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Beauty Brands That Sell in 'Essential' Retailers Are Feeling Pretty Lucky Right Now

Mass retailers were seen as the unglamorous alternative to Sephora. Now they’re the only game in town.
Target's new beauty format will roll out to hundreds of stores in the next year. | Source: Courtesy
By
  • Cheryl Wischhover

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ELLENVILLE, United States — Four weeks into sheltering in place, I went to Walmart to pick up some groceries and household items. I made a detour through the beauty aisle in search of eye cream. My usual choice is from a prestige brand that retails for $32 at Sephora. But Sephora is closed and I didn't have the patience to wait for an online order to ship. So I picked up a L'Oréal Revitalist version for less than $10 instead, tossing it into my cart next to a giant bag of pretzels.

I'm not alone, either in trading down in price or shopping for beauty products at a so-called essential retailer. Since mid-March, shelter-in-place orders are common, millions have lost their jobs, and non-essential businesses have been forced to close. With Sephora and Ulta going online-only for the time being, grocery stores, drugstores, and big-box stores like Target and Walmart are the only beauty game in town.

That’s created a sharp divide in the fortunes of beauty brands. Prestige beauty sales plunged 58 percent in March compared with a year earlier, according to NPD Group. Meanwhile, Target reported overall sales rose 20 percent year on year last month. Some beauty brands that sell at Target have seen their sales remain stable or even increase.

"Consumers now have a mindset of 'I just need the essentials and maybe I just lost my job, so I'm going to go inexpensive,'" said Mary Pickering, a senior partner at Simpactful, a CPG and retail consultancy firm. "It's kind of similar to what we saw behind the recession in 2008."

Pickering has clients that sell at both Target and specialty beauty stores. “Ulta has dried up for them,” she said, even taking into account a jump in online sales. “You’re definitely at more of an advantage now if you are selling to food, drug and mass. You will keep your head above water.”

Hero Cosmetics, an acne care brand that sells pimple patches and just launched a skincare balm, has seen “steady” business at Target, said co-founder Ju Rhyu. By contrast, sales at Urban Outfitters and Anthropologie have declined.

Consumers now have a mindset of 'I just need the essentials and maybe I just lost my job, so I'm going to go inexpensive.'

“I think [Target’s] guests are definitely buying more essential items, so things are skewing that way, but beauty is holding its own for sure,” she said. Target declined to comment.

In recent years, both Target and drugstore chains like CVS and Boots in the UK have expanded their beauty offerings, including more DTC and higher-end brands merchandised like their tonier competitors. It's good, if coincidental, timing for both the retailers and brands that have recently entered them.

Bliss, which rebranded in 2018 from a prestige spa brand to masstige positioning, sells at retailers including Target, CVS and Ulta. It’s seen strong sales in its mask and hair removal products, said Meri Baregamian, the brand’s chief executive. She described a “massive” increase in online orders at Target, with the vast majority of those customers opting to pick up their items curbside.

She acknowledged that business has still been negatively impacted for the brand overall, but said she felt “fortunate” that Bliss has a strong retail presence in these essential retailers.

It also helps that many of the brands that are seeing an uptick in business at mass retailers, like Bliss, offer DIY at-home beauty solutions, since shoppers don't have access to hands-on professional salon services anymore. These brands are benefitting both because of the categories they're in and from being visible in channels where a lot of people are currently shopping.

“Haircare, specifically hair colour, is experiencing the biggest surge within the category,” said Maly Bernstein, vice president of beauty and personal care at CVS Health, in an email to BoF. The drugstore chain has also seen an uptick in nail polish sales. (CVS has had a relationship with Instacart for several years to deliver front store products, including beauty and personal care, increasing ease of access.) Walmart’s Chief Executive Doug McMillon reported similar shopping behaviour for hair colour recently on the Today Show.

Haircare, specifically hair colour, is experiencing the biggest surge within the category.

Flamingo, the women’s shave and body care brand owned by Harry’s, has been selling at Target since January 2019 and entered Walgreens and the Kroger grocery chain in February of this year. Sales of its face and body wax kits jumped 63 percent since March 7 at Target, said Allie Melnick, general manager at Flamingo. The brand is seeing similar surges at its new grocery partners.

Oars and Alps is a DTC men’s grooming brand that launched at Target in early 2019 after winning a spot in the retailer’s accelerator programme. Its sales are actually up since March, partially because it just launched a hand sanitiser sold only on its website. But sales of its body wash have spiked at Target, increasing by 50 percent in March compared to February. It has displaced deodorant as the brand’s bestseller.

“In general, customers are moving towards clean products that make them feel germ-free and hygienic,” said Mia Duchnowski, chief executive and co-founder.

But it’s not clear that this sales bump for brands selling at essential retailers will last. Pickering said that when shelter-in-place orders first started to roll out, customers bought more expensive items in her clients’ portfolios at Target. One skincare brand, she said, then saw consumer behaviour “completely reverse to opening price point [purchases]” later in the month. As more consumers lose income, even these lower-priced beauty purchases may dry up.

On Thursday, New York and other East Coast states have extended the closure of non-essential businesses through May 15. And as shelter-in-place orders extend, shoppers are going to grocery stores less frequently.

“People are being more cautious and selective about when they need to go to the store,” Flamingo’s Melnick said. There was an “initial surge of foot traffic” sales the brand saw that has since died down.

Still, as the potential for rolling stay-at-home orders looms until a vaccine or appropriate therapies are found, these brands likely have a leg up on their counterparts who sell in non-essential retailers.

Hero Cosmetics’ Rhyu certainly thinks so. “I think for us, being in channels that were deemed ‘essential’ is key to getting through Covid-19 and even thriving.”

THIS WEEK IN BEAUTY

L'Oréal sees sales drop in first quarter. But the cosmetics company said e-commerce sales have surged as demand picks up in China where lockdown measures have eased.

Beauty manufacturers go digital. As trade shows are cancelled, suppliers are making overtures to budding beauty brands by offering more information online than ever before.

Marc Jacobs did a beauty tutorial. After all, he's stuck at home and has his own beauty brand.

First TikTok influencer beauty line launches. The Nel Twins, who have 1.2 million followers, are launching a range of lip glosses.

Beauty bosses take salary cuts. Top execs at the Estée Lauder Companies are taking 50 percent pay decreases, while Coty's can expect 25 percent cuts.

Beauty brands donate over 140,000 products to healthcare workers. A group of beauty writers (including BoF's Cheryl Wischhover) are coordinating a grassroots effort called Donate Beauty to help brands donate products to frontline hospital workers.

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