Cosmetics the new battleground for retailers

Lipstick wars are gaining momentum across the country, led by French-based cosmetic giant Sephora, which is opening its fifth NSW store at Macarthur Square in Sydney's south-west in June.

Cosmetics sales are lucrative as they have some of the biggest margins in retail, and the double bonus is that they are popular with all ages of, mainly, female shoppers.

According to IBIS World, the Australian cosmetic sector is worth about $4 billion, and had sales growth of about 3 per cent on average.

"The constant introduction of new products has been a key driving force in the industry's performance, as has Australian consumers' willingness to buy an increasing range of complex formulated products and premium green products," IBISWorld says.

"The development of fusion and eco-friendly lines has stimulated new demand in an otherwise mature, saturated industry. As a result, industry revenue is expected to grow at an annualised 2.6 per cent over the five years."

The new trend of male grooming, being dubbed "menaissance" is also seeing a growth in that sector for skin care and hair products for the male population.

It has been said that the opening of Sephora and the expansion of the Australian brand, Mecca Maxima, have put pressure on the cosmetics sales in the two department stores, Myer and David Jones. Priceline is also making a dent with its large offerings of cosmetics and skin care ranges.

The director and head of retail leasing Australia at CBRE, Leif Olson, said the cosmetics sector had a huge retail advantage given its wide appeal to anyone from 14 to 80-plus, with brands catering from entry level to luxury consumers.

"We are currently witnessing the rise of standalone cosmetic stores including Sephora, part of the LVMH group and the global leader in cosmetics," Mr Olson said.

"While department stores have had a monopoly on cosmetics for many years, we have recently seen the emergence of more players in the market. This includes local operator Mecca Maxima, who have had considerable success with a highly successful formula, taking key locations."

Other players include Bobbi Brown, MAC and Kiehl's, while the luxury cosmetics industry is also going through an expansion phase with Dior and Chanel opening.

The new Sephora will be the second store opened this year by the French beauty retailer and the ninth across NSW, Victoria and Queensland.

It will feature Sephora's most sought-after brands - Tarte, Anastasia, Kat Von D, Beauty Blender and Marc Jacobs Beauty - alongside new products from Blithe, Murad, Tarte Skincare and Sephora Collection.

The national director, research at Cushman and Wakefield, John Sears, said the popularity of cosmetic retailing was two-fold.

"It is part of the international retailer story, which have more efficient models than local players, and also the lipstick effect of instant gratification and an ability to splurge without breaking the budget," Mr Sears said.

Country manager of Sephora Australia, Libby Amelia, said the store would incorporate "direct-from-the-US fixtures", such as the Benefit Brow Bar and Sephora Beauty Studio, and customers would have the opportunity for exclusive, one-on-one access to Sephora's beauty experts as part of the complimentary and redeemable paid service offering.

"After such a great reception for our four Sydney stores (Pitt Street, Broadway, Macquarie and Warringah), it is clear that there is huge demand for Sephora's exclusive brand offering in NSW. Naturally we are thrilled to be able to offer our south-west Sydney customers the opportunity to experience the wonderful world of Sephora, right on their doorstep at Macarthur Square," Ms Amelia said.

Macarthur Square

It will be part of the $240 million development at Macarthur Square, which is jointly owned by the Lendlease-managed Australian Prime Property Fund Retail (APPF Retail) and the GPT Wholesale Shopping Centre Fund.

The redevelopment of the Lendlease-managed centre includes a new-format David Jones across two levels, international retailer H&M and a a new fresh food market hall, and more than 40 new specialty stores. Following its recent redevelopment, Macarthur Square is the largest shopping destination in south-west Sydney.

Macarthur Square centre manager Pedro Araujo was pleased to welcome Sephora to its retail list.

"We are thrilled Sephora will be opening their doors to our customers in June," he said.

"Sephora is an exciting addition to the new retail experiences at Macarthur Square and further cements our position as the No.1 place to shop in south-west Sydney."

This story Cosmetics the new battleground for retailers first appeared on The Sydney Morning Herald.