Currently dealing with a pre-pandemic “retailpocalypse” that has already claimed Barney’s as a casualty in 2019 and resulted in downsizing and redundancies at Macy’s this year, many U.S. retailers are battling for survival. Many had looked to recover a share of the beauty market which over the years has become dominated by e-commerce companies as well as multi-brand retailers like Sephora and Sally Beauty. At present, beauty has ended up being critically important for retailers, as consumers are spending more on beauty products than on fashion.
According to Skypad, a retail performance data platform, which tracks merchants including department stores, sales of clothing items have plunged by 42% through the last week in March. This was a bigger decrease than cosmetics, which declined by 32% during the same time period.
“Beauty is hurting a little bit less than fashion,” said Skypad CEO Jay Hakami. Skypad estimates that the year-over-year decline for April 2020 will remain in the range of 40% for fashion and 30% for cosmetics, according to their current data sets.
Online retailer Verishop, which launched in 2019 and sells fashion, beauty and home products, is faring better than beleaguered department stores. The business has seen a month-over-month growth of 102% in their beauty category, and a drop of 16% and 17% in ladies’ and men’s fashion, specifically, for the remaining weeks of February and March comparatively. According to Verishop founder and CEO Imran Khan, beauty has accounted for approximately 10% of the businesses sales prior to the Covid-19 shutdowns hit, yet it now makes up 30%.
Thanks to the sustained demand for beauty products, the firm’s order quantity increased 50% month-over-month in March and April. The brand’s Instagram account has recently refocused to mainly concentrate content on beauty and home goods. “We always have ups and downs in categories, but you want to have a diversified business,” said Verishop co-founder and CEO Imran Khan.
“Out of this situation, we will certainly see a velocity of the trends we saw going into the economic downturn. We’re most likely going to see faster landscape adjustments for firms and also the [falloff] of fads that were struggling going into the economic crisis,” Khan said. Earlier this year, the company had already seen increasing popularity of skin care products, which is now a top-performing category for the business.
“Beauty has been trending above the performance of apparel, footwear and accessories,” according to Larissa Jensen, NPD Group vice president. The research firm, which tracks retailers including department stores and nationwide chains like Bloomingdale’s, Macy’s, Ulta and Sephora, found that beauty sales declined by 14% year-over-year in the first quarter of 2020. The decrease began in March as a result of the countrywide lockdown.
Beauty is a category where department stores have lost traction over the last ten years, missing out on beauty’s e-commerce growth, and conceding their previously held status as the primary locations for luxury beauty purchases. Major online retailers like Sephora, Sally Beauty and Ulta have taken prominence as the key destinations for beauty purchases. Over the past several years, sales of beauty and personal items within nationwide retailers grew by 6%, a growth rate that appears insignificant compared to the 150% increase in total online sales for the category during the same time period, according to a previously published Euromonitor report.
In recent years specialty retailers like Urban Outfitters, Free People as well as Anthropologie have progressively diversified into beauty. The Urban Outfitters’ earnings call in November 2019, saw CEO Richard Hayne highlight beauty as a category that was achieving better results for the business overall.
Department stores’ attempts to recover lost ground within the beauty market have included welcoming popular emerging brands and launching new digital ideas. Kohl’s introduced its Beauty Checkout program to feauture new brands in partnership with Facebook in October 2019. Yet department stores have spent significantly on now-unavailable physical in-store experiences. Nordstrom teamed up with Glossier for a pop-up in December 2019, yet does not market the prominent DTC brand on its site. The store’s new NYC flagship, which opened in the second quarter of last year, includes a multi-level beauty department offering in-store experiences like Botox and other facial treatments. Saks Fifth Avenue and Bloomingdale’s have also refurbished their beauty floors with experience-heavy offerings.
For retailers that “entered this already in a precarious position — and this could be department stores; it could be any kind of retail environment out there — it’s going to be challenging to see how those come out on the other side,” said Jensen.
In 2015 Macy’s had previously acquired luxury beauty and spa chain Bluemercury, but supposedly listed it up sale in April 2020. Although Macy’s had revamped its department store and e-commerce beauty experience in 2018, it continued to struggle, and in a press release in March announced it had “lost the majority” of its sales as a result of the global pandemic, despite continuing to drive sales through digital channels.
J.C. Penney, on the other hand, had adjusted to the multi-brand beauty phenomenon by renting floor space to brands such as Sephora as well as offering their product ranges through its website. However, the department is supposedly in “advanced talks” to declare insolvency.
“It’s getting a bit touchy, and some retailers, unfortunately, will probably not make it,” said Hakami.