FMCG:

Beauty Retailing Insights

March 2011

Contents

NEWS: P&G replaces Government as UK's

biggest advertising spender
Procter & Gamble is now the UK's biggest spender
on advertising, following a 47% fall in COI spend.
The COI spent 112m on advertising in 2010, down
from 221m in 2009, when it was the UK's biggest
advertiser. Since coming to power in May, the
coalition Government has imposed a spending
freeze to ensure that only "essential" advertising is
run. As a result, the COI is now the fifth-biggest
spender, according to estimates* from Nielsen.
In comparison, Procter & Gamble increased
adspend by 33% from 142m in 2009, to 189m in
2010. BSkyB was the second, spending 161m, up
from 134m in 2009. Unilever was third with a spend
of 132m, having increased its spend by just 2%,
substantially less than its FMCG rival, P&G.
Tesco, the biggest supermarket in the UK, was
fourth, spending 120m, an increase of 19%. BT
made the biggest increase to its outlay of any top 10
advertiser, lifting its spend by 44% to 104m.
(Source: MediaWeek)

*The figures cover the year to 15 December and do not include:

internet advertising for the period 1 October to 15 December;
outdoor, cinema, direct mail and door drop advertising for the
period 1 November to 15 December; regional press and
magazine advertising for the period 1 to 15 December; or TV
and radio advertising for the period 6 to 15 December.

Beauty Retailing Summary

Online beauty market to represent just 2% of total online retail sales in the UK

It is growing rapidly, rising 20% in 2010 to an estimated value of 420 million (equivalent to 5% of the
total beauty market).

Mintel forecasts sales of beauty products online to reach 855 million by 2015, doubling sales over the fiveyear period to account for as much as 9% of all beauty sales.

Only 44% of internet users have bought a beauty product online in the past year this is likely to rise
however the industry faces some obstacles.

What hurdles does the industry face?

The biggest obstacle for consumers is that they are unable to physically see, smell or
feel let alone test the product prior to purchase, and this acts as a deterrent for
over six in ten consumers.

Building trust throughout the online experience is key for retailers, which need to find
ways to make beauty products more interactive and less 2D online.

Almost six in ten female internet users find it difficult to buy beauty products online
because they cannot tell if products will suit their skin tone, hair or skin type.

Source: Mintel, Feb 2011

What does the future hold?

Ensuring that the whole experience of buying online is easy, hassle-free, safe and pleasurable is
essential.

One of the brightest areas for future development is user-generated content.

Enabling consumers to share everything from reviews about their purchases to expert beauty
advice with other customers, or ideally, their own network of friends, online can become a
channel that offers something that the high street cannot: a social shopping experience at the
click of a button.

Beauty brands and department stores have reflected a lack of trust too, being reluctant to
implement any serious online strategy, although this is at last starting to change.

Online video can help retailers present a more

rounded view of beauty products. It can also help to
market categories that are considered to be more
difficult to sell online such as make-up.

Almost half (46%) of 25-34s would consider buying

from a brands website in the future, yet relatively few
big beauty companies are currently engaging with
consumers in this way.

Source: Mintel, Feb 2011

Market Forecast
Looking ahead, growth in the market may be more difficult as the number of online shoppers reaches maturity, and
economic uncertainty, tax rises and unemployment continue to be an issue. However, online beauty retailing has already
proved it can weather a fragile economy better than the high street.
Best and worst case forecast for online consumer expenditure on cosmetics & toiletries, 2005-15

1,200
Best case (m)
1,097

Market value (m)

1,000

This years forecast

800

Mintel forecast
(m) 855

600

Worst case (m)

613
(m)
420

400

200

0
2005

2006

Source: Mintel, Feb 2011

2007

2008

2009

2010

2011

2012

2013

2014

2015

Seasonality Trends
In general, FMCG sub-categories seasonal peaks towards the later months in the calendar year inline with Christmas
holiday peaks & early months into the new year.
Health & Medical site visits are the highest however Alcohol & Grocery sites are increasing share month on month
towards the December peak

Source: Hitwise, Feb 2011

Health & Beauty Seasonality Trends

When looking just at Health & Beauty - the retail market share increased by 0.1% points
between October 2010 to December 2010 according to Hitwise.

