3 Trends Shaping Health and Beauty Retail in North America
Health and beauty retail has weathered much over the course of the pandemic…
…but after an approximate 30% contraction of the global beauty market early in the pandemic, consumers have become more focused on health and wellness — and their spending shows it.
Seventy-one percent of surveyed U.S. consumers intend to spend the same or more in 2022 on health and beauty products as they did pre-pandemic. In fact, McKinsey & Co. estimates the wellness market — of which health and beauty is an integral part — to be worth $1.5 trillion worldwide, with annual growth of up to 10%. The e-commerce market alone may grow between 20% and 30%.
The trajectory of health and beauty retail is becoming clearer, and the outlook is good — so long as retailers adapt accordingly. Let's look at three trends shaping the future of health and beauty retail, and what you can do to help make the most of the moment.
1. Traffic: in-store, digital, and the new normal
By and large, foot traffic for health and beauty retailers plummeted — and digital traffic soared — when the pandemic arrived. Due to the essential status of pharmacies, foot traffic for major chains like CVS and Walgreens has mostly recovered to pre-pandemic levels. Meanwhile, some major beauty retailers have maintained great gains in digital traffic — even as foot traffic is also increasing (though not reaching 2019 levels). Bottom line: Omnichannel is here to stay, despite stabilizing foot traffic — and retailers will need to adapt to this new norm.
As traffic finds its (new) normal, retailers will need to evaluate their patterns anew in order to staff and stock accordingly. It will be important to integrate digital and in-store traffic patterns into staffing and inventory strategy, especially for retailers that have seen a significant uptick in omnichannel use — because it's not just a matter of the number of customers who walk through the door, but how many orders need to be fulfilled for customers using BOPIS (buy online, pick up in store) and BOPAC (buy online, pick up at curbside).
Using a sophisticated traffic analytics solution that goes beyond people counting to provide insights on the shopper journey and paths-to-purchase can help ensure retailers staff both to general demand and specific department. Likewise, utilizing item-level inventory intelligence delivers real-time transparency and accuracy that enables retailers to stock and sell confidently, without the concern that a product purchased in-store will leave a curbside order unfulfilled (and customer disappointed).
2. Shopper experience undergoes an evolution
Not only are spending habits in this market changing, but also shopping habits — which means what constitutes a superior shopping experience has also changed. One thing, however, remains the same: The desire for experiential retail. Sephora and Ulta are opening stores across the U.S., which is testament to this desire.
So what has changed? Sensormatic Solutions' retail professionals highlight three shifts impacting the desired shopper experience:
- drivers of loyalty
- patterns in omnichannel use
- focus on health and safety
Bye-bye brand loyalty
The days when shoppers were loyal to a specific brand at their favorite department store are long gone. Instead, shoppers' health and beauty purchases are increasingly trend- and product-driven.
"One fundamental truth about today's health and beauty consumer is that they're far more product- and trend-driven than they are brand loyal,” said Pete McCall, senior manager, retail consulting practice at Sensormatic Solutions. "They'll happily buy the product they want from any given retailer as long as it's in stock."
Omnichannel use for health and beauty
Few consumers strictly shop online or in-store anymore, and in the case of health and beauty products a pattern is emerging: Shoppers tend to rely on e-commerce channels for their routine products and venture in-store to experience new items.
"If it's a product they already use and know it works for them, they may be content to buy from Amazon or the like," McCall noted. "But if it's a product they're not accustomed to — especially if it's one that comes in a variety of colors or shades — they may not want to take that risk. That's when they're going to walk into a brick-and-mortar store."
Health and safety you can see
The pandemic disrupted the conventional one-on-one connection of in-store experiential health and beauty retail, but shoppers still desire it — with health and safety in mind.
"The pandemic didn't change the need for that connection," said Kaitlyn Bontrager, a customer success manager at Sensormatic Solutions, “but it did change what that connection looks like." To gain shoppers’ trust in this regard, Bontrager notes, it’s not just a matter of the actual sanitization, but that shoppers actually see it happening.
It will require more than sheer will for retailers to harness trend loyalty, match stock and staff to omnichannel use, and create visibly safe in-store experiences.
One critical tool is accurate item-level inventory intelligence. It enables shoppers to see transparent item availability no matter where they choose to shop — because if they show up at your store and you don't have what they want, they'll happily go elsewhere.
Accurate traffic insights are also vital for creating a superior shopper experience, as they help retailers know which departments get the most traffic during which times — incredibly useful knowledge, since, if a customer is in your store, they're likely looking for a new product and an experience. Of course, traffic insights aren't only beneficial for staffing purposes, but to know how and where to best promote the on-trend products that are driving loyalty (and, thus, profits).
3. Shrink — and what to do about it — takes center stage
Shrink plagues all markets, but the often high price point and small size of cosmetic products make them a prime target for theft, which is why shrink is an especially significant problem for health and beauty retailers. And the pain of shrink is felt beyond the bottom line — it strains inventory management. If a customer visits your store to purchase a product the website said was available, only to find it's not because someone walked out with it earlier, you risk losing a customer (and you've already lost the revenue).
To complicate matters, the obvious solution — keeping items in a display case behind lock and key — is detrimental to the shopper experience, and the small size of the products render many common tagging solutions impractical. So, what's a retailer to do?
"Obviously, preventing any shrink event is a priority, but having a broader understanding of your shrink helps you plan for the future," McCall said. "It's a constant game of chess between the retailer and the bad guys, and sometimes, you let the bad guys win today so you can learn how to beat them tomorrow."
Leveraging loss prevention solutions like RFID-enabled electronic article surveillance (EAS) can help you do just that. EAS systems can integrate with your existing channels, giving you insight into what is being stolen and when, and ensuring any items lost to shrink are correctly reflected in online sales platforms. Even better, integrate video surveillance into your loss prevention strategy for real-time suspicious behavior alerts and more insight into the how, who, and when of theft.
Something new is emerging from the pandemic years and signs point to health and beauty retail heading in the right direction, which means it's the exact wrong time for retailers to rely on "pre-pandemic normal" methods. Preparing for new traffic patterns, shifting priorities for the shopper experience, and vigilant mitigation of shrink will be key for retailers to hitch their profits to the market's rise.
Want to learn more? Download our report, The Future of Health and Beauty Retail.