“Growing consumer demand for more personalized solutions is breathing new life into select health, beauty and wellness (HBW) categories.”
With that simple sentence, Winning in Health, Beauty and Wellness, a benchmarking report from Global Market Development Center (GMDC) in partnership with A.T. Kearney, sums up the opportunity—and the challenge—the categories present. Released in late September 2018, the report offers fresh insights on how and why traditional retailers should rethink the $64 billion health non-Rx and the $38 billion beauty and personal care categories to build sales and profits.
“More than ever, consumers are leading the way with health and wellness central to all purchase decisions,” says Mark Mechelse, GMDC’s VP of insights and communications. “We’re currently seeing a consumer-driven movement focused on health and wellness, which is critical to the future success of manufacturers and retailers. Consumer choices and mindset are driving the future of the industry, where retailers will become even more accountable to the shopper. We’re finding that health and wellness products are a key area where consumers are continuing to return to brick-and-mortar retailers.”
These Strategies Are the Keys to Success in Health and Beauty
Modern Lifestyle Affects Trends
When millennials’ ranks swell to a projected 73 million in 2019, they’ll take the top spot on the population pyramid. They will replace baby boomers, whose numbers will fall to 72 million from a population peak of 78.8 million in 1999.
That demographic shift, combined with an evolving modern lifestyle, are affecting purchase decisions and product assortment in four key ways:
Urbanization: Consumers young and old alike are settling in cities, changing the way they live and the products they buy. According to GMDC, apartment living increased by 19.2% between 2005 and 2016, and with it the demand for space-conscious, efficient and convenient goods.
Consumerization: From 2014 to 2017, alternatives to hospital clinics grew by 47%—a GMDC data point that underscores how proactive consumers have become when it comes to their health and wellness needs.
“Sixty-three percent of consumers rank leading a balanced lifestyle as a top priority, expanding the notion of health beyond the treatment of disease and injury and maintenance into a holistic search for balance, health and wellness—all broadly defined,” GMDC reports. “Disease prevention and maintaining health, for example, are becoming more crucial areas of retail focus as consumers take on more and more personal responsibility for their health outcomes.”
And this consumerization of healthcare isn’t a passing fad, which means FDM retailers must rethink their merchandising and assortments to attract these holistic-minded shoppers.
“Consumers are addressing the full spectrum of healthcare and wellness issues—physical, emotional and even spiritual, in some cases—and that is impacting their behavior through their entire shopping trip, from the produce department to the beauty aisle and healthcare subcategories to selecting laundry soap,” the report says.
Personalization: This has become a rallying cry for today’s consumers, who are searching for personalized options that emphasize customized, preventative treatment. That kind of personalization, the report says, “is crucial to future success in retail in general, and health, wellness and beauty products in particular.”
Demand for natural alternatives:/bold/ Consumers have weighed in, and their decision is clear: They increasingly prefer natural ingredients over artificial chemicals in products.
Health Non-Rx: Category Insight
As important as HBW has become, it is important to realize it is more than one all-encompassing category. As the benchmarking reportsays, understanding the dynamics specificto individualproduct categories within the growing health sector can help retailers choose inventory and create merchandising and marketing plans that will best serve their customers and build HBW sales.
Vitamins and supplements: Sales are expected to increase as older shoppers look for products to help them maintain health and possibly improve outcomes. “Given the shift from broad vitamin solutions to targeted or personalized offers, retailers need to increase the level of education and expertise they provide to help consumers navigate the proliferation of products,” says the report, which advises retailers to start offering products such as antiaging supplements or cognitive enhancers that appeal to aging consumers.
Probiotic supplements: The fastest-growing vitamin subcategory in 2017, probiotic supplements will also grow at more than twice the growth rate of all vitamins, the GMDC report predicts.
Oral hygiene: Consumers’ emphasis on increased personal responsibility where their health is concerned is leading to overall category growth, and specifically in sales of products made with natural ingredients that address problems such as tooth sensitivity. A burgeoning demand for convenient, portable products is boosting demand for items such as dental floss. And while many retailers offer basic products segregated by child versus adult, the GMDC report suggests they engage consumers by adding products similar to those offered by niche players and by using public initiatives and social media to build community around the idea of improving oral health.
