August 7, 2013
Will Target Become a Driving Force in the Online Beauty Market?
Target, kind of quietly, has been acquiring e-commerce sites to help differentiate and grow in line with its trendy branding position. In March, the retailer agreed to acquire Chefs Catalog and Cooking.com, two e-commerce sites focused on cooking and kitchenware. Yesterday, Target announced an agreement to acquire the DermStore Beauty Group and its DermStore.com site.
DermStore, according to a release to announce the deal, will become a new, wholly owned subsidiary of Target and continue to operate as a separate entity under its online name.
"There is no doubt that the online beauty industry is growing rapidly, and this unique opportunity enables Target to gain insight into the superior, online customer experience DermStore provides," said Casey Carl, president of Multichannel and senior vice president, Enterprise Strategy, Target, in a statement. "Not only will DermStore’s 750-plus brands offer Target expanded breadth across the beauty and skincare industries, but also access to exceptional content and helpful resources we know consumers want."
Dan Obegi, the current CEO of DermStore will be president of Target’s new subsidiary.
"DermStore’s success was built on understanding the beauty market and catering to a shopper who’s seeking a wide array of prestige products, exceptional service and product expertise," said Mr. Obegi. "Our customers have come to trust us to consistently deliver a quality experience and we are confident that this acquisition will benefit Target’s guests and expand Target’s online market share."
The DermStore acquisition signals Target’s commitment to the beauty area as a means to growth. In June, RetailWire reported on the chain’s decision to expands its Beauty Concierge program to 200 stores this summer. Each Concierge is staffed with a "highly-trained, brand agnostic beauty enthusiast" who is available to answer customers’ questions about products. Two-thirds of respondents to a RetailWire poll said the Beauty Concierge program would be rolled out to all Target stores in the future.
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Recent Discussions
Discussion Questions
What do you expect Target to do with DermStore.com? Will Target become a driving force in the beauty products category as a result of the actions it is taking in its stores and online?
Poll
In some ways I think both Walmart and Target are thrashing, trying to get their hands on the online shopper. Walmart keeps buying tech companies, and Target buys niche retail players. I imagine they are thinking “store within a store” and that’s fine.
What Target has to be careful of, though, is alienating its poorer customers. If it appears to be going up-market it will give back a lot of customers to Walmart.
Beauty is a strong niche business for Target, and they have further differentiated themselves by adding more staffing than competitors like Walmart. This move is similar to the home goods acquisitions in the spring, because it allows Target to test products and brands before rolling them into bricks-and-mortar. And this can also turn out to be an especially robust omnichannel opportunity for Target.
Target is doing what companies should do when they want to expand in a market: they are investing. With the addition of the “beauty expert,” as well as this new online beauty acquisition, Target is really putting their money where their mouth is. Instead of reinventing the wheel, it’s smart for the retailer to partner with an online model that’s already working. I’m not sure if Target will become a driving force, but they will definitely be a category leader in this field. Whatever Target does, they do it well.
The idea of having a specific focus on targeted areas or categories online that match with Target’s consumers has potential. While any one store may not have a large consumer group in a particular segment, the segment may be large across all consumers. Augmenting in-store assortment and experience with online activities makes sense. The issues are logistics, details, and implementation.
Since Target’s introduction of the beauty concierge program, it only makes sense that they would invest to expand the category.
Of course I will be interested to see how they tie the in-store concierge program with the on-line DermStore. That’s where the beef is. IMHO
Target’s recent acquisitions reinforce the notion of the blurring of retail channels. Today, good marketing is about understanding what consumers buy and where they buy it, whether that’s online or in the brick and mortar store. While the DermStore acquisition may not, in and of itself, make Target a driving force for beauty, it will certainly help to raise the bar on its understanding of how consumers operate in this area and thus help them to better serve beauty consumers. Having this well-rounded knowledge will definitely help to further its competitive positioning.
I fully understand what they are doing and why they are doing it—as covered so well by the RW panelists.
I’m not so certain that it will succeed. It’s a great idea—toyed at for years by any number of beauty care companies, but if manufacturers aren’t seen as authorities in this area why should we believe retailers can be?
Can they do business? Yes!
Can they do enough business to create a sustainable mass scale offering? Count me skeptical.
Very interesting move by Target. Acquiring DermStore Beauty Group and DermStore.com positions Target to become competitive in the beauty products category with some middle market department stores as well as Sephora.
One of the similarities I see with Sephora will be Target’s in-store Beauty Concierge program. Each Concierge will be cross training in multiple product lines, similar to the sales staff in a Sephora specialty store. This is different than at department store beauty brand counters as the sales staff is trained only their particular brand.
The Beauty Concierge program will be an important factor as Target builds convergence of beauty products and expertise between online and in-store.
DermStore gives Target 3 things:
1. Equity of beauty category to bolster position with “fashionistas”
2. Category with high purchase frequency ala grocery
3. Preexisting ecommerce/direct sell skills ala Chefs Catalog and Cooking.com
Together this is a stream of content and consumer insight when combined with in-store activities add to TGT understanding of consumer behavior.
Of course there are inevitable integration issues, which could be nasty.
Which is why we say, “retail ain’t for sissies.”
Health and beauty is a category that is ripe for disruption and for rapid growth in the percentage of sales happening online. As Target develops its offering, they have an opportunity to take share from traditional department stores, like Macy’s.
