Structural Shift in the Personal Care Industry - Spas and the Beauty Business in a Downturn
By Jacqueline Clarke Wellness Research Director, Diagonal Reports | November 14, 2009
Many hotel spa operators are facing their first significant economic downturn. The first because many hotel spas are new, and hotel spas were among the pioneers of the new spa industry that has developed in the past decade around the world.
How is the spa industry faring? The newness of this industry means there is no directly comparable historical data. Further in a fragmented spa market data is scarce. This article looks at the performance of a mixed bag of broadly comparable businesses, that is beauty and personal care, to give a flavour of the disparate industry.
An often expressed view in the beauty industry in late 2008 to the first indications of a serious downturn was to roll out the "lipstick theory." That is that any future downturn would see the core consumers of beauty, women, sustain the market by spending on minor indulgences, such as lipstick.
The lipstick theory derives its name from an explanation propounded by Estee Lauder to explain the rise in luxury lipstick sales during a downturn at turn of the century. Though luxury lipsticks might not be the product, the fundamentals of the theory are a guide to consumer behaviour. That is, that beauty is necessary treat for many consumers.
Some companies in very different markets from North America to Europe have bucked the trend and report no change in sales to date in 2009, compared to 2008. These companies attribute their performance to their offer of, what are, relatively inexpensive treats (what in the USA they call "little goodies," and in France "petits bonheurs".)
The USA company represents the, so-called, beauty kiosks. That is small unit offering various beauty and body care treatments that are located inside of high volume commercial centres across North America. The performance of the kiosk beauty formula, which was first rolled out in the USA in 2007, contrasts with the performance of the wider professional beauty market. According to one leading company ––L'Oreal–– US beauty salons, day spas, and medspas registered a reduction in footfall to date (first half) in 2009.