Source: Hitwise, Feb 2011

Peak Xmas period for Health & Beauty

shopping clients. Ramp in activity
begins as early as early September

Search Traffic
Traffic
Searches for major FMCG brands continue to
climb on Bing.
December 2010 was the largest month where
consumers continued to search for branded
goods - increasing +45% YoY

Big FMCG Players

Taking a look at 3 large FMCG clients brands
you can see that P&G brands received more
search traffic compared to GSK and Unilever
brands.
This is not however dependant upon
specific categories in which brands sit
within.
Categories covered include Homecare,
Beauty, Food & Drink and Health & Wellbeing.

FMCG Brand Demographics and Daily Trends

Weekdays are by far the most popular days for

searching for FMCG brands online with Bing.

On average, each weekday accounts for 16% of

the total search volume throughout the week,
with the lowest day being Saturdays (10%)

This could be attributed to researching products

online during the week and the potential to
purchase products online/offline at a later date
including at the weekend

The 25-34 year old age brackets are the main

age groups for traffic with 32% .

18-24 year olds and 35-49 year olds are fairly

equal with 25% and 28% respectively

Gender breakdown favors females with 58%,

Males 40% and an unknown gender of the
remaining 2%

1.Microsoft Advertising Intelligence Tool December 2010 to Feb 2011 data

Display Advertisement Publisher Location:

Reach and Frequency (FMCG)
Microsoft sites delivered the highest number of unique visitors for Retailers within the
combined Consumer Goods, Fragrances & Cosmetics and Retail Food category.*

*comscore vertical alignment

Source: ComScore adMetrix : January 2011

Display Advertisement Publisher Location:

Reach and Frequency (FMCG)
Although Microsoft delivered the most unique users, eBay, Glam Media* and Facebook
had a higher share of Ad Impressions but also have a higher frequency.
Microsoft Advertising is a fantastic opportunity to reach a wide audience and more unique
users than some close competitors

(Glam Media includes Daily Mail due)

Source: ComScore adMetrix : January 2011

Market Insights

Beauty Retail Target Groups

Target groups for online beauty, September 2010

Bargain

Online

Hunters

Enthusiasts

34%

33%

Net Neutrals

33%

Base: 2,000 internet users aged 16+

Source: Mintel

For Online Enthusiasts, the internet has

revolutionised they way they shop. They have moved
on from shopping in-store, finding online to be at once
more convenient and rich in information and opinion.
However they need to be encouraged to buy more
beauty products, and are most likely to respond to
retailers efforts to engage with them, a range of
delivery options and targeted sampling. These tend to
be young, high-earning Londoners.

Net Neutrals are the least interested in buying beauty

online but do seem to be aware that the internet could
help them to find products cheaper. This group, biased
towards retired and less affluent men, may respond to
free delivery and a discount on their first order.
To Bargain Hunters the internet is one gigantic sale.
This group is clear about which beauty product they
want to buy and will search for the best deals. Free
delivery will appeal to Bargain Hunters, who are
typically female, married and not working. They are
the most nervous about buying online, so need
reassurance over the returns procedure and website
security.

Who Buys Beauty Online?

Shopping online for beauty and personal care products, by
gender, September 2010
Have bought any product online in
last year
19

Everyday toiletries eg deodorant,

soap, bath and shower

18

Everyday skincare eg facewash,

moisturiser

Make-up eg mascara, foundation,

lipstick, nail polish

Added benefit skincare eg anticellulite, self-tanning, anti-ageing

Base: 1,970 internet users aged 16+

10

Women, 25-34s, ABs and those

with very young children are the
most likely to buy online.

19

11

Hair treatments, eg styling products,

intensive treatments, colourants,

26

24

14

Other beauty and personal care

products

26

26

15

Hair products such as shampoo and

conditioner

Source: GMI/Mintel

54

34

Fragrances

Over four in ten (44%) shoppers

bought beauty or personal care
products online in the 12
months to September 2010. This
leaves a significant majority of
consumers who are yet to be
persuaded to make their first
purchase.

Spending power is a governing

factor in online shopping
behaviour. High income earners
are most likely to buy (51%).

15
25
Women
Men

15

20

30

40

50

60

Fragrances and everyday

toiletries are slightly more
popular products for shoppers to
buy online. Over a fifth (22%)
have purchased from these
categories over the past year.

Where Consumers Buy Beauty

Online supermarkets dominate as the overall outlet of choice for 46% of online beauty shoppers.

