Consumers of skincare products are becoming ever more fickle in their choice of brands, forcing manufacturers to win back loyalty in an increasingly competitive market, according to a report by Datamonitor.
On the one hand, the news is good. The market for skincare has grown, albeit slowly, by 8.9 per cent since 1993. Women have more money in their pockets because of higher levels of disposable income.
New product development has been a significant factor driving growth in the skincare market. Companies have developed products for consumers who are increasingly aware of product innovation. Alpha hydroxide acids (AHAs), vitamins incorporated into products, anti-cellulite creams and gels, and nose and facial strips are examples of new arrivals on the skincare shelves in the past few years.
The AHA and anti-cellulite products have driven growth particularly in the 45-plus age group of consumers, while vitamin-based products and nose strips have met the needs of consumers opting for natural-looking skin.
The bad news for manufacturers is that, as a result of this higher disposable income, shoppers are experimenting more with new products instead of sticking to their favourite brand.
Skincare manufacturers appear to be addressing this problem with a self-defeating strategy. In an attempt to win back loyalty, some are increasing the number of below-the-line promotions they are running and grabbing share from rivals. But the impulse buying behaviour encouraged with the use of free gifts may be adding fuel to the fire and encouraging the trend.
Savvy marketers are looking to increase their share through the teenage market. Teenagers are being encouraged by marketers to follow a skincare regime from an early age and to use cleansers rather than soap to remove make-up. Consumption has risen among younger consumers, but the UK is behind the US in this respect and there is room for further growth.
Marketers might also look to the other end of the age-group spectrum. The over-40 age group has high levels of disposable income and fewer concerns about price, making it a lucrative market. This group is also concerned about ageing and damaged skin, and products which offer repair to skin are naturally of interest.
Manufacturers have targeted older people successfully, encouraging them to trade up to higher priced products and to buy more of them. Consumers have traded up in the facial care and hand and body care markets particularly, where new product developments have raised average price points significantly.
Skincare companies have used ad campaigns to raise awareness of new developments, especially for facial care products.
Apart from the needs of the older market, healthy looking skin has become the holy grail of fashion. Consumers have bought into the natural look and are on the look out for products to help them achieve this – for example, vitamin-based formulations and the use of natural extracts such as seaweed. Manufacturers Aveda and The Body Shop have been active in this area, while mainstream manufacturers have incorporated natural ingredients into their products to satisfy demand – for example, Boots’ Natural Collection range.
Consumers have also started to buy across a broad range of brands and have become more open-minded about mixing mass and premium brand products.
This is good news for companies such as L’Oréal, which has a portfolio of brands spanning both the prestige and mass-market sectors. L’Oréal is in a position to maximise returns on research and development by transferring new technologies introduced in its prestige brands to mass market products at a later date.
Men have had a positive effect on the moisturiser segment which represented &£180.5m sales in the facial care market for 1998. However, manufacturers do not appear to be throwing large amounts of money into advertising aimed at them. They believe the men’s market is small and that a campaign would not result in a significant increase in expenditure.
Despite growth, competition in the skincare market is fiercer than ever. Datamonitor researchers believe manufacturers are only able to build their market by taking share from rivals. This, combined with declining levels of loyalty, has led to increasingly aggressive advertising.
Established brands are also coming under pressure from the own-label sector, where products have become increasingly sophisticated. The Boots No 7 brand, for example, is a strong competitor against upper mid-market products such as Vichy, given Boots’ power as a retailer to promote its own products. These products are often endorsed by consumer magazines, which has helped to boost sales.
Other retailers such as Marks & Spencer have jumped on the own-label bandwagon, and are targeting aspirational consumers through packaging which bears a resemblance to prestige brands such as Clarins and Payot.
Between 1993 and 1998, the hand and body care market grew by 10.4 per cent, spurred by new product development within the body care segment where anti-cellulite creams, body lotions and masks boosted the category.
The recent high growth rate of facial care has been boosted by new product development, such as pore-cleaning facial strips and new moisturising products. Facial care remains the largest of the skincare categories at &£358.4m, representing 46.4 per cent of the skincare market in 1998.