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While department store cosmetics sales tumble, specialty beauty shops like Ulta and Sephora are seeing a boom.
USA TODAY

On a recent shopping trip to her local Ulta Beauty store, Tatiana Clark got more than $160 worth of cosmetics, potions and tools including Clinique sunscreen, three types of foundation, Buxom lip gloss, a Shiseido eyelash curler and an NYX eye primer—and she didn’t spend any money. 

Her strategy isn’t magic and it doesn’t break any laws. Clark combined points she received from the store’s frequent shopper program and a coupon she received in the mail to score the savings. 

Specialty shops are just one way makeup lovers like Clark, a stay-at-home mom in Fairfield, Calif., are treating themselves to killer discounts. Shoppers are taking advantage of a shift in beauty industry to score discounts that were once unheard of. 

Specialty stores like Sephora and Ulta Beauty are using loyalty programs and apps to notify customers about the latest deals. Meanwhile, some shops have freebies. MAC Cosmetics hands out free lipstick when shoppers return six used MAC containers to a store. If they spend enough, online shoppers often can skip the trip to the mall and save money by scoring free shipping. 

“Consumers are shopping across multiple channels,” said Larissa Jensen, beauty industry analyst at the NDP Group, a market research company. “There’s a blurring of products. They’re buying in mass, online.”

It’s no wonder that department store makeup counter sales have declined by 19% in the last decade, according to Euromonitor International, a market research group. Wall Street has taken note. In a recent preview of Macy’s earnings UBS analyst Michael Binetti expressed concern about the profitability of the makeup counter, writing “we’re very concerned about recent discounting in cosmetics (one of the last industry holdouts from excessive promotions).”

As department store cosmetic counters struggled, sales at independent makeup brands skyrocketed by 42.7% in 2016 alone. And brands long found at beauty counters are still growing. Prestige makeup, or cosmetics considered high-quality, grossed $4 billion in the first half of 2017, 5% higher than the same period last year, according to NDP.

The difference, it seems, is that makeup fans are no longer limited by department store prices or counters that only cater to one brand. Sales from specialty makeup shops, where shoppers can browse multiple labels at once, have grown 20% since 2006, as more physical specialty stores continue to pop up all over the country. Shoppers are aligning themselves with specific values, such as ingredients they like, rather than forging brand loyalty.

“Consumers don’t shop that way,” Jensen said. “With all the information consumers have at their fingertips, through social media, blogs, specialty stores… consumers are able to get a read of what’s working—the best of the best—and are shopping across multiple channels.”

 

In an NDP survey, seven out of 10 consumers said drugstore and specialty shop makeup was just as good as designer department store cosmetics. It’s the decorative showrooms and the scavenger-hunt-like thrill of finding something new that attracts customers to the actual stores.

“Specialty shops offer a different shopping environment altogether,” Jensen said. “A lot of retailers are taking steps to make bricks and mortars more of an experience for consumers. This is what they’re looking for.”

In New York City’s Koreatown, Heather Schultz finds skincare products and budget-friendly eyeliners at stores like Nature Republic and Tonymoly, shops with colorful displays full of panda bear hand creams and kiss-shaped lip scrubs.

“Tonymoly is filled with cute characters,” said the Rockville Centre, N.Y. resident. “That’s definitely part of the appeal.”

At Lush Cosmetics, shoppers watch as beauty specialists slice and mix fresh products in front of their eyes. Shops that allow visitors to try on the products and encourage them to share their experiences on social media are also fan favorites. So is the possibility of stumbling onto new products.

“There is the excitement of discovery,” Jensen said. “Some of these independent brands consumers have never heard of.”

The arrival of new products might motivate Sara Cameron, 21, to visit her local makeup counter for a trial run. But mostly she prefers to shop online.

“I feel more pressure to buy things in the store with all the sales people,” said the Orlando, Fla. student, who skips the in-person makeover in lieu of YouTube makeup tutorials. 

Online sites, such as Colourpop, Glambot, All Cosmetics Wholesale and Overstock, among others, offer high-end brands like NARS, Estee Lauder, Dior and Tarte on the cheap. The internet also gives consumers a wider range of custom products, like organic, health-conscious, natural and cruelty-free.

Some friends even pair up to save money with group sets. Glossybox lets customers shop online and delivers a box full of goodies—free of charge—within a few days.

“You spend a lot less if you buy in a kit,” said Chelsea Fordiani of Sausalito, Calif., who uses makeup when performing burlesque. “You can get makeup for a third of the price.”

But department stores aren’t going down without a fight. Earlier this summer, department stores such as Lord & Taylor, Macy’s and Bloomingdale’s announced they would slash cosmetic prices for the first time ever in an attempt to keep up with the competition. 

“Lord & Taylor is competitively priced and regularly offers our customers great deals and savings for top brands they love, including cosmetics,” the company said in an official statement.

But NPD’s Jensen thinks the department store price cuts are a mistake.

“It’s a slippery slope,” she said, noting NPD research that found that while many Millennials prefer lower-priced brands, the younger buyers are still willing to pay for luxury products. 

With consumers dictating trends more so than stores, the promotions might not be enough to regain once-loyal customers.

“Bricks and mortar department stores are definitely not dying by any means,” Jensen said. “But they will need to reinvent themselves to remain relevant.”