NEW YORK — What were once considered upstart indie color cosmetics brands have become the mainstays of department stores as prestige sales hit a record $8.2 billion at retail last year, a 4 percent increase over 2004.
According to figures released Thursday by NPD Beauty, cosmetics grew 6 percent in dollars; fragrance, 3 percent, and skin care, 2 percent.
Color cosmetics, which generated $3 billion in retail sales in 2005, was the biggest winner, eclipsing fragrance, which generated $2.94 billion in retail sales last year. Showing particular strength were “alternative” and makeup-artist brands such as MAC Cosmetics and Bobbi Brown — they were just 3 percent of the prestige makeup category in 1997, and in 2005 accounted for 29 percent of sales in the category. The face segment of cosmetics rose 5 percent, the eye segment was up 10 percent and the lip category was up 1 percent. According to NPD, these three segments together account for nearly 95 percent of all cosmetics dollars spent in department stores.
Karen Grant, a senior beauty industry expert with the NPD Group, noted in the study that artist and alternative brands have gained substantial ground; almost one of every three dollars spent on prestige makeup products goes to them.
That doesn’t surprise John Demsey, global president of the Estée Lauder and MAC Cosmetics brands at the Estée Lauder Cos. “It’s clear that the brands that are resonating today have a strong brand culture, are experienced providers, and are fun and entertaining with an accessible price point,” said Demsey. “If you look at the scorecard, the best-trained makeup artists, the most directional fashion and color stories, and the best products are coming from [makeup artist and alternative] brands. And makeup is fashion — it transcends generations.”
Demsey added, “When you have an out-of-the-ballpark hit, it brings new people into the department, and it brings business to other categories.”
NPD’s figures — which do not count brand-owned stores like those of MAC, Lancôme and Kiehl’s — might even skew a little low, noted Edgar Huber, president of the luxury products division at L’Oréal USA. “When you add in these other doors, the numbers get even larger,” he said.
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According to industry sources, brand-owned, freestanding stores; e-commerce sales, and specialty chains such as Victoria’s Secret Beauty and Bath and Body Works push prestige beauty’s overall total closer to $15 billion.
Lynne Greene, worldwide president of Clinique, noted that beauty has an expanded definition these days. “Baby Boomers refuse to age,” she said, “and younger people aren’t accepting imperfections. Your teeth are yellow? There’s a treatment which will turn them white. You have wrinkles on your forehead? There’s Botox. And this movement has also given a different perception to pricing. If, say, Botox is $500, that $150 skin cream sounds reasonable. Products that used to be luxury items are now bargains.”
“Our business does not break down the same as the department store business,” said Kate Oldham, vice president and divisional merchandise manager of cosmetics, accessories and fragrances at Saks Fifth Avenue. “Our cosmetics business has always been much bigger. [As for industry growth], I think it’s the product offering being given to consumers. There are more appealing, more interesting offers [and] products are more efficacious,” she said, acknowledging that products like lip plumpers also have treatment benefits.
Commenting on the industry-wide trend, Ed Burstell, senior vice president and general merchandise manager of beauty, jewelry and accessories at Bergdorf Goodman, said, “It’s happening here, too, that color [is outpacing fragrance]. Color cosmetics have really taken off.”
One retailer who requested anonymity speculated that strong growth by MAC Cosmetics and Giorgio Armani Cosmetics could be driving the color cosmetics category, adding that “excellent” growth by MAC would have been “big” for some retail chains. Still, the retailer noted, while color had a “good” increase last year, skin care had a “better” increase. As to why fragrance lagged behind color cosmetics in growth, the retailer said, “The number of [fragrance] launches across the board seems to be so large that it’s not as appealing to consumers as it could be. And it could be that the color products are more enticing than in the past. Maybe the runway looks were much stronger this season. The full-makeup face was [big]; that could be part of it.”
Industry consultant Allan Mottus credits the growth of Sephora — which he estimates is expanding 25 percent a year — and MAC’s ramped-up presence in department stores with fueling makeup sales. Mottus said it is not surprising that makeup sales edged past fragrance, noting that a decade ago, women’s fragrance sales accounted for 38 percent of department store beauty sales. They have since dropped to 28 percent.
“There’s been more news around the color cosmetics business recently. Consumers are absolutely compelled to buy a new gloss or shadow,” said Wendy Liebmann, president of WSL Strategic Retail, with a nod to Chanel’s and Dior’s efforts to inject excitement into the category. “In the last year, we have seen prestige beauty brands take on color cosmetics.” However, she cautioned, after allowing for inflation, the increase may not be “as glossy as it looks.”
A major retailer who asked not to be named said, “Our results are not consistent with the industry trend. Fragrance consistently outperformed color. The fragrance business is on fire.”
Prestige women’s fragrance sales were just shy of $2 billion, up 2 percent, and men’s fragrances were just under $1 billion, a 5 percent increase. And when it comes to fragrances — no surprise here — star power sells. According to NPD, celebrity fragrances now represent 9 percent of the top 100 women’s scents, racking up sales of about $150 million in 2005 — roughly three times what they did in 2000. However, Grant doesn’t necessarily think the strong growth in celebrity fragrances will continue. “The question becomes, Who’s left to use?” Grant said. “This movement is going into its fourth year. I don’t think it will continue at the same fast and furious pace. There are so many launches, so many people fighting for the same amount of the dollar. Consumers are so overstimulated, they can barely focus on a fragrance. That doesn’t mean that the celebrity doesn’t have cachet, it’s just that there are, in a sense, 10 people eating off the same plate.”
L’Oréal’s Huber said men’s fragrances in particular have been a boon for his company; the new Giorgio Armani and Ralph Lauren scents rank in the top 5.
However, Grant noted, the number of fragrance launches overall are staggering. Since 2003, there have been more prestige fragrances debuts — an average of 100 annually in 2004 and 2005 — than all of the scents launched from 1998 to 2002 combined. The result, she said, is a much shorter life for many of these scents. “In the past, a new product launch would generate healthy sales for two, three, even five years,” said Grant. “In 2005, with sales nearly breaking through the $3 billion dollar mark, the average new launch was down to zero within 12 months.”
And there is an overemphasis on holiday selling in beauty. Grant noted that one-third of prestige fragrance’s yearly sales last year were made in December; 20 percent of overall prestige beauty sales came that month.
As Baby Boomers age, sales of high-tech skin care items are rising. The prestige skin care industry racked up sales of $2.2 billion in 2005, fueled chiefly by antiaging products. Launches — mainly of high-tech antiaging products — accounted for $269 million of that figure.
“The consumer is aging,” said Saks’ Oldham, “and people are more interested in products that make them more youthful and technological breakthroughs.”
As a category, antiaging facial care products have grown 33 percent since 2001, to $664 million; basic facial care products, not including antiaging benefits, grew just 4 percent, to $415 million in 2005, according to NPD numbers. And those hoping for a virtual fountain of youth are particularly eager to shell out the big bucks: What NPD terms “super-premium” face products, at $150 and above, did $40 million in sales last year, four times the dollar volume for the category in 2002. The most expensive facial skin care product in broad distribution carried a tag of nearly $600. “It’s like paying $3 per gallon for gas,” said Grant. “A year ago, we might have said, No way! and this year we’re paying it. With skin care, people are willing to pay what they need to get results. If they see the results, they’ll keep spending.”
— With contributions from Molly Prior