

A more affordable “Beauty Finds” display has also rolled out in about 1,400 stores, offering shoppers lip glosses, lotions and more for $3, $5 or $9.

Walmart also has exclusive deals with direct-to-consumer companies such as Bubble, a skincare brand focused on colorful packaging and Gen Z and younger millennial customers. Walmart’s vice president of beauty merchandising, Creighton Kiper, has seen double-digit growth in its cosmetics business over the past few quarters.

“Beauty is not like food and it’s not like health and wellness, but the customer interacts and engages with it every day,” she said in an interview earlier this summer. “You have that mental health component of confidence and feeling good about yourself.”

When budgets are tight, Kiper said, customers can fall back on skills they picked up during the pandemic — like coloring their nails or hair at home — and go to Walmart to shop at home at the salon.

Ashley Marie Lemons, who lives in a suburban Atlanta home, said her family is eating out less because they are spending more on groceries, diapers and other necessities. He said he cooks more meatless meals and buys hot dogs instead of more expensive meats like ribs.

But she said she still allows herself to spend about $50 a month on beauty products like eyeshadow palettes and mascaras.

“It’s an outlet for me,” he said. “Some people love art. It’s a creative way for me to express myself.”

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