Four in ten online beauty consumers have bought items from pure-play stores. These retailers are most
popular amongst 16-24s, particularly for make-up.
Men and women are equally likely to shop at online chemists (37%), and although chemists tend to
attract purchases across many product areas, they dont stand-out in any one category. However,
chemists are in a good position: over six in ten women and under-35s would consider buying beauty
products at an online chemist.
Specialist retailers such as The Perfume Shop are slightly more popular with men than women (37%
vs. 30%).
16-24s represent the biggest opportunity for brands selling direct from their website.
Boots would always be my starting point for online beauty products as they
have a very wide range of stuff, dont go anywhere else so wouldnt check
other choices 45-54 ABC1 female

I may buy grooming products such as shaving and skincare online from reputable
retailers such as Boots and Superdrug if there was significant savings to be made.
35-44 ABC1 male

Source: Mintel, Beauty Retailing Report 2011

Market Shares
Market shares in online sales of cosmetics and toiletries, 2010

Department
Stores
5%
Other
5%
Specialists*
10%

Chemists/Drug
Stores
35%

Boots is the most popular online retailer for beauty

purchases, and is the single largest retailer in terms of
online beauty sales in the UK.

Collectively, supermarkets, led by Tesco, attract the

majority of beauty shoppers. This is particularly the case
for purchases of everyday toiletries.

Pureplays currently represent a small percentage of the

online beauty market, however many are experiencing
rapid growth due to their strong online experience.

The Perfume Shop is the most successful specialist

multichannel retailer online. Online sales grew by a
staggering 162% during Christmas 2009.

Department stores have on the whole been late to

market and are disadvantaged on price. As a result,
they have been a minor presence in the market.

Pureplays
15%

Supermarkets
30%
* Eg Perfume Shop

Source: Mintel, 2011

Beauty Retailing: Strengths and weaknesses

Strengths
Popularity of loyalty cards.
Constant flow of product innovation.
Significant development in private
label launches, especially economy
lines.
The increase in fibre optic broadband
packages is rapidly growing, enabling
consumers to fully utilise site features
and interactive tools.
Beauty products are an affordable
treat and necessity purchase for
women.
Fragrance represents one of the best
prospects in the online beauty market
for future sales.
More retailers are engaging
consumers with tutorial videos,
implementing user-generated content,
search and selection tools, sampling
and expert panels to enrich user
experience and bring beauty products
to life.
Source: Mintel, Beauty Retailing Report 2011

Weaknesses
Nearly half of consumers are indifferent
to beauty and grooming products.
The main obstacle facing the market is
that the majority of consumers (six in
ten) would rather feel, touch or smell a
beauty product before they buy it.
Make-up is particularly challenging to
sell online.
Beauty is currently one of the smallest
online categories, representing an
estimated 2% of total online sales in
2010.
Consumer mistrust about using the
internet to buy beauty is widespread.
Almost half (46%) of internet shoppers
are nervous about using unfamiliar
sites to buy beauty.

18

Beauty Retailing Market Size

Online spending as % of total spend on cosmetics & toiletries, 2005-10
2005

2006

2007

2008

2009

6,876

7,151

7,456

7,739

7,916

na

+4.0

+4.3

+3.8

Estimated online sales of c osmetics and

toiletries
% annual change

160

190

225

na

+18.8

Cosmetics and toiletries as % of total

beauty sales

2.3

2.7

Retail sales of cosmetics and toiletries

% annual change

2010
(est)
m

%
change
2005 - 10

8,182
+3.4

+19.0

+2.3

290

350

420

+162.5

+18.4

+28.9

+20.7

+20.0

3.0

3.7

4.4

5.1

+2.8*

* % point change

Online is currently a very minor channel of distribution for beauty, taking an estimated 5%
share of the total cosmetics and toiletries market in 2010. However this has more than doubled
since 2005.
The reluctance of high street beauty retailers to sell beauty online created an opportunity for
the development of a pure-play market that is dynamic and creative.
Multichannel retailers recent, serious drives to increase online business will be a likely boon to
the online beauty market in the future.
Source: Mintel, Beauty Retailing Report 2011

FMCG Opportunities
Creativity is Key
Creative sites, display ads and search creative can boost
ROI. Consider utilising unique technology i.e. photosynth,
deep zoom to interact with consumers.
Consider how users could potentially try before you
buy could help boost interaction.
Opportunity to test products against skin tones, personal
attributes could open further purchase opportunities
Reach of the Internet
Utilise Microsoft Advertisings large reach of the internet
population through MSA properties we reach 93% on
the UK internet population. (comscore January 2011)
FMCG Unique Users
Using adMetrix data we can see that through Microsoft
Advertising we delivered the most unique users for
FMCG brands compared to our closest competitors!
(adMetrix, Dec 2011 slide 11 of this deck)

Search and Display

Use both offerings to help boost your ROI moreover, use
our display offering to help boost your brand campaign to
the largest audience.
For further ideas on how Microsoft Advertising can help
please reach out to your Microsoft Advertising contact.

