BW Confidential - Issue #17 - March/April 2014 - (Page 63)

Improving the offer Mexican department stores are out to enhance their offer by Alex Wynne M exico's ultra-competitive prestige beauty retail landscape is dominated by department stores. They represent an estimated 90% of the prestige market, which counts around 300 prestige doors in total. Faced with Sephora's entry in late 2011, these stores have undertaken a number of initiatives, adding exclusive brands, opening up more to skincare and make-up, and offering services in treatment rooms that work on a rotational basis for brands. "We believe the consumer wants to see new things, so all retailers are trying to respond to this," says research firm Segmenta Latam retail manager Daniel Morimoto. Focus on service and new brands The Mexican prestige beauty consumer is accustomed to service, and this, alongside attractive credit offers for card holders, is helping department stores retain customers. "There is still a very strong service element in [department stores] Palacio and Liverpool, with strong relationships between the beauty advisors and the customers. Definitely, those customers continue to return to department stores," says Tanguy de Buchet, Coty Prestige regional director, Americas travel retail and export. "Sephora's arrival has led to some changes, Mexico beauty sales by channel 2012* % Channel % share Grocery retailers 58.0 Direct selling 24.1 Department stores 5.0 Chemists/pharmacies 2.0 Beauty specialist retailers 1.7 Parapharmacies/drugstores 1.6 Other health & beauty retailers 0.7 Source: Euromonitor International; data for 2013 not yet available; Figures do not add up to 100% as some smaller channels have been excluded March-April 2014 - N°17 - BW Confidential s El Palacio de Hierro is refining its offer and focusing on luxury labels (left), while Sears is adding exclusive brands (right) such as department stores becoming more willing to take more risks in taking on new brands," he continues. "But compared to other markets, they still consider fragrance a category that drives a lot of impulse purchases. As opposed to some markets like the US, their space for fragrances is still considered strategic." Market leader Liverpool reacted to Sephora's entry with the introduction of its own standalone beauty concept, Kybela in 2011. However, the self-service chain closed its seven doors stores in May 2013. The concept failed because Liverpool was unable to manage the very different format and because the store design was too confusing for consumers, with products classed by category rather than by brand, say industry observers. Liverpool has a more accessible positioning, and has been expanding into smaller cities that have previously not had access to selective retail. "The market is really concentrated in Mexico City," says Morimoto. "It represents almost 45% of the total market, and now we are seeing openings in the interior of the country driving sales. Department stores are reaching consumers that they have never reached before, and the consumer is responding to that." As for El Palacio de Hierro, it is refining its offer and focusing on luxury brands; it reportedly has a large market share in skincare. Meanwhile, Saks Fifth Avenue, which operates two stores under license to Grupo Sanborns, is focusing on niche brands like Bond No. 9 and Creed. Sears, long considered the poor cousin of Liverpool, is upping the ante and adding exclusive brands to its offer. "It used to be a hardware store. Changing its image to be a department store, to compete against Liverpool, is costing them a lot of money and time, but they are succeeding at it; they are growing," says distributor Pavel ceo Federico Velez. Sephora's impact While Sephora made waves with its market entry, according to sources, the LVMH-owned retailer has not seen the results it expected in Mexico."Younger consumers are going n n n 63 Market watch: Latin America Mexico: prestige retailing

Table of Contents for the Digital Edition of BW Confidential - Issue #17 - March/April 2014

Cover
Comment
Contents
Update
Brand & retail news recap
Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Guerlain ceo Laurent Boillot
Insight: Make-up
Category overview
Budget brands
The latest trends
Retail
Innovative strategies
Retail
Vending machines
Store concepts
Digital Social media content
Market watch: Latin America
Regional overview
Mexico: country analysis
Mexico: prestige retailing
Colombia: country analysis
Colombia: prestige retailing
Argentina: country analysis
Argentina: prestige retailing
Radar A profile of six up-and-coming beauty brands
Emerging markets Company profile: Mahogany
Travel retail: Brazilian travelers
Analysis
Industry viewpoint
Packaging: Decoration techniques
Trends analysis
Innovations
Last word Diagonal Reports analyst Jacqueline Clarke

BW Confidential - Issue #17 - March/April 2014