The modern retail fashion and beauty industry dates back to the 19th century. Begun from secondhand clothing stalls, the ready-made retail market grew from the slums into the highest echelons of society. Currently, both beauty products and clothing are sold in a wide variety of establishments, from grocery and convenience stores to high-end department stores and boutiques.
Segmented Market
The retail store is the last stop in a system that produces goods and sells them to consumers. At the manufacturing level, the raw materials are gathered and the goods produced. Whether it is clothing or cosmetics, the items must be properly manufactured at the lowest cost possible for the intended level of final sale. Goods that will be sold at lower-end stores such as Kmart, Walmart, dollar stores, drugstores, grocery stores, and the like must be produced with the least expensive raw materials possible and a minimal amount of labor to ensure that the price point will fall within the accepted range for those budget stores. Items can also be produced at a moderate level for stores that are slightly more upscale, such as Target, Sears, and many mall stores. Moderately priced items can either use slightly more expensive raw materials or take more time and effort to produce. The highest level of mass market production is better and includes most anchor or department stores such as Macy’s, Nordstrom, Dillard’s, and Saks. These manufacturers can produce goods that are made from moderate to higher-priced materials and take more time and effort. Better items are considered to be of the highest quality available to the average consumer. Ready-to-wear, boutique, and designer items are the most expensive goods available, but the market for items of this quality and price is small.
Production
After the item is manufactured, the cost of goods is assessed. The manufacturer will take the cost of all raw materials and labor, add on any extra costs such as shipping and import duty, and then add 40–60 percent to cover overhead costs such as building maintenance, housekeeping, electricity, phone and Internet service, and so on. This is the price that the wholesaler will pay for the item.
At the wholesale level, the products are purchased, warehoused, and shipped to the appropriate location in the quantity that a retail outlet requires. The wholesaler is the middleman, often offering a variety of goods in general such as clothing, cosmetics, accessories, and furniture, or in a particular area, such as t-shirts, perfumes, and costume jewelry, to name a few examples. The retailer is able to purchase required merchandise directly from the wholesaler to be sold to the general public. The wholesaler will add 40–60 percent to cover overhead expenses, and this will be the price the retailer pays.
When the retailer purchases items at a wholesale price, the retailer must mark up the price further before it is sold to the consumer. The retail markup is generally higher than the markups at the manufacturing and wholesale level. The retailer usually has a higher rent to pay and more hourly employees. Additional costs are incurred by advertising and marketing, which are not necessary for manufacturers and wholesalers, in addition to standard costs such as electricity, phone and Internet service, and maintenance and housekeeping. In many higher end shopping centers, the mall itself requires a percentage of sales over and above what the retailer pays to the mall in rent each month. These extra expenses at the retail level mean markups of 100 percent and more. An item that costs $5 in materials can end up with a retail price of $22.50 to $45, depending on the price point (budget, moderate, better, or designer).
Youth Markets
In general, items aimed at younger markets, especially tweens and juniors, fall into the budget or moderate category. These items are priced to meet the needs of customers with a limited income. These items can also be made of lesser quality materials, since they are fad oriented and less likely to be worn for longer than a few months. Adult customers have a larger disposable income and generally have a taste for more classic looks meant to last several months or even years. Adult customers are most likely to shop in the moderate to better categories. Stores such as Forever 21 and Charlotte Russe cater to a young, image-conscious female customer who is looking to purchase items at a low price to wear for a short amount of time. The garments purchased from these types of stores have an expectation of trendiness but not of lasting quality. Contrast this with stores like Talbot’s and Brooks Brothers, which focus on the adult woman shopping for career wear meant to be investment pieces, worn for years in some cases, which must be able to withstand multiple uses and cleanings. The styling, construction, and price point of these two types of stores are markedly different from one another, but each is a necessity to its chosen target market.
