This week, I take a look at Walmart’s Gen Z skin-care play and clean makeup brand Merit’s expansion plans.
When it comes to the beauty industry, the skin-care category has been the saving grace throughout the pandemic. Thanks to extended WFH periods and mask-wearing, NPD Group saw sales in the skin-care segment increase 32% year-over-year to $1.5 billion in the second quarter of 2021. And over in mass beauty, skin care saw 5% growth year-over-year in Q2, per Nielsen. As beauty executives rally for makeup’s post-Covid-19 return, there is no denying that skin care has offset color cosmetics’ sales decline for two-plus years.
All brands and retailers have been aware of these shifts (hence the skin care-makeup hybrid effect), but Walmart has made the most significant changes as of late. While the company has worked to improve its beauty assortment across the board, starting first with hair care and then with makeup, skin care’s time to shine is now. Within the last two weeks, Walmart has added 12 new brands to its lineup, including C’est Moi, Mei Apothecary, VitaminSea.Beauty and Walmart-exclusive Skin Proud. (C’est Moi and Mei Apothecary also sell at Target, and VitaminSea.Beauty can be found at Ulta Beauty.)
When discussing the cadence of Walmart’s beauty changes, Musab Balbale, merchandising vp of omnichannel beauty, said, “Hair care is a bit of a less conservative purchase, but the skin care-enthusiast is much more demanding. Our overall thesis in skin care is that there is so much incredible technology, whether it be in terms of functional formulation or ingredients or aesthetic. But those formulations are not yet available and accessible to mass audiences at price points that are more achievable.”
Obviously, finding great brands, many of which have social buzz and digital prowess at their core, has been key for Walmart — but Balbale believes he can bring the innovation of a prestige brand to the masses. “We’re in the midst right now of that shift down from the $56 price point to the $20 price point. But we think we can bring that even further [down] to the $10, $12, $15 price points and offer that for the consumer.”
By and large, Walmart’s focus is Gen Z, and there there is evidence that while younger shoppers are more discerning with their products, they are also more price-conscious. The success of indie brands like The Ordinary are proof of that, but so are brands like CeraVe, which have not only been recommended by dermatologists but also by skintellectual influencers like Hyram Yarboro. In fact, eight of the top-10 skin-care brands favored by Gen Z in 2021 were mass or masstige brands, per Gen-Z media company Kyra’s July Gen-Z State of Beauty Report. And these aren’t one-and-done purchases, either. NPD’s Female Facial Consumer Report on skin-care attitudes and usage, released in August, found that Gen-Z shoppers use as many products in a day as their Gen-X counterparts do.
Thankfully for Walmart, being value-driven doesn’t exclude its tried-and-true older shoppers. NPD also found that skin-care usage for Boomers, ages 57-75, has also increased. These Baby Boomers are also more likely than other generations to say that mass brands are just as good as prestige, and nearly 60% report they only shop to replenish.
“Brands that are targeting Gen Z [at Walmart] are accelerating their growth not only because the younger shopper wants to buy it. [It’s] because mom, daughter, father and son all shop at Walmart. We’re seeing Gen X and Boomers buy these products, too, because it makes them feel younger,” Balbale said.
In many ways, shoppers expect Walmart to do the work for them, said Balbale — and that’s without the type of over-the-top marketing activations often carried out by specialty retailers and brands.
“The power that we have as an enterprise is the everyday shopping trip. When somebody is coming to us, it is for the everyday shopping trips; they’re not coming in predisposed to spend 20, 30, 40 minutes exploring, in the way that they may at a specialty or department store. So the proposition of a product, even if it’s meant for discovery, needs to be really obvious,” he said. “For the most part, that requires one of two things: A brand has built a reputation already that consumers are aware of and has some sort of affinity and affiliation, and therefore picks it up. Or, the [brand has] been incubated by a big CPG [company] that has the resources and know-how to be effective and stable in mass channels.”
Recent examples in Walmart’s skin-care assortment include Bubble that debuted in 3,800 locations in July and Procter & Gamble’s Dermageek. (P&G also recently created Nou with Walmart in the Gen-Z hair-care space.) Of the greater conglomerate offerings for Gen Z, Balbale said, “[The] P&Gs, Unilevers and J&Js are trying to understand how they talk to that consumer with a set of brands that are more specific, using the power of scale that they have.”
Still, it might be the beauty indies that win out, as disruptors have been chipping away at big box brands across industries for at least a decade. “The benefit that we have at Walmart is that our scale is so big. Within our overall beauty transformation, [indies] could feel diluted by heritage, trusted brands, who know how to operate with us. But if I look at the absolute growth of the smaller brands both online and in stores, it is accelerating,” said Balbale. “I feel fairly optimistic that, when we talk in, say, five years from now, smaller brands are going to be a pretty significant portion of our business.”
In the News
The clean color trend continues to follow clean skin-care’s trajectory. Today, Katherine Power’s Merit, which launched in January, announced its $20 million Series A led by L-Catterton. Merit has been on a fast-and-furious track, launching in Sephora, Sephora x Kohl’s and Sephora Canada in March, shortly after its DTC debut. It is expected to be in 800-plus locations by the end of the year. Following this capital raise, Merit will expand to accessories, hair, fragrance and skin care.
Merit is the fourth digitally native brand that has had Power at the helm, following media company Who What Wear, masstige skin-care brand Versed and natural wine line Avaline, alongside Cameron Diaz. In January, Power announced Powered Brands, a SPAC focused on better-for-you products.
“We see an opportunity to reimagine what it means to be a global beauty holding company by creating a platform that has native e-commerce expertise, clean ingredients, a sustainability-focused supply chain, data-driven decision-making and a transparent culture, with values like diversity and inclusion built-in from day one,” Power previously told Glossy. “Those are things that are so hard to layer on to a large company that’s not built that way from the ground up.”
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