Contrary to the prevailing trends in most nonfood categories, consumers are trading up in their purchases of skin care products.
Following a now-familiar storyline, the aging baby-boomer demographic is driving retailers and manufacturers to upscale skin care products that counteract the effects of getting older. And they are willing to pay for any form of youth in a bottle or jar that works, retailers told SN during a recent conference of the General Merchandise Distributors Council, Colorado Springs, Colo.
"They don't downscale in that category. They can't afford to," said Sue Vodika, health and beauty care buyer and category manager, Bashas' Markets, Chandler, Ariz. "When you get into that category, you spend."
"It's not an item where they are looking for a steal," said Charles Yahn, vice president, Non-Foods Division, Associated Wholesalers, York, Pa. "If they try it and it works, it's repeat business and it's something where quality counts."
Women are the dominant purchasers, but men are also becoming interested in the category, Yahn said. "I think it's going to grow and get even more high-end. The consumer who is buying it has the disposable income," he said.
"More and more, we are putting the bigger-ticket items on our planograms -- the Oil of Olays, the Niveas, the perceived better products," said Larry Schimpf, director of HBC/GM, Clemens Markets, Kulpsville, Pa. "The Jergens and the Vaseline Intensive Care Lotions of the world aren't doing what they used to do, and yet the section continues to have good volume, so it must be coming from the upper-end products."
"The big thing is wrinkle removal right now and it is allowing us to get a higher ring out of that category," said Dan Spears, HBC/GM merchandising director, Ingles Markets, Asheville, N.C.
Numbers from the Strategic Planner of ACNielsen, Schaumburg, Ill., indicate that retailers are making more money from fewer units. For example, in the "skin cream -- special purpose" category, dollar sales for supermarkets $2 million and over were up 17.1% for the 52 weeks ending Aug. 9, while unit sales were up 9.6%.
This follows the trend in department stores, where even more-expensive skin care products are sold. NPD Beauty, Port Washington, N.Y., has reported that the volume of luxury skin care products has more than doubled since 1999.
Supermarkets lag many other channels in their share of the skin care market, according to the "Cosmetics & Toiletries USA 2002" report from Kline & Co., Little Falls, N.J. Department stores lead the pack with 24%, and mass merchandisers are next with 20%, followed by specialty stores with 17%, drug stores with 15% and direct sales with 15%. Food stores are near the bottom of the list with 8%, ahead of only "all other" with 1%.
"There definitely is an opportunity to grow the skin care business," said Carrie Bonner, project manager, Kline & Co. "It is one of the fastest- growing categories in the personal care industry and consumers are willing to spend on it. There are all these new products and it could be an area of food stores to capitalize on."
People want products that demonstrate results, she said. "Consumers are willing to invest in their face. The more benefits you can offer, the more the consumer is willing to pay. If it does what it says, the $20 is worth it," Bonner said.
A recent category evaluation at K-VA-T Food Stores, Abingdon, Va., showed that the various anti-aging products were the fastest growing in skin care, said David Lowe, director of GM/HBC. "They are actually paying a little more money to keep the wrinkles away," he said.
To be competitive with other channels, supermarkets need to offer customers the mix they want of higher margin, higher-priced products, said Jay Goble, vice president, merchandising, Valu Merchandisers, Kansas City, Kan.
"I've always felt that skin care is the bridge to women's wellness. It's the piece that goes from pharmacy and the health care initiatives -- whole health -- into the women's wellness arena. Drug and mass seem to understand that better than the supermarket class of trade, so skin care is the one category that needs the most focus right now by supermarket operators," Goble said.
"We've recognized that here is an opportunity in a category in which we can make money at retail and still cater to the customer, getting sales that were maybe going to other stores," such as department stores, said Doug Schwab, corporate director, wholesale health and beauty care, Supervalu, Eden Prairie, Minn. Schwab is based in Chanhassen, Minn.
Because of the category's growth in sales and new products, Supervalu's skin care sets have grown from 4 feet to 12 feet, "and are working up to a 16-foot display, with more higher-priced products," Schwab said.
But it's not just the aging of the baby boomers that is behind this trend, Schwab said, although he said that's the answer he would have given a year ago. "Today, it is just, 'I want to take care of myself and feel good.' It's all about 'me' today and I think that Sept. 11 two years ago probably had a lot to do with that. We are taking better care of ourselves, thinking more about how precious and short life really is," he said.
W. Lee Flowers & Co., Lake City, S.C., put in a shimmer lotion from Jergens aimed at younger women, "but I see the firming, smoothing and products that counteract sun damage as moving better for us," said Susan Spring, buyer.
The skin care category isn't just about people trading up to high-end products, said Jim Wisner, president, Wisner Retail Marketing, Libertyville, Ill. "Our sense is you are going to see people trading in a whole lot of different directions. The skin care category itself is poised for some fairly good growth in the coming years," he said.
Right now the consumers are trading up because of all the new products. "But once they find those products that they feel best suit their needs, then like in all other categories, they will start looking at where they can find the best value for this product, whether it is high- or low-priced," Wisner said.
STUCK IN THE MIDDLE
Facing a lower-income customers and higher-end skin care products, some retailers are looking for middle ground.
"It's hard to disguise a $14 or $15 treatment in a food budget in a lot of areas we serve, so we have to be very sensitive about proliferating that segment. It's a tough sell for us," said Tony Pooler, director of HBC/GM, Save Mart Supermarkets, Modesto, Calif.
"We are sticking with the traditional products, while not totally ignoring the new launches. But we are paying more attention to the mid-priced than we are to the upscale," he said. When it comes to $14 or $15 skin care products, "that's just not our customer," said a nonfood executive with a Texas retailer who asked not to be identified. His customers are trading up, but not all the way up to the high-end goods. "They are trading up to the medium range of regular skin care products." These are the $5 to $10 items, he said.
As good as margins and sales may be for the upper-end products, they are simply out of reach for many stores' customers. "Our stores are in a lot of lower-income areas and the price points are just too high for our retailers," said Darlene Usleton, senior non-foods and tobacco buyer, Affiliated Foods, Amarillo, Texas.
And space is an issue for other stores. The upscale "system" products, where retailers need to carry multiple stockkeeping units, are profitable -- but a challenge to a traditional supermarket that can only give 8 to 12 feet to the skin care category, said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif. "But that is where the growth and profitability is for the future, so we will have to figure something out," he said.