All About Beauty
This is a category the GMDC report calls “one of the most exciting of the HBW categories.”
The reason? “For the first time in U.S. history, the addressable market spans six generations, each with very different objectives and concerns,” the report says.
Not only has it become “the poster child for successful indie brands and innovative
subscription services that allow consumers to explore new products and solutions,” but it also offers tremendous opportunity across all trade channels. The entire category is growing through differentiation of purpose, focus and engagement, the GMDC report says.
Here’s a closer look at three important subcategories:
Hair care: The category overall saw a decline in 2017; however, shampoo and conditioner sales grew by 1.8% in 2016, fueled by a growth of natural products and shampoos. Premiumization is also driving growth. And then there’s the anti-shampoo trend, which is creating an opportunity for new products such as cleansing creams and dry shampoos. Multicultural hair care products also are expected to enjoy continuing sales increases, GMDC reports.
Skin care: A demand for natural and dermaceutical ingredients is driving sales growth. Sales of experiential products, influenced by Asian brands, increased by 2% in the past decade. And non-store-based selling is also a big story. “Euromonitor indicates that online grew at almost 3%, while direct selling grew at an astounding 8.7% in 2017,” the study says.
Deodorant: Products that have natural ingredients, efficacy and multifunctionality are getting premium positioning. Sprays are among the applications that are increasing in popularity. Fragrance substitutes are now environmentally sustainable and cater to millennial customers who enjoy making their own unique scents by layering from a wide variety of options.
Making the Most of HBW
- Looking for advice on how to revamp the health non-Rx and beauty sectors in your store in ways that will let you capitalize on their high profit potential? Consider these suggestions from GMDC.
- Be on trend: Successful health, beauty and wellness (HBW) retailers must understand consumer behavior and tastes.
- Create narratives and tell stories: Retailers who create a broader story around category offerings and don’t just merchandise products are seeing greater success in HBW.
- Educate consumers: HBW narratives should be reinforced through in-store and online consumer education. Retailers should be providing shoppers with information such as ingredients, sourcing, benefits, etc.
- Provide services: The shopping experience should be connected to services aligned with consumer needs, including dietitians, nutritionists, beauty consultants, etc.
- Be online: Retailers driving growth in HBW have a relevant online presence that supports the in-store category strategies.
There are several steps retailers in the food/drug/mass channel can take to become destinations for health, beauty and wellness shoppers:
- Develop a competitive, broad, deep online HBW assortment. “Retailers with declining HBW sales are almost six times as likely to have no e-commerce for HBW [as those that do],” GMDC reports.
- Remember that localization is important. At the GMDC report points out, the role a store plays in a community should inform its category choices. “So, a rural store may act more like a community general store, requiring the retailer to carry a deeper and broader assortment than an urban grocer,” it says. However, 26% of retailers report making store assortment decisions as a single chainwide assortment, which indicates there is room for improvement on many fronts.
- Use displays to drive growth. “Retailers with positive HBW sales are more than five times as likely to have increased their usage of displays for HBW,” the report says. “Displays can play a key role in promoting products but also provide the space and mechanism to help educate consumers.”
- Use digital offers to drive sales. “Retailers with negative HBW sales are more than eight times as likely to have decreased their usage of digital offers,” the report says.
- Create personalized offers. “Sixty-three percent of the retailers surveyed are currently using personalized offers, with 27% of them increasing their investment in personalized offers,” GMDC reports.
- Knock down departmental silos. “Crossing the aisle to bring HBW into other parts of the store is an effective strategy for driving growth, provided store department and zone manager KPIs change to align against the new strategy,” says the report, which also points out that retailers with declining HBW sales are more than three times as likely to never use cross-merchandising in their stores.
Whatever the decision about revamping and expanding the category, one thing is clear: HBW are three letters retailers cannot nor should not ignore. And the choice of whether or not HBW categories in traditional food, drug and mass stores grow and thrive or wither and die is entirely up to the operator, the benchmarking report emphasizes.
“Shoppers are seeking authentic in-store experiences, enhanced services and personalized expert advice focused on products supporting healthy lifestyles,” Mechelse of GMDC says. “By catering to the consumer experience and mindset, physical stores hold the opportunity to create high-engagement experiences with shoppers.”