PORTFOLIO COMPANY NEWS
August 8, 2018 BY SARAH BROWN
NEW YORK, United States - Earlier this summer as I was packing - at midnight, predictably - for a 7 am flight the next morning to a sunny seaside getaway, I realised, with (a beauty editor 's) horror, that we were dangerously low on sunscreen. In a panic, in pajamas, I dashed out to the 24-hour drug store on the corner and stood in front of the wall ofNeutrogena, Coppertone and Banana Boat, reading glasses on.
Options from pricier brands like La Roche-Posay, Vichy and Avene were tucked on shelves elsewhere, so I toggled back and fourth between the two sections , arms full, comparing ingredients, skin care benefits , SPF levels and price. It could have been easier. Had mini, travel-size essentials been displayed nearby, I would have spontaneously tossed a few of those in my basket for good measure, too, because - as anyone in Manhattan buying waterproof SPF 80 would be - I was going on a trip. Instead, it was money left on the table.
There is both an art and a science to merchandising. It's what leads us instincti vely th rough a store and helps us find what we need (or didn't realise we need), persuades us to purchase and, in the best cases, keeps us coming back. It requires studying the past while peering into the future , combining statistics and psychology with a dash of creative license. Retail is certainly in a state of flux, and, in some cases, crisis, but the beauty customer is still buying in physical stores. In 2017, 80.7 percent of global beauty sales - $375 billion worth of purchases - were made in brick-and-mortar stores, while 7.9 percent - $36.6 billion - were mad e online, according to Euromonitor.
And while retail may indeed be in turmoil, "the shopper is not," said Wendy Liebmann, chief executive ofWSL Retail Strategy, a consulting firm. "To see the future ," said Liebmann, "follow the shopper. She, or he, is the true north."
Capturing and keeping today's consumer requires understanding not only where she is headed, but how - in ways both subtle and sweeping - she has changed. Here's what retailers need to know in order to optimise their merchandising strategies for the new consumer.
Purchasing decisions are made long before she steps into the store.
It used to be that, at mass especially, the majority of buying decisions were made at the shelf. P&G referred to this as "the first moment of tru th ," said Liebmann, and it was estimated that at least 70 percent of decisions were made this way.
Today, people do much of their research before even setting foot inside a store. According to Liebmann's annual How America Shops study, seven out of 10 people "do some kind of pre-shopping to inform their decisions." Monica Arnaudo, senior vice president of merchandising at Ulta, puts the number for beauty-obsessed millennials at over 90 percent. This shopping pre-game consists of everything from looking up ingredients and reading product reviews online to watching TV commercials, searching out promotions, cruising Instagram and YouTube for ideas and trusted endorsements, and hearing about something from a friend . As a result, customers are making decisions faster once they're in the store, and thus the nature of their trips are morphing from leisurely discovery and browsing expeditions to "quick, get it off the list trips," explained Liebmann. The merchandiser's first moment of truth is evolving into a "zero moment of tru th," and that , said Liebmann, "is changing everything."
To engage consumers in a physical space, reconsider its role.
While online platforms may be a retailer's most valuable back-up dancer, and have proven to play a role in bringing people to stores, what are the elements that only a store experience can provide?
Cos Bar, which started as a family run boutique in Aspen 42 years ago, and now operates 20 freestanding stores across the United States, has built a reputation for knowledgeable specialists who take luxury clients through the store as dedicated beauty tour guides. As chief executive David Olsen said, "You can go online and learn everything, but how do you learn what's best for you? That's the one thing the intern et hasn't cracked."
Less-intimate-by-nature stores are focused on personalising service too, creating elevated experiences previously found primarily in specialty and department stores. Target has installed beauty counters and now offers consultations with brand-agnostic beauty concierges during which consumers can try products, get colour-matched and receive advice - not to mention samples.
At Target, they 've paid close attention to lighting, added feature tables and consider ed how impactful presentation promotes the things that bring in their consumer in the first place: "replenishment - the items you know you want every day - and discovery," said Christina Hennington, the company's senior vice president of Beauty and Essentials.
Designing in-store experiences for one type of person doesn't work.
Old assumptions about who is shopping your stores, and your brands, no longer hold. Understanding today's beauty customer is about understanding that she may be many differ e nt customers in one. For example, the same woman who buys a $6 Maybelline mascara may save up for a $60 Tom Ford lipstick, just like the woman who buys a designer jacket may couple it with a Uniqlo T-shirt. Ulta saw the potential back in 1990, when they pioneer ed the idea of a store that offered both mass and prestige under one roof. And, ind eed, nearly 80 percent of Ulta 's customers cross-pollinate, dipping across categories for their purchases , said Arnaudo. "If you're not giving a nod to the fact that she shops high and she shops low," noted Liebmann , "There's a chance you will lose her, because you don't understand her."
