BUSINESS NEWS - A struggling economy doesn’t necessarily mean makeup products will be left on the store shelf, but those shopping for cosmetics are increasingly looking for more affordable and organic brands.
According to market research firm Euromonitor International, although consumers are cutting back on non-essential goods, beauty and personal care products continue to register good growth, despite the challenges in the market.
“On the demand side, a strong personal grooming trend where greater importance was attached to physical appearance and hygiene led to changing purchasing patterns,” says Euromonitor.
Looking pretty is serious business. The Department of Trade and Industry tells Moneyweb that last year cosmetics contributed 0.1% to gross domestic product (GDP), with imports at R18 billion, exports at R13 billion, and 60 000 jobs created in the 12-month period.
Euromonitor says private label and economy brands performed well towards the end of the review period (its report was published in June 2019) as their affordability appeals to price-sensitive consumers.
“South Africans are increasingly engaging in brand switching behaviour as they look for products that offer quality at competitive prices,” according to the report. “While there is a general preference for heritage brands, a change in perception towards private label has led to a surge in demand, especially in categories where the quality is on par with the former.”
The South African consumer will, however, not compromise on quality.
“Mid- to high-income consumers are willing to spend extra on products that offer exceptionally good quality, and which stand true to their claims. This is the case for products that consumers use daily, such as skincare.”
The research firm believes that health and beauty specialist retailers such as Clicks and Dis-Chem responded to this by offering aggressive price promotions, introducing value formats and widening their portfolios of budget-friendly brands.
“The rising popularity of private label and travel-sized pack types further contributed to maintaining growth momentum for some beauty and personal care categories,” it says.
E-commerce playing a major role
Euromonitor goes on to say that retailers offering e-commerce services has led to pricing transparency for consumers, and hence the increase in sales.
“[Previously] there were some price differences among various retailers, but now all prices are uniform across the distribution channels. The only difference in price comes from special promotions that might be on offer or when delivery charges are added.”
A study conducted by World Wide Worx – Online Retail in South Africa 2019 – says online sales still make up less than 2% of total retail sales.
Just One Lap financial analyst Simon Brown says new product development, launches, and a strong personal grooming trend are expected to support continued growth in beauty and personal care.
South Africans are becoming more conscious of their heritage, he says. “That is why we are seeing, for example, more soaps [coming] from the Kalahari. They give us that warm fuzzy feeling that this is our culture, our heritage, and our country.”
He adds that retailers are also actively seeking locally manufactured cosmetic brands because of this, and because these products are likely to be cheaper than international cosmetics (not least of all because the transportation costs should be less, even though their all-round input costs might be higher because of the lower volumes produced).
Brown encourages start-up cosmetics brands to have an online strategy, while having a store of their own and also making use of established third-party retailers, to increase their profits.
Entrepreneur Sonto Pooe of NativeChild, a plant-based skin and hair care brand, faced challenges with large retailers not wanting to give her products retail space.