Success Secrets of the Beauty Industry, Serving the Millennials, and Retail Trends to Act On Now
July 17, 2017
Not that long ago, I had clients pushing back against investing in responsive websites. Who will ever shop/research/read/watch videos on their phone was the argument. Yesterday it was mobile. Today it’s being a part of the consumer’s identity, and powering a consumer experience. Beauty’s killing it in both categories. Enough said.
Part of moving from a mono-channel (pipeline) to a multi-channel (platform) strategy is opening our minds to learning from other successful industries, and applying those lessons into our own market-fluent expression of calculated risk. And when it comes to the beauty crossovers, trust me: the analogies you’re about to read are relevant!
MATT POWELL, NPD
For my inaugural interview of the Channel Mastery podcast, I swung for the fences. Who better to provide a snapshot of where we are today as an industry than the mastermind, Matt Powell, himself. Matt is a vice president and sports industry analyst at the data powerhouse, NPD.
Clocking nearly 40 years in the sports, footwear, outdoors and active lifestyle markets, Matt has served as a buyer, merchandiser, operator, journalist, and research and data expert. He’s frequently asked to present to senior executives of athletic and sports retailers and brands, and he’s a go-to industry expert for major business publications. You may know him from his blog Sneakernomics or his frequent contributions to Forbes. He’s also been named by Complex Magazine to “30 Must-Follow Sneaker Writers and Bloggers on Twitter”, Matt has over 13,000 followers (@NPDMattPowell).
Check out the show notes here.
THE BIG PICTURE
With the exception of beauty, all the key markets (including outdoor, bike, run and sporting goods) that NPD covers are experiencing an overall slowdown in consumption. That’s not just brick and mortar retail; that’s all sales.
Matt and his colleagues at NPD have some notions of why this is the case.
- Travel, meaning the focus on experience over goods, is increasing
- Baby boomers are retiring and spending less
- Millennials aren’t in high-paying jobs yet, and
- Hispanics, as a sizeable and influential consumer group, aren’t spending much
Sidebar: When I read the reasons, my brain automatically sees opportunities. What about you?
Specific to our markets, July 1, 2017, marked the one-year anniversary of The Sports Authority (TSA) going out of business. You’ll hear a lot about this in these opening stages of Channel Mastery because the ripple effect of losing TSA and the associated 20-million square feet of outdoor-focused retail space has created a wake nothing short of that from an aircraft carrier. Even brands that didn’t sell through TSA, and other big retailers, have felt recurring tremors.
The biggest question to emerge from the shutdown is where did those TSA customers go? Matt’s answer, which he acknowledges is an assumption based on research and historical comparison, is that one-third went to adjacent retail; one-third went online; and one-third simply went away.
Take that in for a moment. If you’re a TSA competitor, good for you. If you have an active online presence, you may have fared alright. But the last one? The customers simply went away. Approximately $4 billion in sales volume vanished. I want to stay focused on the inherent opportunities, but to see that light at the end of the tunnel, it’s important to hear Matt’s hypothesis on why those customers who vanished may be gone for a few years.
He suggests that these massive closures brought out impulse and sale shoppers. They took advantage of the TSA fire sales to build their camping, outdoor and ski quivers. They may not have been in the market for – say…a tent – but the close-out pricing was a motivator. Now they have their tent and their outdoor needs are met for quite a while.
Here’s why this is worthy of a deep dive. In Matt’s words, “We really haven’t even begun to feel the real brunt of most of the rationalization that’s going to happen (in 2017).”
Let’s take some time to look at some beacons of light and direction from other industries weathering similar corrections.
Home goods: As outdoor and active lifestyle business leaders, it’s easy to become myopically focused on the trends in our industry. But to really look around the corners, we have to get out of our zone, lift our heads up and look around.
Certainly, you’ve heard of the sweeping closures of JC Penney and Sears stores, the numbers of which are forecasted to increase. Together with a relatively stagnant economy and wages not increasing at anticipated rates, these closures may affect us more than we’d expect.
Just like TSA going-out-of-business sales resulted in inventory being dumped into the market and discounted, now, through this other retail sector, a similar phenomenon will occur.
Consumers will be on the hunt for the best deal. How can we provide our target consumers with what they need in this regard without having our own brand always be on sale?
What, in your mind, is the equivalent today for a more traditional “retail circular,” that was positioned in the Sunday paper? That, according to Matt Powell, is directly tied to the ‘evaporation’ of ⅓ of the traffic that went into TSA on the weekends. They were purchasing products they didn’t really need because they were on sale.
What can you bring to the presentation of a circular that makes it more of an experience, while still sparking activation though a value exchange (maybe it doesn’t have to be a sale, per se?).
The takeaway: Continual engagement across their preferred channels is needed with our absolute bullseye target consumer. It takes 7-10 touches to convert (that’s a benchmark that likely is evolving, but it’s a benchmark we have nonetheless). And, as Matt points out in his interview, when it comes to your retail channel, make it about building community, more than about pushing product or sales (think LuLu, Cabela’s, Sheel’s).
And, never fear. The Channel Mastery podcast has no fewer than three episodes recorded and ready for release in the next month, that will bring more solutions to this dilemma.
WHAT ABOUT MILLENNIALS?
To say it bluntly: one of the curveballs in our current market is that the always vaunted young demographic, our dear millennials as it stands today, aren’t behaving like the good little shoppers we’ve expected from that age group.
Matt compares millennial shopping habits to those of baby boomers. The latter has always wanted to build instant kits – from A to Z – with only the highest quality (ahem…most expensive) gear. Millennials are far more practical in their decision-making. They buy less overall, and they’re willing to delay purchases so long as they aren’t missing out on any experiences. Plus, their embrace of the sharing economy extends to outdoor and active gear.
