Predictions come thick and fast at this time of year, but should we now take them with a pinch of salt?
After all, who would have predicted Brexit, followed by the shock fall in sterling? Or that the US would elect Donald Trump as their next President?
I’ve been trying to put this all behind me and focus on what I believe will be the positives for premium beauty in 2017 and there are many.
The UK beauty industry is in great shape and premium beauty has once again outperformed market growth in 2016. I can see no reason this won’t be repeated in 2017.
Consumer engagement is at record levels due to the burgeoning effect of social media. Meanwhile, next-generation apps are changing consumer behaviour, encouraging people to be more inquisitive and acquisitive about the beauty brands they love to use.
Premium beauty brands are taking charge of their destinies by opening their own retail spaces – a move designed to capture the hearts, minds and purses of millennials.
Innovation is abundant across all sectors and brands – both big and small. Niche brands, such as Deciem, are pushing the giants of premium beauty to deliver more of what the consumer wants – not what some R&D expert thinks they should have.
The most creative niche brands are being eyed up by the multinationals who will continue their shopping spree as they search for brands to plug gaps in their portfolio, provide entry to new markets and territories and give them the edge with consumers (mostly millennials).
Of course premium beauty won’t all be pretty next year. Department store retailers are finding it extremely tough to stay relevant to today’s channel-hopping consumer.
Causing huge shockwaves in US retail, Macy’s recently announced it will be shutting up to 100 stores early in 2017. Over here, the smaller groups and independents’ inability to keep pace with the fast-moving demands of omnichannel shopping will see more go the way of BHS, 2016’s biggest UK retail casualty.
The rumoured arrival of Sephora (for the second time…) will do more than ruffle a few feathers. The LVMH-owned retailer has the potential to shake up beauty retail through the creation of a seamless, frictionless customer journey – and could leave a string of casualties in its wake.
Or, we will see a reinvention of the department store model which has dominated premium beauty for decades. That’s what I’m hoping for!
I’m optimistic and excited about the changes we’re about to witness in premium beauty. If it’s anything like recent politics, we’ll be in for a thrilling ride.
So much for my view – I also want to share with you some conversations I’ve been having from a selection of industry friends, all experts in their field, on the state of the premium beauty industry in 2017.
M&A frenzy to continue: Stirling Murray, founder, The Red Tree Consultancy:
“The frenetic activity we’ve seen over the past few years is not going away and there’s no evidence it’ll slow down. There’s a huge opportunity for creative niche brands to be acquired by large multinationals and key players. Coty, LVMH, Estée Lauder – all need new brands to target millennials and to understand their habits and experiences. They’ll be looking across all product categories for new brands to acquire. Haircare could be interesting.”
Discerning Millennials will Opt for “Anti-Brands” and Curated Ranges
Millie Kendall, MBE, Co-founder, BeautyMART and BrandSTAND
“Beauty Pie is interesting to me, as is The Ordinary, so I think the anti-brand is really starting to hit mainstream beauty as a backlash to the brand-dominant boutiques and retail space. I love this, as it is exactly what BeautyMART is all about – product being the hero, not brand.
“The one area I always find a stumbling block for us in retail is service and conversation style in store. I do hope some of the retailers that have adopted “The Edit” this year in response to the consumers inevitable shopping style start to look at how we speak to the consumer as well.”
Tracey Woodward, chief executive office, Aromatherapy Associates
“We feel that consumers will be more focused than ever before on editing their beauty regimes at every level.
“Personal curation and mix and match is going to be stronger and with an increasing number of older millennials coming into the market place they are looking at ingredients and needs. They won’t be inclined to choose the bigger brands so I believe we will see a stronger growth in niche and natural.”
Omnichannel – putting the customer first – Helen Yeardsley, director, Pegasus
“The majority of our beauty clients will continue to experience healthy growth in 2017. This is down to many factors, the most important being their focus on putting the consumer at the heart of their planning, which means they are developing NPD to match customer demand and are integrating technology more effectively than ever to enhance the customer experience.
“In order to adapt to the changing media landscape, the influencer partnership trend will continue to offer brands the best opportunity to raise awareness across wider, more highly engaged audiences – whether on a mass or niche scale. Brands and Influencers are already working seamlessly together and it will be interesting to watch how this evolves into more compelling, credible and creative campaigns in 2017.
“In order to get the omnichannel approach right web, social and in-store need to work seamlessly together to create a consistent and engaging consumer experience, so I don’t expect one part of the omnichannel mix to take precedence over another.
“This year it has been encouraging to see how many brands have blended all three channels to create a more seamless consumer experience, and given how quickly our industry responds to innovation I’m looking forward to seeing who will deliver the next true advances in consumer experiences, and how.”
Social selling – Ruth Harrison, director of retail strategy, Thoughtworks
“Social selling is already a hit with GenZ and is set to explode in 2017. Social selling marketplaces are springing up daily and extended capabilities of social engagement platforms with selling services such as Snapchat and Facebook that will help disrupt the sector even further, wedging a large divide between the brands that have invested for digital engagement and those who have not. Let’s be clear. This extends way beyond an e-commerce platform and social media connectivity -if your customers cannot fully transact within their chosen social channel, your brand will struggle to engage new customers, putting future revenue and growth at risk.”
And the question on everyone’s lips: if Sephora do come back into the UK, what do existing retailers need to do to sharpen up?
Millie Kendall: “ Most obviously it’s looking like Sephora will launch here, inclusive of brands such as Milk Makeup that you can only get in the US.
“I think that we will see a continuing trend with respect to fashion retailers pushing and expanding into beauty. This firmly puts both of the bigger health and beauty retailers on the spot. What I think they should be doing and have the capability to do is to innovate and launch interesting brands. They have the retail space, the manufacturing capability and the finance.
“They need to look at innovators and creators of niche brands and support them. This gives them credible new ideas that will make their retail space more exciting for the fickle consumer.”
Tracey Woodward: “Sephora is a place you go to learn and buy something new. It’s high energy and addictive so existing UK retailers will need to focus on more education, better in-store experience and will most definitely need to sharpen up on service levels as well as offering quick fix treatments. It is essential for staff to be proactive if our retailers are to keep the pace.”
Ruth Harrison: “In order to transform into a tech driven company with digital user experience at their core, Sephora set up in Silicon Valley and have been experimenting on digitalising the store experience, ensuring a totally seamless on-off line customer journey. It is so easy and quick for Sephora to scale this to a new market, such as the UK.
“Sephora would have an immediate point of difference in the UK, and a proven model for engagement with GenZ.
“CoverGirl has tapped into the GenZ market too, effectively deploying chatbot services across social channels. This conversational capability has attitude and is attracting a new audience via cool engagement.
“The UK cosmetics market has stagnated for too long, partly due to the restrictive operating department store and concession model. However brands who own the environment are enhancing user experience, such as Estée Lauder in Carnaby Street and Chanel in Covent Garden.
“The question in 2017 will be… what will happen to the traditional department store beauty hall if cosmetic brands opt to own their customer experience online and open more stores?”
I’d love to hear your thoughts on the potential for the premium beauty industry in 2017. Do let us know in the comments below.
I hope you’ve enjoyed reading the blog this year and, with your input, look forward to tackling more thought-provoking issues next year.