Health & Beauty — Strategy magazine

THE FACT that the consumer population is aging and getting richer is good news for the Canadian beauty market.

As we get older, we’re paying more for paints and potions than ever before, and cosmetics companies are showing their laughter lines all the way to the bank.

The Canadian beauty business broadly breaks down into three main segments: treatments (skin care and ‘therapeutic’ skin products); colour (conventional make-up, from foundation to nail polish) and fragrance.

The combined category was worth more than $2.5 billion in retail sales in 1987 and sales for 1989 seem set to be higher than ever before.

The women’s market, which has had an annual growth of between 5% and 10% in the past few years, is leveling out. The men’s sector, from a much smaller base, has a steady annual growth of 10% to 12%.

In 1987 the colour category alone was worth more than $600 million (up 9% from the year before) and the $300-million fragrance market was up 4% in the same period, according to figures from industry lobby, the Canadian Cosmetic, Toiletry and Fragrance Association (CCTFA).

And one apparent trend in the beauty market is the shift in the sales arena to the drugstore from the department store as the environment of choice for Canadian cosmetic consumers.

“It’s all part of the

overall concern for

health and fitness …

in the past decade.”

‘In 1987, fully 50% of all colour purchases were made in drugstores and only 26% in department stores,’ says Colleen di Gregorio, national director of cosmetics for Shoppers Drug Mart. ‘In fragrance we’re even, with a 40% share each.’

Di Gregorio says the reason for this switch is that cosmetics are losing their glamour and are being bought increasingly as commodity items – necessities, not luxuries. And the convenience of drugstores appeals to women who are looking for beauty items as part of their regular or weekly shopping excursions.

CCTFA figures confirm that four out of five of the top-selling cosmetic items are drugstore-dominated, whereas in 1983, three of the five top-selling items were department store-based.

Indeed, figures out of the U.S. suggest that women are turning away in droves from high-end cosmetic lines, found either exclusively or predominantly in department stores, in favour of cheaper, mass-volume alternatives. It seems U.S. women are prepared to forfeit status, image and prestige in the interests of economy as premium prices go through the roof.

That trend is far from certain in Canada, despite the move toward drugstores. Whereas 28% of U.S. cosmetic sales were made through food outlets in 1988, only 2% (3% including fragrance) were made in Canadian foodstores.

(Miracle Mart now has cosmetic sections in 13 of its stores in Ontario, six of them cosmetician-staffed ‘boutiques’ and seven more self-serve models. ‘And we’re experiencing tremendous increases,’ says Odette Broglio, cosmetic buyer and merchandiser for Miracle Mart.)

Bob Saunders, senior buyer for Eaton’s top-end lines from all the major cosmetic houses of the U.S. and Europe, says his business is booming.

‘It may be that the lower-end does better in the drug [store] environment, but then it always has,” says Saunders.

‘The department-store sector is still very buoyant. Many Canadian women will continue to spend top dollar for the same reason they enjoy expensive clothes or jewellery. It makes them feel good, instills the confidence a $3 brand simply can’t give. If they’re going to economize, they’ll maybe buy three items instead of four, but at the same price point, rather than trading down.’

Saunders says women consider cosmetics an intimate part of their lives – something they put on their bodies – and for many women that’s reason enough to ensure they don’t sacrifice quality in this market.

‘It’s all part of the overall concern for health and fitness we’ve seen flourishing in the past decade,’ he says. ‘We at Eaton’s, for example, have just launched Estee Lauder’s new Signature range of colour – a brand new, beautifully packaged line with prices higher than ever, and it’s doing extremely well. Money is not the issue it’s made out to be.’

Mark Scott, vice-president and general manager of Clinique Canada, the number one colour and treatment line in Canadian department stores, agrees.

‘Our customers have always been prepared to pay for quality,’ says Scott. ‘But it’s true that the distribution patterns form the real, major dichotomy within the industry. You’re basically high-end if you’re in department stores and a mass line [if you’re] anywhere else.’

Clinique, an autonomous division of Estee Lauder, distributes its products exclusively through 230 ‘prestige’ stores across Canada. Ironically, its main competition is sister division Estee Lauder, followed by Cosmair’s Lancome third.

Says Scott: ‘It’s no secret that mass merchandisers, drugstores and discount houses are able to secure more and more brand names than ever before in many categories – the brand names, particularly quality ones, that until this decade were the exclusive property of the department stores.’

‘But now all of a sudden you can get, for example, Levi’s Red Tabs [jeans] in a Woolco [department store] and the whole status thing is immediately debased. Yes it would be profitable initially, for us or any of our top-end competitors to increase our distribution.’