Focus on how the customer wants to shop.
A good place to start, said Liebmann, is by figuring out what kind of trip she (or he) is on, which may change with every person who walks through the door. "Often," she said, "retailers are not good enough at recognising who she is at that moment and accommodating. Even if the trip is just about 'me,' it's a question of how much time do you have? Can we spoil you or do we have to get you in and out fast?"
Service is the name of the game - whether you're a drug store or a specialty store, where people tend to linger longer. But the key is knowing when to give it, and how much. "If you don't have tim e - if you've got the kids with you and all you want is your Sonia Kashuk lip gloss - you don't care that there's a beauty concierge in Target," said Liebmann.
And what is the most comfortable way for consumers to find th e things they are seeking? "We look at the order in which th e customer makes decisions - is it by brand, or by category- and merchandise accordingly," said Hennington. Most of the time, she noted, customers seek out a brand first and then look within that brand of choice for options. The same holds tru e at Cos Bar's niche boutiques. "People are still loyal to brands and want to learn about brands even though everything in that brand isn't right for them," said Olsen. "Combing through 20 different moisturisers is not the way people shop today. They'd rather say, 'I know La Mer; tell me about their three best moisturisers."'
Target recognised that guys - historically a somewhat shier beauty customer - might benefit from a separate moment of their own, and when they gave it to them, it immediat ely started paying dividends. Hennington described the men's section as "a world designed for them," a shop-in shop with special fixtures and lighting, where men can find everything from skin care and fragrance to shave products, minis to encourag e experimentation and zones where they can interact with grooming devices. "We're trying to see how likely men are to browse and spend time investigating categories they might not have before," said Hennington. "We're on our third version now, and each one is a bigger version of the prior and delivering better results."
Recognise that no matter how brand-loyal a shopper is, she's still shopping multi-brand.
Olsen attributes part of Cos Bar's recent success - th eir sales are up 27 percent this year - to the fact that one salesperson learns the customer's concerns and preferences and leads her through the store to cherry-pick a regimen. Conversely, the department store's Achilles heel continues to be the fact that to learn about five different brands, a customer must visit five different (hard-selling, commission-based) advisors at five different counters and start her story over each tim e. These days, who has the time, or the inclination , to shop like that?
At Target, Hennington understood that people with an affinity for products with natural ingredients wanted to shop for them in a dedicated Naturals section, separate from the traditional skin care, cosmetics and bath & body aisles. Merchandising these products within a "lifestyle section" has been a hit with virtually everything - except hair, which Hennington quickly learned customers want to see in one overarching section, regardless of ingredients and positioning.
Pay attention to traffic.
Traffic is all about considering how you want a customer to move through a space, studying what she does when she gets there and makin g adjustments based on those learnings. When designing store layouts and imagining flow, a certain number oflogistical considerations come in to play: not only do you want to create a logical roadmap - sort oflike a life-size Chutes & Ladders board where customers instinctively follow a path, encounter different experiences, and hopefully end up at the cash register feeling like winners - but you need to account for seemingly meaningl ess trivia like the fact that most people are right-handed. This means that people tend to look, and move, instinctively to the right (important when designing the entrance) and grab things that are on the right (important when creating prominence on a tabl e or wall). And remember that, in 2018, most of us have a phone permanently glued to one hand. "If I only have one hand free, I'm only picking up one or two things ," said Liebm ann. Her solution: remind people to take a basket or cart, or find some other way to "crea te a space for the phone." Ulta begins storytelling at the entrance - trending brands and exclusives up front - and leads the customer all the way to the back (so she is effe ctively traversing th e entire store twice) with the lure of salon services and the accompanying hair product assortment.
Cos Bar engaged Retail Next, a firm that counts its traffic, studies where people go, and dwell, and looks at which windows are bringin g them in. "Understanding traffic patterns has been huge and we're seeing traffic increase as a result," said Olsen. He learned that where you put the cash register matters, as it creates the flow and closes the loop on the journey. "Looking at the data from different stores, I think the middle of the store has been our best bet to date, but I don't think we've cracked it yet," he added. The wall behind the register is often a "dead zone" - "so we have nothing there now, just a Cos Bar sign," he said - but the area surrounding the regist er, populated by the "candy" - KNC lip masks, 8Greens tablets, Beautyblenders - where one impulsively adds on an extra, inexpensive item while waiting in line, is retail gold.
