As healthcare costs continue to grow exponentially, how can you optimize your online presence in order to improve online sales and market share? Retailers need to consider pivoting their strategy in order to make sure they dominate this sector and set themselves up for future growth. Society and technology are two main factors in the health & beauty sector that are impacting retail and these two drivers need to be accounted for when suppliers and retailers are changing their strategies to stay competitive.
As sustainability, personalization and in-store experiences become more important to the consumer, it will be crucial for brands to grow and align with their customers. We break down our four winning strategies to uncover how to win in the health & beauty sector.
Store of the Future: Demand for experiences
Health & beauty retailers are rethinking their assortment and space allocation in their physical stores in order to improve the in-store experience for customers. Shoppers are demanding experiences and convenience, leading retailers to concentrating investment in expanding services and personalization and strengthening logistics capabilities.
Filling vacant space with services to differentiate from online experiences is a growing trend for retailers such as Sephora. The personal care brand has developed their Studio Small format which is half the size of an average Sephora location, but has made room for more experiential offerings such as customized makeovers and more digital applications.
Walgreens is trialing a reduced assortment store concept across 17 different stores in Florida. These have 20% reduced assortment compared to the average Walgreens store. These changes in assortment are forcing retailers to rethink how they are allocating space for not only the number of SKUs but also, the type of SKUs they have in their stores.
Retailers are making more of a conscious effort to remove less profitable products and either downsize their store or use the additional room for more experiential opportunities for their customers. For example, CVS has implemented their Smile Direct Club which offers 3D scanning services and convenience to the consumer where they don’t require in-person monthly visits. This has helped to not only improve foot traffic, but also has expanded their customer base to people who would not normally shop at a CVS.
Ecommerce & Digital Ecosystem management: Digital Advancement
The major players in the health & beauty space have recognized the importance of digital advancement and understand by expanding the digital ecosystem will allow for more online health offerings with the benefit to the consumer being added accessibility and convenience. Walgreens is now offering a Mobile Video consultation service which illustrates how healthcare is being digitized more than ever before.
Chatbots, connected products and virtual healthcare tools are making it easier for consumers to get closer to products and make them better informed to make decisions either online or in-store without the help of an associate. The sector is rapidly moving online with the Beauty and Personal Care category seeing a 16% CAGR now that consumers are being equipped with the right tools to make confident decisions online.
Over the next five years, ecommerce will overtake supermarkets and hyper-stores as the second largest channel for the category, growing at 13.8%, with Pharma and Health leading the category. Due to this shift caused by digitally native brands and D2C brands disrupting the traditional brands, we’re seeing traditional brands such as Amazon, Walgreens and CVS all innovate and enhance their offerings and capabilities to focus on consumer priorities, customization and improved customer service.
Supply chain & Fulfillment: Need a strong logistic and supply chain network
Sustainability and immediacy are two values that retailers are looking to align with as they improve their fulfillment. Instilling a strong logistic and supply chain network is vital to meeting the needs of the customer. Shoppers are prioritizing sustainability and natural ingredients and are willing to pay a premium for products that are aligned with their values. CVS is now offering same-day Rx delivery at a nationwide level and Beauty Kitchen (UK) has a refilling station for their consumers.
When customers buy a product from Beauty Kitchen, they can bring that bottle back to the store and refill it. Not only is this cost-effective for the brand, but by aligning with the shopper's values and priorities, consumers will be willing to pay a premium.
Customer engagement and retention
To improve customer engagement and retention, retailers need to expand their touchpoints and enhance personalization. CVS and Aetna have partnered with Apple to build an app that allows for personalized health and fitness goals, enables activity tracking and rewards the consumers for sustaining healthy habits. These additional features allow for the brand to interact at different touchpoints and become more integrated in the lives of the consumer. In addition, it also allows for CVS and Aetna to collect more data from the consumer to further personalization.
Personalization will be a key differentiator in the health & beauty space and Sephora has already taken steps to offer this to their customers. They’ve introduced a digital in-store tool, Color IQ, which allows for associates to shade match customers skin color to a foundation color that is fitted to their skin type. This personalization tool not only can help identify the right product for the consumer, but also has the potential to upsell customers in terms of suggesting other complimentary products.
In conclusion, as health & beauty spending is expected to grow in the U.S. by $128 billion over the next 5 years, and online penetration reaching 23%, it will be imperative retailers and suppliers prepare and set their strategy to stay ahead of the competition. Through personalization, aligning with customer values and simplifying the in-store experience, retailers can set themselves up to win in the health & beauty sector.
Interested in learning more? Download the full webcast to hear from our own Mod Bood-Long share her insights on Store of the Future, Ecommerce, Supply Chain & Fulfilment, and Shopper Engagement developments.