Cosmetic retailers feel threat of supermarket competition

By Louise Prance

- Last updated on GMT

Related tags: Market research company, Retailing, Supermarket

Cosmetic retailers are being urged to target masstige and premium
segments in order to stay abreast of the upsurge in supermarket
retailing cosmetics – which are predicted to account for over half
of all beauty sales by 2011.

According to a new report by market research company Verdict, the overall health and beauty market currently stands at £14.9bn and is predicted to rise to £17.4 by 2011, offering a large and growing market for all retailers. However, Carol Ratcliffe, retail analyst for Verdict told CosmeticsDesign​ that department store operators, home shopping companies, specialists and general retailers should start to amend marketing plans and begin to capitalise on the importance that higher segment products are beginning to have in the market. This in turn should help them to compete with the predicted success that supermarket sales are expected to achieve. "Retailers should target masstige and premium segments – higher value segments are experiencing higher growth, partly due to insulation from deflationary effects at the bottom end of the market"​ she said. However, despite the specialist end of the spectrum having the advantage of the important experience element of shopping– with attractive store elements and high shop keeping standards - supermarket chains are creating measure to challenge this. "Grocers (i.e. large supermarket chains such as Tesco) are also beginning to design more appealing spaces, for example with high walls separating personal care areas from noisier grocery shopping areas, and in-store pharmacies that provide both a sense of authority to the range and a reliable source of product information". ​ Indeed, health and beauty specialists are predicted to lose a large share of the market, with the specialists retailers current share of the market said to decrease to from the current 40.2 per cent to 34.9 by 2011. The decline is offset by competition from the supermarkets, whose retail strategies are directly taking away sales from the specialists, and forcing them to maintain lower prices – mainly in widely available and commodity products. Ratcliffe went on to say that a current trend emerging in the health and beauty market is the continuation of both cosmetic and fragrance manufacturers benefiting from increased interest in premium products. Furthermore, both dental and skin care manufacturers are expected to continue to profit from an aging population profile, with greater innovation amongst this sector predicted.

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