From The January 2004 Issue of Natural Foods Merchandiser

Naturals' New Wrinkle: High End HABA

Move pricey purchases from department store to your store

Vicky Uhland

A $98 night cream, $24 shower gel, $56 facial mask, $50 bust-firming cream—if you think you’re at a Saks Fifth Avenue or Neiman Marcus cosmetics counter, guess again. All of these items, and hundreds more, are designed to be sold in natural foods stores.

Once the purview of grocery store-priced cosmetics brands, natural products stores are responding to customer demand by stocking high-end health and beauty care products. And an increasing number of manufacturers are giving retailers those products, with face creams, body scrubs, makeup and even soaps that retail for $15 or more.

In the past year, more than a half dozen companies, including Dr. Hauschka Skin Care, Annemarie Borlind of Germany and Zia Natural Skincare, have launched health and beauty lines designed to compete with the best-known high-end products that are staples in many natural foods stores. And the stores naturally want to cash in on the success of these lines. Martha Bishop, segment manager for Dr. Hauschka, says that last year her 25-year-old brand’s sales increased 22 percent in natural foods stores. So many requests have come in from natural foods retailers that want to stock Hauschka products that “we’re turning people down daily” because the company doesn’t have enough stock or field representatives to fulfill them.

Linda Upton, vice president of sales and training at Borlind, says her 23-year-old brand has seen no decrease in sales during the recent economic downturn.

The new high-end personal care lines are designed to lure crossover shoppers—women who traditionally shop in department stores for personal care but who also have a social conscience and are knowledgeable about natural and organic ingredients. “We appeal to the LOHAS [lifestyles of health and sustainability] market—a woman who still reads her Glamour and her women’s magazines, but also reads Utne Reader and Mother Jones and is concerned with the environment. She’s very cognizant of ingredients, reads a lot, educates herself a lot,” says Jeny Dowlin, director of marketing for Symco, distributor of the Symbiotics Age Defiance line, three skin care products priced in the $30 range that were launched in August 2003.

“The people who are going to Nordstrom and Saks Fifth Avenue to buy their cosmetics are coming [to natural products stores] to buy their food. They’re willing to pay a premium price for high-quality, natural, pure products, so why not extend that to [personal care]?” says Adrian Larralde, president of TransitWave Int’l., distributor of Mirra, a Russian skin care line that debuted in the United States in March 2003. Mirra has 25 products priced from $19 to $50.

Another market consists of consumers who don’t shop in natural foods stores but who have had adverse reactions to harsh ingredients in mainstream personal care products. “As people develop problems, they go to the health food stores to see what they have,” Upton says.

Higher-priced products also help increase the average expenditure per customer.

Shoppers who buy high-end beauty care are mainly baby-boomer women who have the money and the interest to seek out natural cosmetics, says Lisa Sedlar, vice president of sales, merchandising and marketing for Pharmaca, an eight-store natural pharmacy and personal care chain based in Boulder, Colo. Sedlar says about 70 percent of her stores’ facial care products are priced at more than $15. Pricey skin care lines give Pharmaca an “image of a unique and distinctive marketplace,” she says.

Higher-priced products also help increase the average expenditure per customer, says Borlind’s Upton. “Are you making money or are you just moving a lot of items?” Also, she points out, customers who make the price commitment to lines such as Borlind tend to be loyal to their brand and to stores that stock it.

But marketing to these customers, no matter how knowledgeable they may be, can be tricky. “People are going to pick up our $150 cream and look at it and say, ‘Holy cow, why does it cost that much?’ ” Upton says.

Is It Really Worth It?
Costly products have costly ingredients, manufacturers say. And whereas more than 50 percent of a mainstream health and beauty product’s price may be devoted to advertising, that’s not the case with most natural personal care products. Instead, the money goes toward ingredients and formulations. Take Symbiotics’ Age Defiance line, for instance. It’s made with colostrum from New Zealand cows, where the organic standards are strict. Mirra’s products contain sturgeon and salmon caviar and hand-harvested herbs. Dr. Hauschka’s plant ingredients are raised biodynamically, using a holistic agricultural process.

