Andrea Van Dam & Kurt Jetta, CEO of TABS Analytics
A thorough understanding of your consumer is the backbone of any great media campaign. Kurt Jetta, CEO of TABS Analytics, spoke with Women’s Marketing CEO, Andrea Van Dam, and shared his insight into the way women discover brands and shop in 2016…and beyond.
Van Dam: Since you launched TABS Analytics in 1998, how has your research on consumer behavior become both easier and more complicated?
Jetta: It’s a two-part answer: companies have made research much more complicated by employing lots of pseudo-scientific segmentation methodologies such as consumer decision trees and psychographic clusters. In reality consumer research is MUCH easier than in the late 1990’s due to the availability of online research. This platform makes statistically reliable consumer insights available to companies large and small for minimal cost and time investment. Online research has “democratized” the availability of consumer insights.
Van Dam: Looking at the past two years, what influences have made the most significant impact on the way women shop today?
Jetta: The trendy response to this question is the development of e-commerce, but our research shows that eComm share in most consumer categories is very small and not increasing. There’s two other influences that have more quantifiable effects on their shopping behavior: 1) I think the rapid acceptance of specialty interest blogs, particularly beauty blogs, open up a whole new avenue for how women gather information about new products and beauty trends, and 2) the increase in the number of retail channels, eComm being one of them. Whereas drug and mass used to be the dominant channels, we now have specialty outlets (such as beauty specialty), value channel (e.g. Dollar Tree and Dollar General), natural food (Whole Foods) that have captured greater market share from drug and mass. Each channel offers its own distinct position such as selection, deep value, premium offerings, or shopping experience or convenience. These formats give women many new choices in the way they shop
Andrea Van Dam: This is so interesting…we’ve heard that e-commerce in the beauty category has reached 19%, which is concerning bricks and mortar retailers. Your view is that e-tail is less of a concern for physical stores?
Jetta: Correct, our research shows ecomm about 8%. Given how women talk about how engaged they are with the shopping experience (“I love to spend a lot of time selecting just the right products”) it is hard to believe eComm will ever get more than 15% of cosmetics and beauty, in general. Additionally, the heavy buyer shows a virtually unlimited propensity to try and buy new brands (over eight, on average) and shop at multiple outlets for these products. In beauty, the pie is definitely not fixed. There’s plenty for everyone.
Van Dam: Do you believe that these changes are primarily driven by Millennial consumers, or do you see these changes across demographics?
Jetta: Millennials clearly are driving huge shifts in beauty, but their influence on the entire consumer products sector is greatly exaggerated. Households with kids are the greatest driver of sales in the majority of CPG categories. It is changes in their buying patterns that have a greater effect on our industry.
Van Dam: Digging deeper, is segmenting consumers by traditional demographics at all still a valid way of analyzing behavior, or should we be solely looking at life stages or personas instead?
Jetta: Demographics have the benefit of being easy to obtain, and they help predict and explain shopping behavior. Life stage actually has greater predictive power, but the data is typically not gathered in most research. As an example: vitamin usage among those 55-64 is 60% above the overall average. The usage among adults that still have kids in the house, however, is 20-30% lower than among those that don’t. This is the Empty Nester effect; adults start thinking more about themselves when the kids are out of the house.
Van Dam: Is the mall dying? Looking specifically at beauty, specialty retailers like Sephora and Ulta are engaging consumers in an entirely new and innovative way. What do department stores and mass retailers need to do, if anything, to stay competitive and do you see this trend creeping into other categories as well?
Jetta: The mall is not dying directly. There are dozens of shopping malls that are crowded and busy on any random weekend. This big issue for many malls, however, is their mix of stores within them. The fashion industry is really hurting, and these declines will drag down any mall that has a disproportionate number of stores dedicated to apparel. Sephora actually is doing a great job as a store-within-a-store concept at many JC Penney stores, and the Sephora success helps JCP and the mall, overall. I expect there will be a major increase in the number of new beauty specialty retailers in malls that show up because there is a clear shift in shopping patterns away from apparel and towards beauty products.
So malls are getting hit with a double whammy: 1) preferences are clearly shifting from fashion to beauty, and malls are heavily invested in fashion, 2) share of the shrinking fashion market is shifting strongly to eCommerce. Greater beauty retail presence makes sense due to the positive shift in preference and its relative insulation from encroachment from eComm.
Andrea Van Dam: I love to think of specialty beauty chains popping up across the country! Do you think another result of retail challenges is growth in beauty at Amazon?
Jetta: Again, I question the notion that Amazon or eComm, in general, is a major factor. Department stores are experiencing positive trends in beauty, overall. You may see, however, a different model of how it is merchandised. The Beauty counter concept runs contrary to how women like to shop. The majority do not want a Beauty Advisor and they want to touch, feel and use the products themselves. Having them all sequestered behind a counter runs contrary to how most heavy buyers say they like to shop. As far as retail challenges at the mall it is coming from Amazon, but the shift is in fashion and apparel, not beauty. If retailers play it right, beauty can be their savior, as there is a major shift in how many – if not most – women define indulgence. It used to be fashion, and it’s moving to beauty.
Van Dam: Today’s consumers are much more educated than in the past. They do a significant amount of research before they buy and know what they want before they go to the store or push the buy button. How has this changed the purchase funnel and how would you describe today’s typical purchase journey?
Jetta: It varies by category, of course, but within beauty we see shoppers doing their research both online and in-the-store. The shopping experience itself is often a greater source of pleasure than using the product purchased. Heavy buyers say they love to spend a lot of time in the beauty aisle selecting just the right product. Retailers that want to succeed in beauty need to facilitate this experimentation and search.
Van Dam: Looking ahead to 2017, what trend are you most excited about?
Jetta: I go back to the likelihood we will see several new beauty specialty banners hitting the market. The eye-popping sales growth (Ulta +15% in same store sales) is too great to ignore, particularly in the context of sales for apparel retailers in decline. I can’t imagine major national retailers will leave the spoils of beauty growth to just Sephora and Ulta.
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