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Moda Operandi, Farfetch and Best Buy are expanding into beauty for the first time.
Make way for beauty. (Photo by Flickr user Marco Verch Professional Photographer, used under a Creative Commons license)
As retailers look to grow selection, they have an eye for beauty.
With the category rising among shoppers amid the return to in-person activities and ecommerce platforms looking to grow into new verticals, retailers that built their initial business in verticals like fashion and even consumer electronics are adding beauty in 2022.
At a time when digitally native brands are increasingly eager to add new channels both online and brick-and-mortar realms, the moves offer a sign that retailers are seeking out new kinds of products to bring to their shelves, too.
Moda Operandi is the most recent platform to move into beauty. On Monday, the luxury fashion-focused ecommerce platform indicated it will begin launching beauty products in skincare, makeup and fragrance later this year, WWD reported.
“Beauty is the logical next step for Moda,” said Moda Operandi Cofounder and Chief Brand Officer Lauren Santo Domingo, in a statement. “Our customer comes to us for our curated point of view on personal style across fashion, fine jewelry and home. With the launch of this category, Moda will become a complete lifestyle destination.”
Serving as beauty director will be Jessica Matlin, the former Harper’s Bazaar’s beauty director and current cohost of the Fat Mascara podcast. She said in a statement to WWD that Moda’s approach would include a “thoughtful mix of content and commerce centered around exclusive access, elevated editorial, and brand discovery.”
This launch comes closely on the heels of a splash into beauty by luxury retail platform Farfetch. The three-part launch included curated products and community across Farfetch.com and Browns, as well as a new fragrance collection from the label Off White.
Best Buy, which is synonymous with electronics, is also making a move into the space in its own way, as well. The company announced that nearly 300 stores and BestBuy.com now have a collection of nearly 100 skincare devices available. These include the portable facial massage device TheraFace Pro, as well as products from brands like Foreo, Vanity Planet, and PMD Beauty.
The approach keeps Best Buy’s core focus on technology in the mix, but shows an interest in growing the category mix. It came as part of a broader expansion, as the retailer also added products in outdoor living and etransportation.
Best Buy made previous moves into health with the prior acquisitions of home care technology platform Current Health and aging-focused emergency response provider Great Call. This shows an approach to add every day products for consumers that lean more toward the wellness side of the equation than health.
While each example has its own specifics and internal machinations involved, when considered together they offer a look at the opportunity that exists when brands and retailers have a willingness to cross previously-drawn vertical lines, and lean into strengths as curators of products that appeal to customer tastes.
As is the case with many trends, there are likely a number of overlapping factors at play that can explain why this is happening, rather than a single, elegant answer.
With their moves into beauty, Farfetch and Moda are expanding into a category that is adjacent to their initial offerings in fashion. Farfetch’s announcement pointed out the crossover potential between the two categories, both when it customer interests and the integrated experience it can offer through its online community and virtual try-on tools.
There’s untapped market potential, too. Farfetch also pointed out that the $69 billion luxury beauty market is the second largest within the global personal luxury market as a whole, behind leather goods. As WWD points out, the luxury ecommerce space is also growing. Brands and retailers that long prioritized an elevated in-store experience are upping their digital presence. Ecommerce platforms bring the ability to easily offer more choice, and pushing into new categories can be one way to expand the number of options.
At the same time, beauty as a broad category is showing growth. According to data from the NPD Group, the US prestige beauty category grew to $22 billion in 2021, which was 30% growth over 2020 and above 2019 levels. Fragrance was the top-selling sub-category in 2021, while makeup and hair products returned to growth amid reopening, NPD states.
In the first quarter of 2022, the beauty and personal care category had a 29% year-over-year increase in sales, according to the Q1 2022 INFORM Report from Tradeswell, which draws on data from direct-to-consumer platforms and marketplaces to offer a look at trends in multichannel ecommerce.
Beauty stands poised to continue to show strength as the return of more in-person activities brings routines, upkeep of appearance and the expression of beauty back to daily life.
Estee Lauder, which owns brands like MAC, Clinique and Bobbi Brown, characterized this shift as ushering in a “makeup renaissance” last year. As its recent earnings call showed the company had better than expected organic sales growth of 9% for the three-month quarter ending in April 2022, executives suggested this period was continuing.
"We envisioned the category would experience a recovery driven by both restocking as well as a renaissance rooted in a renewed passion for the joy and creativity of makeup after a difficult time," CEO Fabrizio Freda said on the earnings call. "Even with the rise of the Delta and Omicron variants, the makeup renaissance has delivered very favorable trends and offers great promise for the future."
Beauty is also playing a big role as DTC companies look to add brick-and-mortar channels amid the return to in-person retail. Ulta Beauty announced deals to add brands like Hally Hair, Mielle Organics and sk*p in recent weeks, while haircare brand Sunday II Sunday is launching its latest product straight into Ulta while bypassing its own website, Retail Dive reported.
Beauty is even serving as a springboard for additional growth at stores that already had a well-established foothold in the category. Beauty products are a linchpin of "shop-in-shops," where retailers set up a mini-store with curated products from another store owner on their floor. Ulta is set to expand the number of “shop-in-shops” it has within Target stores by 250 in 2022, with a goal of hosting 800 total. Beauty and personal care products retailer Sephora, meanwhile, is growing a similar model inside Kohl’s stores, with plans to add 850 locations in 36 states.
