And both specialty retailers show no signs of slowing down — suggesting that mass retailers must find new strategies to stem the losses, especially of Millennials and Generation Z customers.
Market researcher Euromonitor estimates that Sephora and Ulta Beauty account for 22.7% and 26.7% of U.S. beauty specialist retail sales, respectively.
If there was any doubt Sephora is the ultimate beauty playground, that notion was put to bed in March when the LVMH-owned power debuted its latest store.
The high-tech yet high-touch store on 34th Street near Broadway shows off all the bells and whistles shoppers have come to demand. The 11,300-square-foot store is a shrine to social media, virtual makeover technology and traditional hands-on service.
“It’s an incredible milestone for Sephora,” said Deborah Yeh, Sephora’s senior vice president of marketing, at an event marking the store’s opening, which was complete with champagne and a disc jockey. “We love creating immersive and inclusive experiences.”
It is Sephora’s largest in North America. The company now has more than 2,300 locations in 33 countries (about 415 in the United States). This store features more than 13,000 items, and it has been buzzing with traffic — locals and tourists. The unit is one of Sephora’s TIP (Teach, Inspire, Play) Workshops, joining six other next-generation Sephora outposts.
The overarching goal is to fuse online discovery and offline trial, something that the mass market is just embarking on now. There are myriad high-tech tools and makeup and virtual beauty stations. One device simulates makeup application, another gauges skin moisture levels.
The centerpiece is The Beauty Workshop, a workspace equipped with mirrors and beauty products, iPads, USB ports and WiFi, where customers can view digital tutorials and virtually test lipsticks, eye shadow and even lashes.
Consumers can also gather at The Beauty Workshop for group beauty classes and to browse through Sephora’s Beauty Board, a user-generated platform that allows selfie-inclined visitors to upload images of themselves in Instagram-esque fashion. The images are then immediately sent to Sephora.com, where customers around the country can browse and even shop specific Sephora products based on looks they like.
Tap and Try technology allows consumers to give a trial run to lip and lash products using the Sephora Virtual Artist technology and a proprietary scanning technology. There is also Sephora’s France IQ service, which samples scents for customers to find favorites. This is the first Sephora to offer La Mer and Jo Malone.
The technology is appealing, but consumers still love the hands-on expertise of the more than 150 employees in the new location. More than 25 simultaneous consultations can occur at any time. What differentiates Sephora from many department stores is that the consultants are brand agnostic, so they don’t “push” one line over another.
And while Sephora hauls with technology, Ulta Beauty is packing a product punch. Most recently, MAC announced it would enter Ulta Beauty — a huge milestone.
The rollout starts with 25 stores, with plans for 100 installations by the end of 2017. Owner Estée Lauder sees the move as an avenue to bring MAC to a new audience that has probably heard of the on-trend makeup artist line but perhaps hadn’t had easy access.
Simultaneously, Tara Simon, Ulta Beauty’s senior vice president of prestige merchandising, said MAC will bring new shoppers to her stores. MAC will occupy about 200 square feet with curated items from MAC’s range.
Ulta Beauty can really pack a wallop for a brand: being stocked at Ulta Beauty helped raise the visibility of both NYX and It Cosmetics, which were both acquired for handsome sums. At the other end of the price spectrum from MAC, wet n wild and e.l.f. Cosmetics are also getting a shot at Ulta Beauty.
Ulta plans to keep with ambitious plans to open another 100 stores in its current fiscal year.
Sephora’s and Ulta’s rapid growth in market share and mind share hasn’t been lost on mass retailers.
In the chain drug arena, for example, leading retailers CVS Pharmacy and Walgreens have been bolstering their beauty offerings with new formats designed to enhance the beauty shopping experience as well as a bigger mix of exclusive brands.
CVS recently unveiled its beauty game plan as a pillar of a comprehensive front-end strategy. The drug chain is adding new, on-trend beauty brands like Wunder2 and Tigi Cosmetics and products with more skin health benefits and natural ingredients. And to sway customers to browse the beauty area, CVS has put up a “trend wall” spotlighting new launches and niche brands at 2,000 stores. A beauty discovery zone also displays on-the-go options at checkout.
Also, CVS has begun rolling out an exclusive Korean beauty section called K-Beauty HQ, curated by Korean beauty expert Alicia Yoon, to more than 2,100 stores.
Walgreens, meanwhile, has been fine-tuning its Beauty Differentiation concept, a multiyear program to provide customers with an elevated beauty experience.
Launched last year, the initiative has included the addition of Walgreens Boots Alliance flagship brands such as No7 and Soap & Glory on Walgreens.com and in 1,800 Walgreens stores. A new beauty consultant role has also been introduced as part of the Beauty Differentiation effort to provide customers with expert advice on clinical skin care and cosmetics. Tester products also are offered on No7 and Soap & Glory displays in stores with the concept.
Walgreens last month announced plans to roll out NYX products to select stores this year. NYX Professional Makeup products are slated to become available in almost 2,000 Walgreens stores nationwide and in Puerto Rico by this fall. The NYX products are being sold now on Walgreens.com. Select stores, too, will offer testers for NYX, L’Oreal and Maybelline branded products by the end of the year.
In addition, Walgreens recently added Botanics, an all-natural line of products, to its website and select stores.