Strategic Group Mapping: Beauty Retailers

Brenna Kacar

Strategic Management

September 28, 2017

Strategic Group Mapping: Beauty Retailers

INDUSTRY: Beauty Retailers

        Map Analysis: The companies plotted in the map above compete within the beauty retailer industry across differentiating characteristics such as price ranges, product breadths, quality, and geographic scope.  The two variables identified above highlight general price of products and geographic range that these competitors are grouped with.  Within the beauty retailer industry companies can be grouped based on the brands and products they offer.  My first step in identifying where companies should be plotted was to research them and identify what consumer markets they reached based on the brands they sell so I could plot them on the price variable.  Within the sample list I labeled four groups within the industry as “high-end” represented in orange, “high-end/drugstore” in green, “bath & body” in purple, and “drugstore” in blue.  Brands ranged from high to low price points such as La Mer and Dior to easily accessible brands like Maybelline and Conair.    

        The next characteristic analyzed was the geographic range of each company based on where their stores were located nationally and internationally.  Information for this variable was found on the varying companies “about us” pages.  The least number of locations being Bluemercury with 124 stores across 22 states (Bluemercury), CVS Pharmacy totaled with 9,700 locations across 49 states, Puerto Rico, and Brazil (Company Information).  Another factor that I took into account when mapping geographic scope was the number of international locations.  As depicted Boots UK is low on the geographic scope variable because the company operates locations in the United Kingdom and Ireland (Our Stores), while Sephora operates stores featured in 33 countries worldwide (About Us).  Other companies competing within this international geographic scope were Sally Beauty and Bath & Body Works.  Though CVS Pharmacy and Walgreens have the highest number of locations nationally they lacked in international locations.  

        The two main strategy groups among the list of companies are “high-end” retailers and “drugstores”.  Companies competing within the higher-end category retail designer collections ranging in uses from skincare, makeup, hair-care, nails, and beauty tools.  Brands represented advertise themselves as having the highest quality product with the price tag to match.  Featured across all three “high-end” companies are brands such as Keihl’s, Yves Saint Laurent, and NARS.  Drugstore brands usually represent the same categories of product use, but are found at much lower price ranges and easily found at multiple stores with brands such as Jergens, L’Oreal, and Neutrogena.

        The biggest barriers for a startup to enter the “high-end” distribution industry would be costs, brand recognition, loyalty of consumers and brand partners.  Retailers, such as Nordstrom, have been around since the beginning of the 20th century with 349 stores across 40 states, Puerto Rico and Canada (About Nordstrom).  This type of storefront expansion would be difficult for a new retailer to compete with simply because of the cost it takes to build and maintain a single store let alone almost 400 locations.  Brand recognition also acts as a barrier because consumers trust that they will enter a Sephora or Bluemercury store and have access to their luxury products and experience the highest level of customer service.  A new retailer could be blocked by consumer recognition and comfort of existing retailers.  Lastly, a startup would have to build relationships with the brands they will be selling and convince them that it would be in their interests to offer their products at a new retailer.  The barrier would be a brands reluctance to partner with a new retailer that doesn’t have established market connections.

        Barriers to entry on the drugstore side of the industry include the highly competitive atmosphere, and the recent push for online distributors.  The drugstore industry is highly saturated with competition between major chains such as Walgreens and CVS as well as independently owned stores that would pose a major threat to a drugstore startup.  From my own experience of shopping in drugstores and observing my surroundings in commercial areas I’ve observed the abundance of drugstores to choose from and the density in which they are made available to the consumer.  Using Boots as an example, their website featured the statistic that “approximately 90% of the population is estimated to be within a 10 minute drive of a Boots store” (Our Store).  There is also the barrier of online distributors such as Amazon, and Overstock, which sell the same products and feature the same brands as storefront distributors but offer consumers the convenience of products arriving at their door without having to leave the comfort of their home.  Drugstores will need to plan for the future and strategize whether they will continue expanding storefronts or move in the direction of online retailers.

        The unused market position that makes the most sense for a new entrant to the market to fill would be the low price, high geographic scope sector.  I think it is a matter of time before this position is filled because companies are constantly making acquisitions and mergers with competing companies.  There are already movements toward global pharmacy-led, health and wellbeing enterprises such as the Walgreens Boots Alliance (About Us).  The Walgreens Boots Alliance became the “largest retail pharmacy, health and daily living destination across the US and Europe with a presence in more than 25 countries” (About Us).  I believe alliances would be the only way for a “new” entrant to take advantage of this space.  Drugstore retailers could only utilize this space, because higher-end or mixed-priced distributors wouldn’t fit the low price variable.