‘Sales for a little while might go through the roof,’ Scott says. ‘But then you’d be in the dog-eat-dog battlefield, where you’re subject to all kinds of discounting, and you lose control.’

‘Maybe you would triple sales in the first little while, but in the long term, your franchise is finished. It would take only two weeks to destroy the image we’ve created and sustained over the past 18 years.’

Susan Kessler, director of communications for Avon Canada, believes retail cosmetic sales are suffering generally across all kinds of outlets. Avon, the world’s largest cosmetics company, sells all its products by the direct method, using its own trained representatives.

‘Although the category itself is generally growing in Canada, we at Avon are projecting growth of about 7% to 10% for both 1989 and 1990,’ Kessler says. That compares with Retail Council projections of about 2.5% real growth for 1989 although, according to Colleen di Gregorio at Shoppers Drug Mart, the chain is reporting an increase of about 12.5% year-to-date for 1989, with cosmetics at 16%.

Avon says consumers are disillusioned with declining levels of service in Canadian department stores and ever-escalating prices, and says they want to buy cosmetics ‘commodity-style’ without too much fuss.

‘Direct selling has many advantages, particularly for working women,’ Kessler says. ‘We give a very personal but non-intimidating service. Women don’t want the heavy sales pitch department-store cosmeticians increasingly subject them to as they fight for every sale they can get.’

‘A typical Avon customer is looking for top-quality products at affordable prices. She hasn’t much time to spend choosing, buying or even putting on cosmetics. Direct selling avoids all the high overheads department store-based manufacturers are having to wrestle with.’

One phenomenon department stores and some drugstores report is the surge of so-called ‘anti-aging’ (AA) products – up 121% in 1987 over 1986, the last year for which CCTFA figures are available.

A feature of upscale lines for some time, AA treatments can now be found in the volume ranges, such as the new Plenitudes line from L’Oreal, a drugstore-based, medium-priced product which has taken traditional department-store imagery into the mass-market area at mass-market prices.

Launched in France six years ago, Plenitudes is the number one skincare line in that country with 35% of the market. Di Gregorio says Plenitudes sales look good but since the range was only launched last month across Canada, it’s simply ‘too soon to tell’.

Revlon founder Charles Revson’s famous ‘[selling] hope in a jar’ quip continues to ring true for the overall women’s treatment and cosmetic markets. North Americans are determined to challenge the inevitable results of the collusion of Mother Nature with Old Father Time.

There is a plethora of new products in the general AA category, all of which are supposed to scientifically prevent, although not reverse, the visible signs of aging skin. Prices for these products range from hundreds of dollars at the top end to less than $20.

‘Women are beginning to realize that you don’t need to spend exorbitant sums on attacking the aging process,’ Kessler says. With Avon’s new BioAdvance, a ‘beauty recovery system,’ the consumer mixes a lotion with a ‘fortifier’ before applying the treatment, to give her an extra level of comfort and ‘consumer involvement’.

BioAdvance, believed by Avon to be a first in its use of Retinol, a Vitamin A derivative, retails at $29.50 for a month’s supply.

“Many Canadian

women will continue

to spend top dollar

for the same reason

they enjoy expensive

clothes or jewellery.

It makes them feel good …”

All the upline manufacturers feel representation in the AA category is a must, as the market is projected to grow in leaps and bounds. Also cashing in on baby-boomer fears are products designed to combat graying and/or thinning hair and ‘cosmetic zoning’ products for improving the tone of skin around the throat, elbows and thighs.

As evidenced by the popularity of the ubiquitous sunscreen, Kessler says people now realize how big a part the environment – especially the sun’s ultraviolet rays – plays in the aging process.

Scott says Clinique’s new Sun Block SPF 30, to be launched in Canada next spring, has already climbed to the number one spot in the sun-lotion category in the U.S., ‘in recognition of the fact that we now know ultraviolet rays to be potentially the most hazardous factor to the skin.’

Three or four years ago, Clinique’s SPF 4 and 6 were the company’s best-selling sunscreens. Now the situation has reversed. ‘People just aren’t willing any more to take the risk,’ Scott says. ‘It’s all part of the dramatic change we’ve seen in the Canadian consumer over the past 10 years.’

Women have had a documented love affair with cosmetics since long before the time of Cleopatra. But according to Chatelaine magazine’s 1988 Spotlight on Beauty consumer study, in some respects, plus c’est la meme chose.

