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Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

Story-Telling and Image-Building: Standalone Stores are Back in Vogue in Western Markets

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In a world where everything moves towards digital, is there still a place for brick-and-mortar stores? Consumers have been increasingly turning online for their beauty purchases leading to an increase of 11% in online sales in 2014, but 84% of global beauty sales remain in the hands of physical stores. Beyond department stores, drugstores/chemists (which have been increasing their beauty space) and beauty specialists like Sephora and Douglas, stand-alone beauty stores are gaining traction. While they have long been a strong presence in Asia’s high street, in Western Europe and especially in the UK, standalone beauty stores are going through a renaissance. This is due to brands like Kiko, Aesop and L’Occitane, which have centred a large part of their brand identity on consumers’ in-store experience.

Free-standing stores can create a strong brand image through story-telling

Kiko has been one of the fastest growing brands globally in both colour cosmetics and skin care, growing by 20% and 26% respectively in 2014. Italy remains the brand’s biggest market, but its expansion into France and Portugal, where it holds shares of 4% and 7% in colour cosmetics respectively, has sparked the attention of even the biggest beauty players in the market. In 2014, it entered the UK and the US continuing its global expansion. Kiko’s dark lit stores, big screens with music videos, coupled with its segmented product lines (the brand’s eye shadows, lipsticks and nail polish ranges are available in very extensive colour ranges and shades), strong beauty blogger endorsements and affordable prices, resonate well with consumers, especially millennials.

Aesop was the fastest growing premium skin care brand in the UK where it has over 12 of its own stores and just celebrated the opening of its 100th store globally, with its latest expansion into Norway. The brand was acquired by Natura in 2012, but has continued to operate independently. What makes the brand’s free-standing strategy unique is instead of a one-size-fits-all style where one store design is replicated all over the world, Aesop engages local architects to design stores sympathetic to the surrounding area and community. However, while each Aesop store is unique, the experience of consumers with the brand is consistent, creating a brand identity that is uniform around the world.

Stand-alone beauty stores are also becoming an important feature in fashion brands’ strategy in beauty. Fashion brands looking to raise their profile and boost market share use stand-alone beauty stores to make a bigger statement to beauty consumers and improve consumers’ experience with the brand. Chanel, Christian Dior and Burberry all have stand-alone stores next to each other in London’s famous Covent Garden, which offer not only the brands’ full product range but various services such as a nail bar and make-up tutorials. Within Europe, Chanel and Christian Dior have also opened beauty-only stores in Paris, capitalising on the high influx of tourists that visit the fashion capital.

L’Occitane is arguably the biggest beauty player with a free-standing retail strategy, having surpassed US$1 billion sales in 2013. With the majority of its sales coming from the company’s own stores, its stand-alone strategy has given it a unique identity, which appeals to its consumer base. The strategy particularly favoured L’Occitane when it expanded into China and Brazil, where it has seen double-digit growth year-on-year. The success of the likes of L’Occitane, Aesop and Kiko has prompted heritage beauty brands which did not traditionally have own store concepts as a key part of their strategy to rethink their retail presence. Guerlain – LVMH’s heritage beauty brand – revamped its flagship store in Champs Elyse in Paris, to include a café/restaurant “Le 68" as well as the L’Institut Guerlain, a private residence-like spa, while Clinique also has a new store-concept strategy which is presented through its new store opening in Covent Garden called Clinique Great Skin Lab.

Asianification also sparks renewed interest in mono brand stores

Asianification of beauty and skin care in particular, due to the increasing influence of Asian and Korean brands in beauty, is expected to intensify the importance of stand-alone stores. Many Asian brands have a strong stand-alone presence including Etude House (through its famous house-shaped stores), Innisfree (skin care’s fastest growing brand in 2014 globally) and Herborist, among others. Innisfree has been given regulatory clearance to open its own shops in India at the end of 2014. Korean player Misscha opened its first stand-alone store in Germany back in February and the increasing expansion of Asian companies – which have stand-alone stores as part of their core retail strategy – outside their home markets is expected to bring about even stronger store presence on prominent high streets around the world.

Stand-alone stores can shape a brand’s personality, create stronger awareness and boost the consumers’ experience, allowing the brand to create a bond with consumers, which is hard to replicate online. While we are entering the golden era of online shopping in beauty, the importance of brick-and-mortar stores, especially mono brand stores, will just like the little black dress, always be in fashion.

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