“In stores where we’ve added an Ulta Beauty experience, guests are buying incremental items from the assortment, while continuing to shop the beauty brands they’ve loved at Target for years and adding more to their baskets in complementary categories,” said Christina Hennington, executive vice president and chief growth officer at Target, in a February announcement.
With increased interest in the category and a multitude of expansion strategies, don’t be surprised to see beauty products keep popping up in places you might not expect. With more demand and a growing number of possible channels, brand leaders should be on the lookout for unique partnership opportunities that could arise as a result.
Product innovation, marketing and ecommerce helped boost sales 49% in the holiday quarter.
e.l.f. beauty Poreless Putty Primer. (Courtesy photo)
The clouds are getting darker in today's retail environment, but e.l.f. Beauty is shining. Digital commerce and marketing growth is a primary reason.
The makeup and skincare brand posted the following results for the quarter ended Dec. 31, 2022:
The brand is also outperforming category trends. The cosmetics category grew 8% over 2021, while e.l.f. grew 36%.
“We grew our market share by 150 basis points and increased our rank to the #4 brand as compared to #5 a year ago,” CEO Tarang Amin told analysts. “We continue to be the fastest-growing top five brand by a wide margin.”
The strong results proved validating for a brand that prides itself on offering affordable cosmetics, and digital-forward marketing. They were also another sign of the resurgence of beauty as people return to in-person experiences post-pandemic and seek affordable luxuries that can provide joy despite tougher economic conditions.
Here’s a breakdown of the digital drivers of growth for e.l.f., and how it is showing strong results in a tough economic environment:
@meghantrainor A special @elfyeah radiance report: It's an E.L.F.ING GLOW STORM! Please exercise ✨extreme iridescence!✨ (and thank you @weatherchannel for inspiring the glowcast!)🤍 #elfpartner
The brand prides itself on marketing that is both bold and pioneering on emerging channels.
One example came in the form of a holiday kickoff with the singer Meghan Trainor delivering a Weather Channel-informed report on social channels to celebrate the restock of the brand’s Halo Glow Liquid Filter, which was a viral sensation.
“The trifecta of e.l.f., The Weather Channel and Meghan Trainor helped us reach new audiences and entertain our community,” Amin said. “The campaign generated over five billion press impressions, exceeding last year's holiday campaign by a wide margin.”
The combination of innovation on product and virality in marketing helps attract a new audience for the brand.
“They see the viral buzz,” Amin said. “They see other people talking about this prestige quality, these great prices and particularly these days with platforms like TikTok, we get consumers doing their own demonstrations and comparisons.”
When it comes to metrics, Amin said the brand explores, “What percent behind each product are we pulling in new users?”
It's often up more than 50%, and attracts the core consumer in Gen Z as well as millennials and Gen X.
“I think the quality of these products at the prices we have and our ability to engage them really are attracting even more consumers to our franchise,” Amin said.
e.l.f. also deepened its marketing investment. The overall share of marketing is now 16%, as compared to 7% three years ago. It will increase to 17-19% this fiscal year.
“We recently completed our annual Nielsen marketing mix analysis and again saw exceptional ROI results, giving us further confidence that our marketing and digital initiatives are driving brand demand and delivering profitable growth,” Amin said.
Strong ROIs were observed across digital advertising and influencer marketing, while PR was “off the charts,” Amin said. Experimentation also plays a key role in developing these channels.
“The other thing about us is, we're not afraid to test and learn our new platforms. So we were one of the first beauty brands on TikTok. In the early days, it was hard to get attribution on TikTok. We now can see almost immediately when something goes viral on TikTok, the impact it has on our business and our ability to be able to attract that,” Amin said.
When it comes to ecommerce, Q3 digital consumption trends were up over 75% year-over-year, said CFO Mandy Fields. Digital channels drove 17% of total consumption in Q3, up from 14% a year ago. In the quarter that includes the holidays, digital channels were particularly strong through Black Friday and Cyber Monday.
A big point of emphasis for digital growth is the company’s Beauty Squad loyalty program, which provides early access, exclusives, free gifts and bonus points. The program grew enrollment 25% year-over-year to 3.5 million members. The loyalty program helps to boost the value of individual customers.
“Our loyalty members drive almost 70% of our sales on elfcosmetics.com have higher average order values, purchase more frequently, have stronger retention rates and are a rich source of first-party data,” CFO Mandy Fields said.
Plenty of brands and retailers reporting earnings over this week are speaking of a slowdown in demand as a result of inflation and cooling demand in the economy. They also talk of consumers trading down to more affordable and smaller products that challenge margins. Amin batted away that kind of talk.
“No, we've not seen any slowdown in demand,” Amin said.
The response spoke to the unique place that beauty sits in this moment.
“What I'd tell you is, historically, mass color cosmetics, mass skin care has fared really well in…recessionary environments,” he said, referring to the Lipstick Index that posits beauty sales rise during economic downturns as people seek the small joys when they have less to spend on bigger items.
But there’s also a timing factor coming out of the pandemic.
“This is a category that really did suffer during the pandemic when people were restricted from their normal behavior,” Amin said. “So I've long felt there's a lot of pent-up consumer demand for the categories in which we compete, and we very much are seeing that.”