HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY

© Euromonitor International

1

HOW RETAILING CHANGES ARE AFFECTING

THE DISTRIBUTION OF BEAUTY AND PERSONAL

GOODSJON WRIGHT, HEAD OF RETAILING RESEARCH

MARCH 2011

© Euromonitor International

2ABOUT EUROMONITOR INTERNATIONAL

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HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

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3

Introduction

Premium retailers formalise strategies to fight back

Beauty specialists find their niche

Parapharmacies and drugstores gain share

Internet retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

4RETAILING ENVIRONMENT IS CHANGING

Changing retail

environment

Grocers growing

presence

Consumers looking to

save

Consumers looking for

convenience

Internet retailing

encroaching

INTRODUCTION

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5RETAILING CHOICES CONFLICT WITH DESIRE FOR QUALITY

ConvenienceAssurance over quality

INTRODUCTION

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6PRIVATE LABEL’S SHARE OF GLOBAL SALES BY INDUSTRY

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Sh

are

of

Sale

s (

%)

INTRODUCTION

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7GROCERY AND NON-STORE MAKE GAINS IN SHARE

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sh

are

of

Valu

e S

ale

s

Grocery Retailers Non-Grocery Retailers Non-Store Retailing

INTRODUCTION

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8IMPORTANT CHANNELS MAINTAIN SHARE

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sh

are

of

Valu

e S

ale

s

Other channels Beauty Specialist Retailers

Parapharmacies/Drugstores Department Stores

Internet Retailing

INTRODUCTION

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9

Introduction

Premium retailers formalise strategies to fight back

Beauty specialists find their niche

Parapharmacies and drugstores gain share

Internet retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

10WHAT IS A DEPARTMENT STORE?

Department stores:

Mainly non-grocery merchandise

At least five lines in different departments,

Usually with a sales area of over 2,500 sq metres

Arranged over several floors

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

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11DEPARTMENT STORES’ SHARE OF SALES DECLINES

0.0

5.0

10.0

15.0

20.0

25.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sh

are

of

Valu

e S

ale

s (

%)

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

© Euromonitor International

12BUT REGIONAL DIFFERENCES REMAIN

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Ch

an

ge in

sh

are

of

dis

trib

uti

on

2000 - 2005 2005-2010

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

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13DEPARTMENT STORES IN US BOUNCE BACK

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2006 2007 2008 2009 2010 2011 2012

Year-

on

-Year

Gro

wth

(%

)

Sales growth Store growth

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

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PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

SUPER PREMIUM DEPARTMENT STORES AVOID CREDIT CRUNCH PAIN

-45.0

-30.0

-15.0

0.0

15.0

30.0

2005-6 2006-7 2007-8 2008-9 2009-10

% y

-o-y

gro

wth

Russia

GUM

Bolshoy Gostiny Dvor

Total department stores channel

-10.0

0.0

10.0

20.0

30.0

2005-6 2006-7 2007-8 2008-9 2009-10

% y

-o-y

gro

wth

United Kingdom

Harrods

Liberty

Fortnum & Mason

Total department stores channel

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15JOHN LEWIS LAUNCHES IN-STORE BEAUTY SPA CONCEPT

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

0

5

10

15

20

25

30

2006 2007 2008 2009 2010

Gro

ss s

ale

s (

GB

£)

Sto

re n

um

bers

Store numbers Gross sales

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

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16DEPARTMENT STORES IN EMERGING MARKETS

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2005 2006 2007 2008 2009 2010

Sh

are

of

Sale

s (

%)

China India

PREMIUM RETAILERS FORMALISE STRATEGIES TO FIGHT BACK

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17

Introduction

Premium retailers formalise strategies to fight back

Beauty specialists find their niche

Parapharmacies and drugstores gain share

Internet retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

18WHAT IS A BEAUTY SPECIALIST RETAILER?

