Health and beauty retail merchandising: specifics and recommendations

Health & Beauty is currently the fastest-growing sector in retail. According to the research company GlobalData, it will grow by another 16.5% in 2023.

The development of the industry has caused changes in the field of professional merchandising, which can be a powerful sales tool for store chains. But seeing significant results from innovations is only possible if they are implemented correctly.

Updating the assortment, organizing the store space and displaying goods should be based on proper analytics and consistency. An incorrectly chosen strategy inevitably leads to losses. This is especially true for health & beauty, where there is a certain specificity.

That is why we will consider merchandising from the point of view of niche features, as well as provide essential recommendations and tools to improve the efficiency of product display, sales and customer loyalty.

Pay attention to the aesthetics of equipment and product display

Most customers of health and beauty stores are women. This requires special aesthetics and display methods for the sales area. Shelves should be well-organized and sufficiently diverse, attractive and well-stocked. This also explains the relatively high cost of layout in such stores.

“With LEAFIO Shelf Efficiency, you can control the layout’s aesthetics. In the mobile application, store employees will receive tasks to change the layout and send you realograms (a photo of the layout created based on the provided planograms). The planogram will determine the final location of goods on the shelf, taking into account the aesthetic appeal."
–Lana Panasenko, Product Director of LEAFIO AI Retail Solutions

To present goods in a health and beauty store in the most profitable way, pay attention to the following rules:

• Don’t just put cosmetics on the display. There should be cabinets with mirrors and aesthetic lighting.
• Products can be laid out in baskets or boxes and aesthetically arranged on shelves.
• Create a visually attractive and convenient layout. The senses guide potential customers in this area: they want to see a beautiful "picture", touch the products, smell them, try them on their skin, etc. This is possible only with a display that you want to touch and open where the product is presented "in all its glory." It is vital that the buyer can easily engage with the layout and test the product.
• Goods from different manufacturers with the same functional purpose should be placed on the shelf vertically. Do not forget that the goods of the same brand should be laid out together within the product group.
• The number of shelves is very important when placing non-food goods. A product group like vitamins and dietary supplements has 4-5 shelves, and hygiene products have 7-9. Often such parameters are not given proper attention, but it dramatically affects the room’s aesthetics.
• The balance between the requirements of the store and the cosmetics supplier is one of the most challenging tasks for the merchandiser. The brand can dictate its own rules for laying out cosmetics or other products, which must be combined with the chain’s policy.

In branded stores, it is worth choosing equipment that emphasizes the status of products and justifies their value. A striking example is Sephora that also focuses on an exclusive assortment: some brands of cosmetics and perfumes can be found only in these stores.

Placement within the group can be carried out in a horizontal or vertical layout. The goods should be placed near the edge of the shelf or on hooks in a straight line. In related products, there are nuances of presentation that are practically not used for products – for example, a layout using perforated racks.

Consider the target audience when creating the display

The main target audience of health & beauty is women from 25 to 45 years old. However, there are separate niches: teenage cosmetics, age creams 40+/50+/60+, etc. In addition to age and gender, cosmetic products have many additional parameters that are closely related. For example, the skin and hair type of your audience depends on geography and ethnicity. Ethnicity is becoming a critical factor for large brands that supply their products to different countries worldwide.

Understanding the actual needs of the target audience dictates the rules of the layout, the choice of equipment, the organization of space in the store, and improves the work with cross-merchandising. The store’s location determines the category of customers with specific needs and the reasons for their visits and behavior..

Analyze competitors and follow global trends

Competitor analysis is an integral part of professional merchandising. It partly determines pricing, assortment, special offers and your marketing strategy.

A complete analysis of competitors is based on a matrix of estimates of comparison parameters: categories of goods in the sales area, cross-merchandising techniques, pricing policy, type of equipment, layout features, consumer behavior, etc.

It is important to analyze competitors geographically located nearby: in this case, the probability of finding a point of differentiation is much higher. However, building a strategy should not be based solely on "spying" on competitors. The basis of merchandising programs is always an assessment of your products and the characteristics of your customers.

At the same time, the industry dictates global trends that should not be ignored. To stay competitive, cosmetic companies should focus on three short words when forming a strategy: natural, organic, and clean. The global value of natural cosmetics is expected to reach 54.5 billion dollars by 2027.

The most significant competitors for perfume and cosmetic chains are supermarkets and drogerie stores. It is difficult to compete with them in terms of prices, but supermarkets also have significant disadvantages. They can’t maintain a complete assortment and have to create identical conditions with other products in the store. Hence, the level of cosmetics sales depends entirely on the buyer’s preference.

Recently, pharmacy supermarkets have been competing with them. But customers perceive them as a place to meet their needs rather than to have a pleasurable shopping experience. 

Zone equipment for name brand and store brand products

Shops in the health & beauty sector should provide a wide range of products for their customers and arrange them so that each product is easy to find on the display shelves. Of course, well-known brands get a lot of attention because customers follow trends. When working with brands, pay attention to the following points:

• Merchandisers should ensure that the share of sales of goods corresponds to the percentage of space occupied by brands on the shelf.
• Regarding the location of goods on the sales floor, it is necessary to maintain a balance between the requirements of the supplier and what the store needs. 
• Brands often take up a particular area on the sales floor and have to strictly adhere to the layout rules – follow the formation of planograms and their implementation taking into account all brand requirements.

When brands rent zones for their products, they have the opportunity to collect analytics: products with the most turnover, the most effective locations and other data necessary to improve sales. They can also directly control the volume of their brand's representation in the network, form its visual presentation, and optimize the assortment on the shelves and the number of goods delivered to the store.

