The move will be the first major shake-up in the premium cosmetics segment, which for the last several decades has been dominated by two Australian department stores, Myer and David Jones, who together control 60% of the market.
The diversification of the cosmetics market in the country looks set to drive innovation, as consumers look for added value products: according to market research firm Euromonitor, ‘time-saving’, ‘instant gratification’, ‘mini luxury’ and ‘long-lasting’ are product claims increasingly demanded by antipodean consumers.
Changing market
The rise of multifunction and value-added products in the region has driven innovation in the masstige sector to date.
“By “borrowing” product attributes from adjacent categories, manufacturers aim to achieve wider consumer appeal through more holistic features, cross-category benefits, multi-functionality and value-driven price points,” note Euromonitor analysts.
Sephora’s entry into Australia means prestige brands will now be looking to assert themselves with innovation in a similar way, in order to win over consumers in the increasingly competitive landscape.
Asserting its multi-channel approach
Sephora is reported to have declined offers by the country’s major department stores to open as outlets within their retail units, opting instead to launch stand-alone stores when it enters the country later this year.
Investing in a clearly visible physical presence is perhaps a savvy move for the retailer, at a time when multi-channel retailers are beginning to bring in the lion’s share of sales, while online-only brands lose out.
According to Ipswich Chamber of Commerce president Anita Dwyer, reported in the Queensland Times, e-commerce sales for retailers with both online and bricks-and-mortar outlets grew 22% in the preceding year up to January, while sales at online-only, single-channel retailers grew just 13%.
“Customers are choosing products from a better-informed position, exemplified by the research-online, buy-offline (ROBO) segment which typically spend over 80% more per transaction than non-ROBO customers and are increasing the demographic to target,” industry expert Peter Luebcke told Cosmetics Design.