Speaking in generalizations: Millennials are willing to rent, instead of buy. They’re willing to share, instead of owning outright. They’re less interested in high performance than they are in versatility.
These practices have been highly evident in the bike and run markets. Millennials would rather shell out $90 for a fashionable sneaker they can run in, than a race-ready, ultra-endurance running shoe for $150. In the two-wheeled realm, a mountain bike is a commuter, a trail bike, a road warrior and a townie all in one. A road bike? That does one thing really well: road rides. Case in point: Mountain bike sales are up; road bike sales are down.
The takeaways: Do not discount this group. They are investing in experiences – emotionally and financially. There are opportunities to curate travel sections (online and in-store), rental operations and versatile gear.
WHERE’S THE GOOD NEWS?
It’s not all doom and gloom. Multi-channel development is one solution to a challenging and changing market with external pressures is to expand your opportunities for sales.
From a history steeped in both e-commerce and brick and mortar, Matt has advice on how to keep this transition as seamless as possible.
- As you embark on selling (or increasing your capacity) direct to consumer, focus on maintaining as good of relationships as possible with your key wholesale accounts and sales reps. Bring them into your decision-making. “Be transparent about what you’re doing, why you’re doing it and what products you’ll be selling.” Collaborate on stock and pricing structures.
- Utilize available data that sheds light on today’s consumer buying process. Realize, however, that to make informed decisions, “The real key is to try to get behind the data and understand what’s going on, connect the dots.” NPD does both.
- The jury is out, according to Matt, on brand-owned, physical storefront. The data tells us that square footage is shrinking as it should to rationalize America’s numbers with the rest of the developed world. But there’s no denying some brands have nailed the private label stores. Apple, Bonobos and Warby Parker are top examples.
- From the brick and mortar side, customer experience is still king. Be creative and be different. “If I’m advising a brand about building their own physical stores,” said Matt, “I would advise them to make (the stores) about community and less about commerce.”
- What type of physical storefronts are doing well?
- Curated collections that don’t try to appeal to everyone
- Stores with distinct points of view that align with the values of your consumer
- Stores that offer experiences and community opportunities
- Stores that have embraced the model of becoming a community space, through events, classes and non-commerce-related fundraisers
- Stores that have invested in updating to a contemporary aesthetic
- As for non-negotiable: you must have free wi-fi!
BRING ON THE LIPSTICK
I promised you beauty and beauty you shall have.
In the episode, you’ll hear all the points of what is propelling beauty to become a sterling performer. Spoiler alert: there’s a some talk of community building, both online and in physical stores, and there’s a valid point about a full range of price points offered in one modern, status-filled shopping experience. There’s even more in the podcast than there is in this blog post – trust me -it’s worth a listen.
But the showstopper for me is this: “Capitalize on a trend; don’t devalue it.”
In the cold, hard light of day, I had to acknowledge that as an industry, we have a tendency to shut ourselves off – just a bit – from the rest of society. We’re fiercely proud of what we do. We help people get outside to play in wild places. We advocate for protecting those places. We should be proud, and I am proud.
But do we ever risk crossing the line from pride into righteousness when we eschew mass trends? Let’s look at one of biggest trends of late: selfies.
It shouldn’t come as a surprise that the beauty market got a boost with the selfie phenomenon: it’s an aesthetic industry and everyone wants to look good in photos. Brands and retailers, alike, realized an opportunity to connect with a customer base beyond make-up. They expanded their content, product offerings and messaging to include natural skincare, sunscreen and health and wellness. Basically, they went lateral.
It may not be apples to apples, but the outdoor industry reaction to this huge trend was different. Brands and media alienated untold numbers of people (typically younger, influential people) by painting selfie-taking with a brush of shame. Why can’t a millennial take a selfie to commemorate their outdoor experience, rather than approach their adventure with the reverence of Buddhist monk or John Muir?
If your knee jerk reaction is to devalue certain consumer behavior because it wasn’t how you “grew up,” then take a moment to reflect on why you’re shutting it out.
Personally, I’m not a big fan of selfies. And, hey, if a selfie is anathema to your brand, than fine, critique away. You know what? You’ll alienate some millennials (among others), but you’ll bond with your target consumers. You should never try to be remarkable to everyone, because you’ll be remarkable to exactly no one.
What I wonder is if a customer who valued make-up and beauty wanted to start mountain biking, would the beauty industry shame her for sweating? Or would it say, “Hey babe, don’t forget your sunscreen and SPF lip gloss” and make a customer for life?
The point is that we need to focus on meeting the customer where they are, that means in their online behavior and how they experience the world. The tide began to turn a few years ago when brands began in earnest to expand their marketing and product design to appeal to enthusiasts, not just core users. We opened our arms and welcomed people who didn’t flash 5.13s or think that a 50-miler is a short day.
We began to meet people where they were, and we stopped trying push them to go where they didn’t want to go.
I’m proposing that we keep up the momentum and expand that flowing tide to meet even more (potential) consumers where they are. Your target customer is choosing between a lineup of worthy suitors. He or she will not commit immediately, they’ll date you through your content and brand experiences. Again, 7-10 touchpoints.
The beauty industry embraced (and capitalized) on a massive trend. Beauty-focused commerce has turned shopping into a tangible experience of experimentation, frivolity, style and personal expression. If that’s not an emotional experience that the end consumer is highly vested in? I do not know what is….
Back to what beauty is doing well and what we can consider to add to our own multi-channel brand experiences.
Online, there are apps to try on different hairstyles and makeup looks. In-store, you can get facials and samples and free tutorials. The best retailers and brands in beauty create a supportive experience for anyone trying to look their best on their own terms.
While I don’t see a lateral move into incorporation of facials for our passion-driven industries, connecting with the experience is in our DNA. We can SO do this.