Five basic commodities – lipstick, mascara, eye shadow, blush and nail polish – remain unchanged in Canada year after year as the top five cosmetic categories. It is a conservative picture, despite colour changes from season to season and the huge array of enticing new products continually entering the market.

Significantly for marketers, French-Canadian women are far less predisposed to use face make-up – foundation, powder or blush – and only 13% do so on a daily basis compared with 30% of women in English Canada.

But francophone women are prepared to pay more for the cosmetics they do use. The average price of 10 representative items among French-Canadians was $74.03, compared with English Canada’s $62.22. Eye make-up sales are up throughout the country, more than 18% versus 1984.

And today’s female consumer is also very sophisticated – more educated about health and beauty and more confident than she was even five years ago.

‘The Canadian consumer always has been sophisticated, but today she’s more traditional,’ Saunders says.

‘She’s very much skincare-oriented, and very knowledgeable about ingredients. In the mid-1980s, my business was 81% colour, 29% treatment. Today it’s 50-50 down the middle. That’s an enormous shift towards treatment and skincare. The Canadian woman knows that a little attention now is well worth the effort in preserving her appearance.’

Debbie Purvis, head of the cosmetic retailing program at Toronto’s Centennial College and author of The Business of Beauty, sees a great move towards simplicity in women’s skincare – away from complicated regimes and towards a renewed back-to-basics approach.

‘Anything that takes some of the guesswork out will appeal to consumers who are very often overwhelmed by all their options,’ Purvis says.

Contrary to public opinion, the Canadian consumer does not lag behind her U.S. counterpart when it comes to the decision to purchase, di Gregorio says.

‘The European influence is very strong in Canada – we’re much more susceptible to it than women are in the U.S.’

‘Lines like [Cosmair’s] Biotherm were here for years before they appeared in the States. Vichy and Lancome were here first too,’ di Gregorio says. ‘In our mothers’ day, women used colour primarily as a camouflage. Skin fitness – the skin itself, rather than the colour you put on it – is the key concern of women today.’

Mark Scott says that apart from knowing what’s out there and insisting that products perform, women are also demanding – and getting – better service. He cites the importance of the store environment in building a franchise.

‘It used to be that department stores would give us the space and tell us to get on with it,’ he says. Now, more and more, top-end stores are asking us to put in our own brand identification.’

This has led, in Clinique’s instance, to the development of ‘lab rooms,’ which give a real opportunity for one-on-one consulting. ‘It makes us much more able to transfer the look you see in our advertising, for example, to the retail level,’ says Scott.

Advertising is of primary importance in sustaining image throughout the category, particularly at the high end where positioning is all, and where so many competitive new products constantly and unceasingly appear.

Estee Lauder relies heavily on traditional glamour and the appeal of beautiful, elegant faces in its advertising and at point of sale. Clinique uses a ‘product as hero’ strategy – advertising with not an eyelash in sight, a tack that Scott says ‘positions the company uniquely at the juncture where beauty begins and dermatology ends’.

The net result within the Lauder corporation is two completely different strategies behind two functionally similar lines competing in identical environments at similar price points.

Clinique’s now-famous ‘computer’ – used to analyze and determine individual skin type – has long been one of the company’s most salient selling points. The same concept has recently been imitated by Noxell’s Clarion line, a middle-range drugstore product for sensitive skins launched three years ago in the U.S.

But Scott says that in the case of Clarion, ‘it’s a selling tool. For us [Clinique], it’s a real need-finder.’

‘We take the basic questions a dermatologist would ask you and determine your skin’s requirements in conjunction with our specially-trained cosmetician. It’s not a substitute for service, as it would be in the drugstore arena.’

‘You can have the best marketing programs in the world but service is the ultimate criterion for today’s consumer. It’s those last two feet over the counter – the moment of truth – that’s going to make all the difference.’

Fragrance is another area in which the Canadian consumer of today knows exactly what she wants. Since Coco Chanel exhorted women years ago to dab a spot of perfume ‘wherever [they] might expect to be kissed,’ the fragrance market has seen incredible growth.

There are now more than 4,000 known scents available worldwide, compared with an initial 120 in the 19th century when synthetic perfumes were first manufactured.

The Chatelaine survey reveals that 86% of Canadian women consider fragrance to be an essential part of the beauty process, and among one quarter of those, usage is becoming heavier and/or more frequent. Fragrance also, unlike colour or treatment products, has ideal gift-giving properties, which explains its enormous promotional support around Christmas and Mother’s Day.