Remember that brands should not wholly overshadow other products, such as private label products. Private labels have a high margin and a low threshold of brand dependence. This is an essential category of goods, which, unfortunately, is sometimes mixed in with the "crowd" of the general assortment. 

Selling private labels guarantees earnings, while well-known brands serve more to attract customers to the store. A striking example is Boots, an international chain of stores, which has in its portfolio many of its own cosmetic brands, including No7 and Botanics. Such goods should be considered when forming planograms and controlling the layout. Unlike well-known brands that invest a lot of money in advertising, private labels can stand out if they are favorably presented on the shelf. 

Related: Liquor stores' merchandising and space planning specifics

Store brands are just as critical as name brand goods. As a rule, such products are not represented on the local market and are not imported by direct competitors. Store brand goods attract customers because of their uniqueness.

According to statistics, 1 out of 3 buyers of health & beauty products will not choose an unfamiliar brand if there isn’t a familiar one in the store.

Create planograms for shelf control

Health & beauty stores usually have a high assortment density. This is due to selling more products with a low turnover compared to the grocery group. Therefore, it is not easy to control the assortment and its availability on the shelves. If the right lipstick shades do not appear in the store on time, it means losing customers and damaging the business.

To avoid this, modern stores use merchandising planograms – these are visual diagrams that show information about the placement of each product in the store. A detailed planogram also includes the number of facings of products that should be present. The planogram helps the retailer to unify the layout throughout the chain and simplifies the work of employees to implement the layout in the store. As a result, it creates conditions for increasing sales.

Thanks to LEAFIO's solution for automatic planogram creation and optimization, our customers, on average, record the following indicators: 5% - sales profitability, 35% - optimization of assortment, and 80% - faster planogram creation process.

Organize the space in the store

In the health & beauty sector, there is a strict division of product groups. Thus, some buyers react negatively when products of a completely different purpose are nearby. Therefore, it is important to monitor the placement of different categories of goods. For example, vitamins are rarely placed near cosmetics.

Also, when organizing the space, pay attention to the following points:

• Many stores in the health & beauty sector have a small warehouse space. This factor affects the organization of the layout: it should be done taking into account the remaining goods and the delivery period.
• Place the most attractive groups of goods at the end in the darker areas, away from the main flow of customers. These products can help to increase sales of other products located next to them.
• Some retailers actively use products in tiny packages, slightly larger than samples (shampoos, shower gels, creams, etc.). Such products are better placed in places where customers make impulse purchases, often near the cash register.
• Product groups with an assortment that complements and increases the demand for the main range actively influence sales. For example, massage brushes should be placed next to body scrubs.

Take care of the safety and security of goods

Health & beauty stores have a high rate of theft. Therefore, when organizing the space, try to find a balance between the attractiveness of goods and their safety.

In the health and beauty industry, some products are statistically considered the most "attractive" for petty thieves:

• razor blades (due to high demand and prices);
• cosmetics (due to their small size);
• relatively expensive items and personal care products;
• popular perfumes;
• pharmaceuticals that can be easily resold on the gray and black markets.

When forming planograms, it is better to allocate a place for such goods near the cash register, where the security service can monitor the buyer’s behavior.

Take into account the general psychological characteristics of customers

Known methods of increasing the efficiency of product display are based on customer psychology. Analyzing sales guides and rules used by our customers, we saw patterns in the formation of the layout in health & beauty chains:

• It is better to place products with bright packaging at the end of the aisle because the buyer notices items in these areas the least. 
• Use bright materials to evoke an emotional reaction and attract attention.
• Half-empty shelves give a negative impression – goods are sold better in stores with a rich layout. Sellers should fill shelves and displays not only before the store opens but also during the work day.
• Goods above eye level are perceived as more expensive products. This is because impulse purchases are typical for wealthy consumers. Therefore, expensive products and gift sets should be placed in the most visually accessible places.

Most cosmetics brands focus on the physiological senses of customers: sight, touch or smell. Therefore, stores offer free samples to help customers choose the right product. A striking example is the attractive scents of free testers in the perfume section.

Expand merchandising opportunities in health & beauty stores

Merchandising programs will only be successful if a well-established system allows employees to do their job effectively. This applies to merchandisers and consultants, who must know precisely the availability of a particular position and navigate an extensive assortment. Convenient solutions for efficient organization of space and control of goods are implemented with the help of software.

Leafio Shelf Efficiency helps manage all sales processes and plan work based on analytics and modern technological algorithms. For health & beauty chains, the software provides significant benefits:

• Creating a layout based on sales data, balances, product turnover, etc.
• Creation of planograms for any type of equipment presented in the store.
• Creation and auto-filling of planogram zones based on selected product attributes (brand, distributor, etc.). This helps planogram managers to organize the space for the convenience of the buyer, as well as for the convenience of reproducing the layout by the employee.
• Analysis of hot and cold zones in sales areas with a macro-spacing function. This helps you understand where to pay more attention to the layout and whether you are directing the flow of customers correctly. Also, taking into account the hot and cold zones, you can change the placement of goods/categories on the sales floor to increase sales or for other goals.
• Monitoring the implementation and neatness of the sales floor layout and the accuracy of the presented promotional products through the mobile application.
• Rotation of the assortment and replacement of positions in just a few clicks.

LEAFIO Shelf Efficiency is constantly being improved and provides solutions based on the actual practical experience of our customers, including in the field of health & beauty. These tools ensure the implementation of an efficient strategy and result in systematic profit growth. 

To summarize

The specifics of the industry dictate the rules that must be followed to increase customer loyalty and sales growth. It isn’t easy to take into account all aspects at the same time. But it is possible if you plan your work with the help of specialized software. Create effective planograms, control the layout of goods and improve business performance by analyzing and optimizing your outcome.