One thing they might consider is a name change, as “DermStore” deserves to be in the annals of unfortunate company names.
My ex and my daughter have purchased Erno Laszlo cosmetics via mail order for decades from an offshore site (a Caribbean island, I think). According to them, it’s the best makeup at the best prices. They were unfamiliar with DermStore.com when I recently asked them, and promised to check out the Laszlo stuff on the site to compare availability and prices. Having used the products for so long, and being comfortable with mail order, they may find that DermStore.com fits their needs best.
B-b-but, when I mentioned that DermStore.com was part of Target, they expressed concern about the purity and quality of the Laszlo products offered there. And, they also found their fave products on Amazon.com, too. They’d just never looked, happy with their Caribbean source. On the topic of the DermStore.com website, both expressed disappointment.
So from my family’s perspective, on a very narrow selection of beauty products, Target’s DermStore.com will have to provide a much slicker and attractive website to engender confidence.
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In some ways I think both Walmart and Target are thrashing, trying to get their hands on the online shopper. Walmart keeps buying tech companies, and Target buys niche retail players. I imagine they are thinking “store within a store” and that’s fine.
What Target has to be careful of, though, is alienating its poorer customers. If it appears to be going up-market it will give back a lot of customers to Walmart.
Beauty is a strong niche business for Target, and they have further differentiated themselves by adding more staffing than competitors like Walmart. This move is similar to the home goods acquisitions in the spring, because it allows Target to test products and brands before rolling them into bricks-and-mortar. And this can also turn out to be an especially robust omnichannel opportunity for Target.
Target is doing what companies should do when they want to expand in a market: they are investing. With the addition of the “beauty expert,” as well as this new online beauty acquisition, Target is really putting their money where their mouth is. Instead of reinventing the wheel, it’s smart for the retailer to partner with an online model that’s already working. I’m not sure if Target will become a driving force, but they will definitely be a category leader in this field. Whatever Target does, they do it well.
The idea of having a specific focus on targeted areas or categories online that match with Target’s consumers has potential. While any one store may not have a large consumer group in a particular segment, the segment may be large across all consumers. Augmenting in-store assortment and experience with online activities makes sense. The issues are logistics, details, and implementation.
Since Target’s introduction of the beauty concierge program, it only makes sense that they would invest to expand the category.
Of course I will be interested to see how they tie the in-store concierge program with the on-line DermStore. That’s where the beef is. IMHO
Target’s recent acquisitions reinforce the notion of the blurring of retail channels. Today, good marketing is about understanding what consumers buy and where they buy it, whether that’s online or in the brick and mortar store. While the DermStore acquisition may not, in and of itself, make Target a driving force for beauty, it will certainly help to raise the bar on its understanding of how consumers operate in this area and thus help them to better serve beauty consumers. Having this well-rounded knowledge will definitely help to further its competitive positioning.
I fully understand what they are doing and why they are doing it—as covered so well by the RW panelists.
I’m not so certain that it will succeed. It’s a great idea—toyed at for years by any number of beauty care companies, but if manufacturers aren’t seen as authorities in this area why should we believe retailers can be?
Can they do business? Yes!
Can they do enough business to create a sustainable mass scale offering? Count me skeptical.
Very interesting move by Target. Acquiring DermStore Beauty Group and DermStore.com positions Target to become competitive in the beauty products category with some middle market department stores as well as Sephora.
One of the similarities I see with Sephora will be Target’s in-store Beauty Concierge program. Each Concierge will be cross training in multiple product lines, similar to the sales staff in a Sephora specialty store. This is different than at department store beauty brand counters as the sales staff is trained only their particular brand.
The Beauty Concierge program will be an important factor as Target builds convergence of beauty products and expertise between online and in-store.
DermStore gives Target 3 things:
1. Equity of beauty category to bolster position with “fashionistas”
2. Category with high purchase frequency ala grocery
3. Preexisting ecommerce/direct sell skills ala Chefs Catalog and Cooking.com
Together this is a stream of content and consumer insight when combined with in-store activities add to TGT understanding of consumer behavior.
Of course there are inevitable integration issues, which could be nasty.
Which is why we say, “retail ain’t for sissies.”
Health and beauty is a category that is ripe for disruption and for rapid growth in the percentage of sales happening online. As Target develops its offering, they have an opportunity to take share from traditional department stores, like Macy’s.
One thing they might consider is a name change, as “DermStore” deserves to be in the annals of unfortunate company names.
My ex and my daughter have purchased Erno Laszlo cosmetics via mail order for decades from an offshore site (a Caribbean island, I think). According to them, it’s the best makeup at the best prices. They were unfamiliar with DermStore.com when I recently asked them, and promised to check out the Laszlo stuff on the site to compare availability and prices. Having used the products for so long, and being comfortable with mail order, they may find that DermStore.com fits their needs best.
B-b-but, when I mentioned that DermStore.com was part of Target, they expressed concern about the purity and quality of the Laszlo products offered there. And, they also found their fave products on Amazon.com, too. They’d just never looked, happy with their Caribbean source. On the topic of the DermStore.com website, both expressed disappointment.
So from my family’s perspective, on a very narrow selection of beauty products, Target’s DermStore.com will have to provide a much slicker and attractive website to engender confidence.