“The Canadian

consumer has

always been

sophisticated …”

Seven out of 10 women say they have received some kind of fragrance – perfume, eau de toilette or parfum de toilette – as a gift in the past 12 months; four out of 10 also claim to have given it to another woman, according to the Chatelaine survey.

Trends show that ‘designer’ scents have been shunned in favour of a return to traditional florals. Top-selling brands for drugstores continue to be the classic lines: Chanel No. 5, L’air du Temps, Anais Anais, and Vanderbilt.

Despite the growth of fragrance in the drugstore sector, the increase in department stores is growing at a faster rate. But many fragrances from the top cosmetic brands – such as Calvin Klein’s Obsession, Armani’s Giorgio and Oscar de la Renta and Alfred Sung’s offerings – are unavailable to drugstores.

Di Gregorio believes manufacturers may be missing opportunities. Indeed, some deliberately restrict their distribution still further. For example, the Borghese line is only available at Creed’s.

‘Top-end people believe they need a premium environment, and it’s true that department stores do devote a lot more retail space to fragrance,’ says di Gregorio.

‘But Ralph Lauren’s Polo began life as a department store-only line, then went into ‘selected’ drugstores and is now in almost all of our stores, where it’s the top-selling fragrance in the men’s and women’s segments combined. We now advertise it and support it extensively and it’s proof that we can sell prestige brands and sell them well.’

The men’s fragrance market, like the men’s skincare and colour market generally, is also waxing strong, although it’s restricted for the most part to large urban centres.

Clinique was the originator of men’s products in this country with its Supplies for Men, after research revealed that many men were using women’s products. Scott says men used Clinique products ‘because the packaging wasn’t too feminine and there was no tell-tale fragrance.’

Five years ago, 80% of men’s products were bought by women, Purvis says. Now only 50% of men’s products are bought by women and men have more confidence at the counter, partly due to magazine articles on men’s grooming which seems to ‘legitimize’ it.

The growth in men’s health and skincare products seems to be coming primarily from younger men who see grooming as a contributing factor to their success, Purvis says.

‘They’ll stay at the high end if they’re happy with the results, but men are more loyal than women to both their choice of fragrance and to their skincare line. They’re not nearly as influenced by all the hype.’

But Purvis feels the men’s market will never escalate dramatically and that the most readily-accepted colour products will be limited to bronzers, lash tints, concealers and hair colour – ‘enhancements, not decoration’.

John Elliot, vice-president of sales and marketing for Smith & Nephew, says Nivea for Men has already been launched in Europe and is likely to be launched here ‘in the foreseeable future.’

Two concepts peculiar to the cosmetics and fragrance industry are the Gift with Purchase (GWP) and the Purchase with Purchase (PWP) phenomena. Both originally developed by Estee Lauder, they have now become commonplace promotional tools in the marketing of high-end beauty products.

An innovative Clinique concept is its RSVP program, an acronym for Repeat Service is Very Personable.

‘When we ran our last GWP this summer, our counters were literally mobbed,’ Scott says, referring to the enormous pull-effect the promotion had on consumers.‘We couldn’t service individual customers to the extent we’d have liked because people were piled three feet deep.’ 

‘So we developed the RSVP concept to be, in effect, the last piece of the gift – an invitation to come back to us during the two weeks immediately following the promotion and tell us how the product was doing, to bridge the gap between the last sale and the next.’

“When we ran

our last GWP … our

counters were literally


At a single downtown Toronto counter, 1,500 people booked these appointments, raising the average daily, non-promotional take at the till from $1,500 to a whopping $5,000.

‘That’s how much people feel a part of our franchise,’ Scott says. ‘There’s no softening at the high end as we see it. In fact, I’d say the absolute reverse would be nearer the truth.’

As for other innovations in the market, beauty and the beast, true to the fairy tale, seem incompatible bedfellows.

After eight years of exploring viable alternatives, Avon was the first major cosmetics company in the world to announce it was abandoning the use of animals in laboratory testing. A week later, Revlon made the same announcement, followed by direct sellers Amway and Mary Kay (who announced a moratorium on it) in September.

‘Consumer pressure in this industry is enormous,’ Purvis says. ‘A company’s own image is intrinsically tied to that of its products.’ Purvis forecasts a boom in other environmentally- and ethically-responsible reactions, citing the Body Shop as one of the global success stories of the 1980s.

As we head into the 1990s, it seems the Canadian man and woman are both groomed, poised and as ready as ever to swap hard-earned cash for cachet.

Who said beauty was only skin deep?

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<b>Health &amp; Beauty — Strategy magazine</b>