Embrace agility.
At Cos Bar, evaluating traffic has allowed th em to quickly asses what's moving and what's not; their flexible new store designs facilitate moving segments and making strategic tweaks "on the fly," said Olsen. "If products aren't moving, there's a reason for that, and you need to find a new home for them." Even if a floor plan is working, "you've got to constantly change th e stores, too, for customer experience," he adds.
Refreshing customer experience includes merchandising according to what's new and what she's interested in, now. That requires keeping up with her life (what is everyone suddenly talking, and posting, about?) and reacting with speed. Ideally, a store's feature tables, endcaps, product and brand spotlights should be a mirror of her thoughts, questions and desires . Consider it retail ESP.
Be a storyteller.
Merchandising is storytelling. Tell stories with your product assortment. Whether you are big or small, luxury or mass, edit, curate and organise in ways that tell the stories of your brands, your products, their ingredients and benefits, buzzy trends, seasonal spotlights and need-spaces. Ulta merchandises products by brand (and by category within brands,) but when Arnaudo sees an opportunity to bring products from multiple lines together in one spot to tell a story she knows may interest her customer, she jumps on it.
It's about laser-focusing a customer's attention, and it works. Her team pulled out "new & notable" hero products in prestige skin (where she knows her client is lookin g for innovation ,) and created a dry shampoo end-cap once she noticed that women weren't washing their hair as much. As masking hit fever pitch, Arnaudo brought sheet masks togeth er from all across the store in dedicated spaces within both prestige and mass. "We saw such a great increase on the mass side - double-digit, if not triple-digit growth - we doubled the space in the section, and the category continued to trend ," she said. When she created a single Sun section - in response to customer feedback last year - blending products from across mass and prestige, sales increased by double digits. The category has continued to surge, yielding double digit on top of double-digit growth this year, she reported. And while curation has been shown to encour age browsing and discovery, stores should keep the focus tight. "What we've learned that doesn't work," said Arnaudo, "is if we try to do too many things at the same time - too many stories, too much product, too many added fixtures and additional signage. Over th e holiday season, we were trying to do a little too much, and that can be sensory overload. There is a balance."
Also, tell the story of your customer. I.e., figure out her story. What is she buying, where is she going? And what else might she need? "It's the part of the job a tru e merchant really loves: anticipating what makes the most sense to bring togeth er for our guest," said Arnaudo. The lesson is to get inside the customer's mind-set : a smart merchant will remind her of her narrative and what she needs - or plant the seed and tell her. That's curation, but it's also storytelling.
Take cues from digital - and use it to your advantage.
Not only does digital drive people to stores and help them once they're there - phone in hand, looking up a review, recalling an Instagram post they favourited or a product they bookmarked - there is much brick-and-mortar inspiration that can be taken from the online space.
Liebmann likens Sephora's "best-of" micro-curations - an end-cap touting The 5 Best Mascaras, for example - to an IRL internet search. "I Google X and get th e top five options," she said. This type of messaging is smart, too, because it reinforces Sepho ra's position as exper ts, their authority to tell the customer what is best.
The digital world provides a living, breathing mood board of the looks, shades and trending application techniques (and the attendant products and tools) that have captured a customer's imagination. It's also a hunting ground for new brands that can set a retailer apart, build credibility and win an audience. Arnaudo looks to platforms like YouTube - which 70 percent of her customers are on - to help determine what's coming in to Ulta's assortment. She recently brought on Morphe and Colourpop, two digitally native brands with enormous social followings and influencer ties. "They're driving traffic into the store because the consumer couldn't see or test the product until we had it," said Arnaudo. "It's a piece we all have to stay on top of, and it moves so fast."
Physical stores, from Tom Ford to Target, have incorporated e-commerce's virtual try-on AR technology to speed up the product selection process too. "It's a step forward in acknowledging the expectations of th e consumer," said Hennington.
Savvy merchandising is an ongoing work in progress. And ther e are many different customers to think about, not just the millennial. "We have 30 million consumers who walk through the doors each week," said Hennington, "so how do you stay relevant with a broad base?" The ability to pivot quickly opens the door for experimentation and innovation. "I'd rather be out there trying and learning than perfecting something on a spreadsheet," she continued. "Of course we make mistakes; it's about what we do with that information next that matters."