APPENDIX

Beauty Retail Extras

Where consumers shop for beauty products

Boots

58

Superdrug

36

Tesco

35

Asda

21

Sainsbury's

17

Morrisons

14

The Body Shop

13

Avon

12

Local independent chemist

12

M&S

Debenhams

Internet - any website

International transport terminal eg. Airport/ferry/channel

Other general variety store eg. Wilkinsons, Bhs

Other supermarket

The Perfume Shop

Somewhere else

Other department store

Lush

Other chemist/drugstore chain

Don't know

Newsagent/corner shop/c-store/forecourt shop

Other specialist beauty shop eg. The Fragrance Shop,

TV Channel eg. QVC

2
1

Source: Ipsos-Mori/Mintel Beauty Retailing Report, 2011

The way people shop for beauty products, 2009 vs 2010

54

My shopping habits haven't changed in the

last year

32
22

I've stuck to a few retailers that I trust

12

I've bought more own brands

17

But a picture emerges of a more

cautious and less loyal shopper.

The family shopper was still

constrained but some in the pre-/no
family demographic increased their
spending.

More consumers opted for deals and

special offers than own brands.

26
16

I've bought a lot more special

offers/promotions/discounts this year

14
13

I still treat myself to some premium products

but more selectively

8
6
3

2009
Source: Mintel, Beauty Retailing Report 2011

A third of all adults did not change

their shopping habits for beauty
products in 2010.

11

I've spent less on these products this year

I've bought more products for home use this

year to save on salon bills

18

2010
23

Attitudes towards beauty shopping by gender

28

I'm prepared to spend more on

good quality skincare

17
27

I'm prepared to spend more on

good quality cosmetics

13

16

I often browse just to see what's

new instore or online

11

I like advice from store staff

when buying beauty/grooming
products

12
7

I'd like to see more stores

offering self service sampling
stations

12
5
11

I'd like retailers to expand their

own brand ranges

Women

Source: Mintel, Beauty Retailing Report 2011

Men

Women are much more likely to:

Spend extra on cosmetics and
skincare than men.
Be interested in self service sampling
stations.
Be keener on getting advice from
store staff.
Be behind the idea of own brand
expansion.
To browse frequently just to see
whats new in-store and online.

24

2005 2010 Competitive Context

Estimated online sales of cosmetics & toiletries and total online retail sales, at current prices,
(inc. VAT), 2005-10
2005

2006

2007

2008

2009

8,064
na

10,640
+31.9

14,448
+35.8

Estimated online sales of cosmetics

and toiletries
% annual change

160

190

na

Cosmetics and toiletries as % of total

online sales

2.0

Estimated online retail sales

% annual change

2010
(est)
m

%
change
2005 - 10

17,584
+21.7

19,758
+13.4

21,728
+10.0

+169.4

225

290

350

420

+162.5

+18.8

+18 .4

+28.9

+20.7

+20.0

1.8

1.6

1.6

1.8

1.9

- 0.1*

* % point change

Online beauty retailing represents a small portion of the online market. In 2010 beauty accounts
for an estimated 2% of total online retail sales.

Sales growth has slowed since 2008, when the sector increased in value by 29%, due to Boots,
Superdrug and Tesco gaining more importance in online beauty retailing. The recession caught up
with this market in 2009 when growth was considerably slower.

Source: Mintel, Beauty Retailing Report 2011

How Engaged are Consumers Online

Online activities undertaken in last 12 months, by gender, September 2010

Price comparison is the most

popular online activity for internet
users. Women, and 25-34s, are
considerably more likely to
research on price before buying.

Researched a product to find the best

price
Researched a product online before
buying in store
Read a review on a beauty product

Consumers are more likely to go

into a store to buy a product after
researching online (36%)

Researched a product online before

buying online

Clicked on an online advert for a product

One of the biggest challenges for

online retailers is turning browsers
into purchasers.

Sold an unwanted product online eg on

eBay

A quarter of 16-24s are fans of a

beauty brand on a social network.