Beauty specialist:

Chained or independent retail outlets

Primary focus on selling cosmetics and toiletries, beauty accessories, fragrances or a combination of these

BEAUTY SPECIALISTS FIND THEIR NICHE

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19SPECIALISTS GAIN SHARE OF SALES

0.0

10.0

20.0

30.0

40.0

50.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sh

are

of

Sa

les

Asia Pacific Eastern Europe Latin America

Middle East and Africa Western Europe

BEAUTY SPECIALISTS FIND THEIR NICHE

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20SEPHORA’S PRESENCE AND SALES GROW

BEAUTY SPECIALISTS FIND THEIR NICHE

2010 sales:

• More than US$1.0 billion

• Between US$500 million an US$1.0 billion

• Up to US$500 million

• New market entry

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21SASA INTERNATIONAL POINTS THE WAY IN ASIA PACIFIC

BEAUTY SPECIALISTS FIND THEIR NICHE

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22

Introduction

Premium retailers formalise strategies to fight back

Beauty specialists find their niche

Parapharmacies and drugstores gain share

Internet retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

23WHAT IS A PARAPHARMACIES/DRUGSTORES?

Parapharmacies/drugstores:

Mainly OTC healthcare, cosmetics and toiletries, disposable paper products, household care products and other general merchandise

May offer prescription-bound medicines under the supervision of a pharmacist.

PARAPHARMACIES AND DRUGSTORES GAIN SHARE

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24PARAPHARMACIES/DRUGSTORES BOOSTED BY DOWNTURN

Beauty Specialist Retailers

Parapharmacies/Drugstores

Department Stores

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

-2.0 0.0 2.0 4.0 6.0 8.0 10.0

2010-1

5 C

AG

R %

2007-09 CAGR %

PARAPHARMACIES AND DRUGSTORES GAIN SHARE

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25GROWTH OF CHANNEL IS GLOBAL

Asia Pacific

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0 5.0 10.0 15.0 20.0 25.0

Sto

re g

row

th 2

005-1

0 C

AG

R %

Sales growth 2005-10 CAGR %

PARAPHARMACIES AND DRUGSTORES GAIN SHARE

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26SUPERDRUG INNOVATES: STORE-WITHIN-A-STORE

PARAPHARMACIES AND DRUGSTORES GAIN SHARE

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27PARAPHARMACIES/DRUGSTORES UBIQUITOUS IN US

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Nu

mb

er

of

sto

res

PARAPHARMACIES AND DRUGSTORES GAIN SHARE

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28

Introduction

Premium retailers formalise strategies to fight back

Beauty specialists find their niche

Parapharmacies and drugstores gain share

Internet retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

29INTERNET RETAILING GENERATES CONSUMER INTEREST

INTERNET RETAILING COMES INTO ITS OWN

2%

2%

4%4%4%

1%

0%

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30INTERNET OVERCOMES CONSUMER CONFLICT

ConvenienceAssurance over quality

INTRODUCTION

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31INTERNET ENABLES BRANDS TO SPEAK TO CONSUMERS…

INTERNET RETAILING COMES INTO ITS OWN

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32…AND ENABLES RETAILERS TO SELL INTERNATIONALLY

INTERNET RETAILING COMES INTO ITS OWN

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33

Introduction

Modern grocery retailing rises in importance

Premium retailers try to fight back

Specialists find their niche and grow

Non-store retailing comes into its own

The future for distribution of beauty and personal care products

HOW RETAILING CHANGES ARE AFFECTING THE DISTRIBUTION OF BEAUTY AND PERSONAL GOODS

© Euromonitor International

34ECONOMIC BACKDROP REMAINS UNCERTAIN

THE FUTURE FOR DISTRIBUTION OF BEAUTY AND PERSONAL CARE PRODUCTS

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35CONSUMERS TO CONTINUE TO LOOK FOR VALUE

Price

Quality

Brand

Connection with consumer

THE FUTURE FOR DISTRIBUTION OF BEAUTY AND PERSONAL CARE PRODUCTS

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36OUTLOOK REMAINS GOOD FOR CHANNELS THAT INNOVATE

Beauty Specialist Retailers

Parapharmacies/Drugstores

Department Stores

Internet Retailing

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

-5.0 0.0 5.0 10.0 15.0 20.0 25.0

2010-1

5 C

AG

R %

Valu

e S

ale

s

2005-10 CAGR % Value Sales

THE FUTURE FOR DISTRIBUTION OF BEAUTY AND PERSONAL CARE PRODUCTS

© Euromonitor International

37

THANK YOU FOR LISTENING

Jon Wright | Head of Retailing Research

Jon.Wright@euromonitor.com