Formulations are also a value-added factor. Upton points out that Borlind customers are paying for a large research staff that creates cutting-edge technology, such as liposomes, and extensive product testing. “That expertise takes a while to build,” she says. Mirra uses a cold emulsification processing technique that produces particles 546 times smaller than the average skin cell, allowing better penetration, the company says.

Cashing In On Knowledge
Women—and the few men—who buy high-end, natural health and beauty products aren’t necessarily rich. Store owners and manufacturers both tell tales of cash-strapped college students shelling out $30 for a Dr. Hauschka moisturizer.

“Price is less of an issue after a product is sampled and tried,” says Pharmaca’s Sedlar. “When your skin is glowing and moist, you don’t care how much it costs.” That’s why sampling is key to selling high-end products. Many large manufacturers make trial sizes and have training staff available to do in-store demos. In addition, they are anxious to train store staff about the benefits of their products and give them samples to try. The idea, says Upton, is to have someone knowledgeable nearby when a customer picks up that $150 cream.

There’s another benefit as well, points out Mirra’s Larralde. “If you’re fighting to keep a customer base and build a relationship, what a perfect reason to talk to your customers and interact with them.” This is particularly important in natural products stores, because they frequently carry smaller brands that don’t do much advertising. Customers have to depend on sales staffs to acquaint them with the brands.

Upton believes that staff at natural products stores can be “as good as, if not better than, people in department stores. They can have more conviction, belief and knowledge” in natural ingredients. So do their customers. “You need to market more toward ingredients and education. The person who shops in natural foods centers is really savvy, has the knowledge and doesn’t need the consultation as much as someone shopping in a department store. Besides, food store shoppers are label readers,” says Caren Conrad, general manager of Boscia, a Japanese skin care line priced between $12 and $38. Boscia was launched in the United States in fall 2002.

Conrad believes shelf talkers that explain how to use a product and what it’s for are key. She suggests that retailers visit their stores’ wine sections for inspiration: “Their shelf talkers do a great job of explanation and recommendation.” Pharmaca posts signs titled “Why We Believe” in certain products, “Your Choice Naturally” product ingredients primers, and offers “Five-Star Beauty Reviews” in its newsletters.

Grocery Store Stigma
Customers who shop in department stores can be flummoxed by health and beauty aisles in natural foods stores. Where are the glass counters? Where are those ladies in perfect makeup and white coats? “I don’t know anyone who can truly counteract the department store image,” says Pharmaca’s Sedlar. “But you can remove the barriers to make products more accessible so people can try them.”

Pharmaca, like some mainstream stores such as Nordstrom and Sephora, has moved away from the department store counter approach and now offers “boutique” areas, where customers can walk the aisles and try products themselves. Boscia’s Conrad suggests that natural foods stores emulate these boutiques. “Keep the product in shelves, but [in] clean shelves with lots of testers, and a Kleenex and trash can area nearby so people can try products.”

Pharmaca and some natural foods stores lure well-to-do patrons by recreating the spa experience. They have an esthetician and massage therapist on staff or on contract who offer facials and massages in a room in the store.

When it comes to display, although most manufacturers prefer that their lines be blocked, they want their products on shelves, rather than in glass cases, and displayed next to other lines of all prices. “If you put all the high-end lines separately, you might miss out on a lot of customers who would actually purchase them. It’s like saying these products aren’t for everyone,” says Mirra’s Larralde. Putting a product behind glass can be a hassle for customers who have to search for a sales associate with a key, says Dr. Hauschka’s Bishop.

But some retailers opt for glass cases to reduce stealing. Theft of high-end beauty products is a serious problem for Pharmaca, Sedlar says. A year ago, the store installed Sensormatic strips on all products over $25. Sedlar wouldn’t say how much the Sensormatic program cost, but says it has already paid for itself in theft reduction. Pharmaca also places its high-end lines near cash registers. Other stores put mirrors at the ends of personal care aisles and make sure aisles are constantly staffed with at least one salesperson.

Vicky Uhland is a freelance writer and editor based in Denver. Reach her at vuhland@mindspring.com.

Natural Foods Merchandiser volume XXV/number 1/p. 42,44,46