Men’s Market
Private-label apparel or direct-to-market manufacturing was used primarily in men’s wear. This allowed a retail store to own and control the means of production and not only create items unique to its own brand, but increase the profit margin considerably by removing the steps between manufacturing and retail sale. The men’s market is a niche market, with individual labels and stores catering to a specific target lifestyle group. This type of private-label marketing was a necessity, as men have been known for their brand loyalty and specific expectations from the brands they choose. Building on the success in the men’s wear market, private-label retailers have become the single largest segment of the retail experience, with stores like Old Navy, The Gap, Anne Taylor, Lane Bryant, and most mall storefront retailers that sell nothing but their own label. While this may not be surprising to 21st-century shoppers, this marks a change in the retail atmosphere. Most department stores will still carry multiple brands and lines, including several in-house labels. This allows stores to spread their profit margin across several brands.
Sales
Private labeling also creates an opportunity for attention-generating sales. With no middleman to pay out to, a store can offer deep discounts when merchandise goes on sale and still make back the initial investment in the item. Sales like this have a multitude of positive effects for the retailer. First, they foster goodwill among consumers, who are always pleased to feel like they have gotten a good deal. Second, well-publicized sales of large percentage discounts are a major draw, bringing more customers in the door. These sales can help a retailer divest themselves of extra or unwanted merchandise as well as bring in a larger than normal crowd into the store. The sale merchandise is almost always placed at the rear of the store, creating an opportunity for the customer to pass by the new and regularly priced merchandise. Sale merchandise can also be placed directly beside the cash registers for impulse buys. Customers who find an item they were ready to purchase for regular price on sale are often willing to take the amount of money they saved and purchase another item. With markups on private-label goods as high as 500–800 percent over the cost of manufacture, this allows the retailer to continue to secure the required profit margin while still offering low prices to its customers.
Various Industries
The purpose of the fashion industry is to create and sell the clothes that a particular market group desires in a style they want to wear and at a price they are willing to pay. The adult woman customer, or missy customer, accounts for the vast majority of all clothing, shoes, and accessories sales worldwide, which totals in the hundreds of billions of dollars each year.
The cosmetics segment of the retail world is not much different. Beauty products like makeup and perfumes are a multibillion dollar business, even before including profits for hygiene-based items such as lotions, cleansers, and other necessities. The segment of the makeup industry devoted strictly to boutique and department store sales alone makes up a substantial percentage of that amount. Beauty’s rise to prestige began after World War I. It did not become socially acceptable for women to wear makeup until the 1920s, but between Hollywood and relaxing social mores, cosmetics became a mainstay for American women.
With such a variety of available cosmetics choices, makeup companies have resorted to two marketing techniques. The first of these is the establishment of seasonal colors. These colors were not only seasonal, with different shades for spring, summer, fall, or winter, but they changed annually. Each cosmetics company also had to set their own shades apart from their competitors and did so with creative and clever names such as Indian Love Call, Cherries in the Snow, Jezebel, Fearless, Where’s the Fire? and the like. Some nail polish companies like OPI take this to an even more unique level with such titles as Aphrodite’s Pink Nightie, I’m Not Really a Waitress, You’re Such a Kabuki Queen, My Chihuahua Bites! and Hoodoo Voodoo?! This marketing technique gives OPI a retail edge by giving them a singular presence among more mundane names like Curtain Call Red and Shy Violet.
Gaining Customer Attention
Another great marketing technique is exclusivity. Even Walmart carries exclusive colors, scents, and gift sets not available in other stores. Holiday time is especially important for this technique, with stores vying for customer dollars. Christmas and New Year’s celebrations also put an emphasis on makeup with sparkle, giving an extra incentive for women to shop for something special.
Once in the retail environment, regardless of the type of store, the customer is subjected to the art of cosmetic advertising. The images and sales personnel are geared toward not just selling an item but selling a story or an image that will in some way improve the life of the customer. Many department store cosmetics counters use video monitors, music, and hands-on displays to entice women to their specific brand. But regardless of gimmick, once a woman settles on a brand, more often than not she is loath to abandon it. The idea then becomes to tempt an established customer to buy something new, something that before that moment, she did not know she could not live without.
In both market segments, the retail world exists to present a perfected version of the world, a story into which the customers can insert themselves. Successful brands connect to their customers on an emotional level, creating more than a great item but an entire experience that surrounds that item. Truly exceptional retail brands are those that positively impact the consumer’s life beyond the moment of the sale, whether through exceptional price, quality, or customer service.
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