Subscribed to a brand newsletter

A fifth of shoppers would consider

downloading a beauty app in the
future, however 29% of those who
have shopped at a department
store have already done so.
Department store shoppers are also
most likely to have read a blog
(51%).

Read a beauty blog

Joined a brands fan group on a social
networking site
Offered feedback directly to a company
Commented on a brand/product in a
status update on a social networking site

Women

Posted a review on a beauty product

Men

Downloaded a beauty related app

0

Base: 2,000 internet users aged 16+

Source: GMI/Mintel

20

40

60

Attitudes Towards Buying Online

Attitudes towards shopping online for beauty and personal care, by gender, September 2010

I shop around online to find the best price

Seven in ten internet users

shop around online to find the
best price on beauty and
personal care products. This
is common amongst all age
groups, and especially those
in the highest income-earning
households.

Six in ten know what they

want before they set out to
buy online.

The convenience that

shopping online gives
consumers is most likely to be
appreciated by 25-34s.

Mums are most likely to spend

a lot more on beauty online
than in a physical store.

When I set out to shop online I usually

have a clear idea of what I want
I shop online because its quicker than
going to the shops
Browsing online has reduced the time I
spend in stores
I shop online to find products or items not
available in stores near me
I shop online to avoid the crowds in the
shops
Women

I tend to spend a lot more online than I

would in an actual shop

Men
0

Base: 2,000 internet users aged 16+

Source: GMI/Mintel

20

40

60

80

Barriers to Shopping Online

Attitudes towards shopping online for beauty and personal care, by gender, September 2010

I prefer to see, smell and feel an item in person

before buying it
I would prefer to return/exchange items in-store
that I have bought online

I find it difficult to buy beauty products online

because its hard to see if they will suit my skin
I am nervous about buying from websites I am
unfamiliar with

Some items I have bought online have taken

Men are more likely than women to buy

a product online that they have not
bought before in-store.

Almost half (46%) of the youngest

consumers are put off buying online
due to finding the returns procedure to
be a hassle.

Half of all internet-using women are

nervous about buying from unfamiliar
sites.

Shoppers under-35 have a bargainhunting attitude when it comes to

buying beauty and personal care
products online.

longer to arrive than expected

I am happy to shop online, but only for less
expensive items
I only shop from websites that have no delivery
charge
I only buy products online that I have previously
bought in-store

Women
Men

I am happy to pay (more) for delivery to get my

order more quickly
0

Source: GMI/Mintel

20

40

60

80

This represents the main barrier to

buying beauty online. Six in ten (58%)
women also find it difficult to tell if a
product will suit their skin tone or hair
type etc.

The hassle of returning goods through the post

puts me off buying online

Base: 2,000 internet users aged 16+

Over six in ten internet users would

rather physically see, smell and feel a
beauty product before buying.

What Do People Buy Online?

Goods/services bought online, December 2010
Which of the following, if any, have you bought/spent money on via the internet in the last 12 months?
Any
Books, CDs, DVDs, video games/software
Clothing/footwear
Toiletries/cosmetics
Food and drink
Insurance
Holidays/leisure travel
Entertainment tickets
Toys and games
Home electronics
Music, video/film, software downloads,ebooks
Household cleaning products
Gift vouchers
Other housewares
Portable electronics
Personal accessories
DIY or garden products
Home appliances
Furniture and furnishings
Online gambling/casino gaming
Sports equipment
Online subscription for music, video or magazine content
Online dating membership
Motor vehicles
None of these
0

10

20

30

40

50

60

70

80

90

Consumers from the more affluent

and better-educated end of the
social spectrum are consistently
the most likely to have shopped
online in any category.

Consumers in the family life-stage

and those with young children rely
on the convenience of online
shopping.

With the exception of home

electronics, portable electronics
and online gaming, women are
more likely than men to have
purchased from every listed ecommerce category.

100

% of respondents
Base: 1,025 internet users aged 16+

Source: Ipsos MORI/Mintel, Online Spending Habits, Feb 2011

29

Market positioning of leading retailers/channels

International terminal
Any website

Sainsbury's

Debenhams

Other dept store

Affluence

The Body
Shop
Other
variety st

Local independent
chemist
Tesco

The Perfume
Shop

M&S

Boots

Asda

Morrisons
Superdrug

Avon

Average Age

Source: Ipsos-Mori/Mintel, Beauty Retailing Report 2011

30