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Burgeoning demand and a return to office is prompting cosmetic brands to rethink their sales strategies, looking beyond the e-commerce and digital channels that were beefed up during the pandemic. As the threat of Covid subsides, beauty and cosmetic companies are making a beeline for offline again.
It’s the touch-and-feel aspect that is driving offline growth, point analysts.
LOOKING FOR SPACE
“Offline stores sell a larger proportion of colour cosmetics and skincare, as most people like to try it out and experiment first with the product,” said Abhishek Malhotra, Partner, McKinsey and Co.
The demand in the segment has prompted an online-first brand like Nykaa to increase its offline presence. Over 90 per cent of the sales for company are currently from its online business.
Nykaa, which listed on the bourses in 2021, is looking to add more brick-and-mortar stores in 2023-24. It has doubled its offline presence within a year to 135 stores across 56 cities, as per the third quarter results for 2022-23.
The offline store sales contributed 8.6 per cent of total beauty and personal care (BPC) segment’s gross merchandise value of Rs 165 crore in Q3.
Despite offline sales in beauty accounting for less than 10 per cent of sales, founder Falguni Nayar, after results, asked investors to expect 50 more offline stores in the following year.
Shoppers Stop, which owns 142 beauty outlets, claims to be India’s largest offline retailer of beauty products. It added 11 stores in 2022-23 . The company is planning to open 15-20 more stores annually in next three years.
Meanwhile, Reliance Retail has also entered the segment. It launched its first flagship store spread over 4,300 sq ft space in Mumbai, under the ‘Tira’ brand in April. The company has plans to expand to 100 cities.
“Our vision for Tira is to be the leading beauty destination for accessible yet aspirational beauty, one that is inclusive,” Isha Ambani said during the launch.
The Body Shop, which has over 189 stores across 75 cities in the country, is planning to open 300 more stores by 2025. “We have the ambition to double our business in India by the end of 2025—it’s ambitious, but we believe in the market,” said Vishal Chaturvedi, Vice President, The Body Shop Asia South.
“Sixty-five per cent of the sales come from retail, while online accounts for 15 per cent, and the remaining 20 per cent is completely omnichannel, which has picked up since the pandemic,” Chaturvedi added.
After getting a cult following in the West, French beauty products chain Sephora came to India a decade ago. It is run by Arvind Fashions Ltd with 24 stores. From Smashbox to Shiseido, the company has around 35 prestige brands.
But it’s not just the legacy players and industry behemoths that are expanding offline presence.
“Since the pandemic, we have observed that customers are interested in experiencing the stores in person, as they value one-on-one consultations and the ability to see and feel the products before making a purchase,” said Ritika Sharma, Founder, House of Beauty, which operates Boddess Beauty, a multi-retail junction for premium beauty products in 2020.
The company has three stores at present and is “expanding store footprint rapidly this year in Tier-2 and -3 locations”. Product brands are also demanding an expansion of their offline footprint.
Backed by a good influencer marketing and omnichannel strategy, the decade-old SUGAR Cosmetics offers products at over 45,000 retail touchpoints. The company is expecting to scale to 100,000 retail touchpoints by 2023-24 end.
“During a period when multinational brands were pulling back on their retail presence, we were extremely bullish on offline expansion, which has given us time to narrow the gap between market leaders,” Vineeta Singh, co-founder, told The Indian Express.
The onus, thus, is both on online and offline channels.
“These days, majority of customers demand a unified consumer experience—filtering brands online and then transacting offline post trials—especially true in categories like colour cosmetics,” said Shankar Prasad, Founder and Chief Executive Officer (CEO) of Plum Goodness, another beauty care brand. Colour cosmetics, which constitute overall make-up products, account for 8 per cent of the Rs 1.2 lakh crore of the BPC segment in India and most sell offline, Malhotra pointed.
STORE MAKE-OVER
The offline expansion has not deterred companies from revamping the store experience, even with a dash of technology. Boddess Beauty has built a hair, nail, and brow bar, as well as smart mirrors with AI tools.
“We have seen a growing demand for premium services, particularly among millennials and Gen-Z consumers. To meet evolving needs, the brand continues to innovate and expand its offerings,” said its founder Sharma.
The Body Shop features a station to personalise “self-care gifts” with stickers, ribbons, and recyclable paper. Reliance Retail’s Tira has a dedicated station to personalise purchases in its Mumbai facility.
EXPANDING BASE
The market is no longer restricted to metropolises either and with disposable incomes rising brands are following customers in Tier-2,3,4 towns.
According to SUGAR Cosmetics’ Singh, over 60 per cent of the company’s sales come from small towns, such as Siliguri, Karnal, and Bhatinda. “Over the past two years, Tier-2 and -3 markets have surprised us with their response,” Singh said.
Shoppers Stop, too, have been expanding and growing in the cities with no store presence. “The growth of new customers has been very healthy in these places,” said Venu Nair, Managing Director & CEO, Shoppers Stop, in the earnings call for the fourth quarter of 2022-23.
Plum Goodness is looking to expand presence in non-metros as well. “We are gearing up for extension in Tier-3 and -4 cities. We recently opened stores in the Northeast region, in cities like Itanagar and Imphal. And, further extended our presence to Rourkela, Amravati, and Vasai,” said The Body Shop’s Chaturvedi.
Even though prestige brands has been the source of a lot of the sales growth, consumer tastes are shifting. The change is coming from the less expensive brands, such as Loreal’s Maybelline and Hindustan Unilever’s Lakme, available readily in general stores and will stay for the long run.
McKinsey’s Malhotra believes that the offline stores will continue to stay relevant, especially for skin and colour cosmetics segment.
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