Striking rewards in beauty retail

With rapid globalisation and increased connectivity, even the consumer today is aware about trends and key changes in the retail Industry. He just not seeks quality but also an entire experience with it. KPMG estimates that over 43,000 franchisee establishments (valued at USD 36 billion) may be required by 2017 to meet the growing demand in the retail sector from a current base of 13,000 (valued at USD 10.6 billion). Existing retail majors are under pressure to consolidate and increase their franchise network reach. Franchising is expected to continue to be one of the most popular business formats among organised retailers to tap the emerging consumption boom, specifically in the tier II and III cities.

Organic products in demand

With beauty retail boom in India, female consumers started moving away from chemical cosmetics due to the increased awareness of the benefits of herbal and ayurvedic products. With this, increase in income levels, expenditure on beauty and personal care is also growing substantially and this is the major reason for beauty brands to retail their products widely in India. Brand Aaranyaa is one such brand under the umbrella of Vedic Natural care Private Limited.  Currently, the company is manufacturing products for DaburNewU, Sahara Q shop and Faces Canada also. Nagendra Pal Singh, Co-founder & Director, Vedic Natural Care Pvt. Ltd says: “Aaranyaa products are world class natural skin care products, confirming to global standards. Soul of the products is the AFA base (Amino Fruit Acid) which makes Aaranyaa products highly suitable to human skin with its more than 99 per cent absorption properties and light texture, with no harmful/strong synthetic chemical in it. Even upon oral consumption, they don’t harm human body.” It is estimated that the size of the beauty products business in India is around Rs 5000 Crore. If we take the beauty salon and spa service industries into consideration, it is said to be much higher, around Rs 10,000 Crore, according to ASSOCHAM. The market size of the total cosmetic industry, including spa services, is expected to double in 2014. The total beauty business is said to be growing at the rate of 25 per cent, but the growth rate of the herbal beauty business has been higher during the last few years. In fact, the herbal beauty business is driving the growth rate of the beauty industry.

Another brand, Avani Dead sea cosmetics is retailing its products in India and is offering numerous opportunities to the investors. The brand has luxury cosmetics and highly developed skincare products for flawless glowing skin, bringing together centuries old beauty care with modern science. The line of skincare products at Avani are 100 per cent natural and made in Israel using original Dead Sea minerals. Shahnaz Husain Group has been internationally acclaimed for its range of over 375 Ayurvedic formulations for beauty and health care, which includes therapeutic products for specific problems.  Shahnaz Husain, Chairperson and MD, Shahnaz Husain Group says, “The Shahnaz Husain franchise is at the core of the success of the Shahnaz Husain brand. Apart from strong branding, the franchise offers an established business model with proven success rate. The Shahnaz Husain brand has also moved to the smaller cities due to brand identity through the franchise system. The franchise salons are also important retail outlets.”

Driving forces

Growing awareness among youth about protecting their youthful radiance and rising income coupled with the availability of world class products in India are some of the factors that are driving the beauty retail Industry. Going natural is also seen as key trend in today’s beauty conscious consumers. According to Janak Rustagi, COO, MegaKonnect that owns the brand Avani Dead sea cosmetics, “Indians are becoming more and more conscious of their looks and spending on themselves. The middle class has more disposable income than their counterparts 20 yrs back. People are influenced by peer pressures and becoming more conscious of their looks. The number of parlours, salons and spas that have come into existence is a clear indication of the growth in the beauty industry.”

Another striking fact is the sale of beauty products in the hypermarkets and supermarkets. This is majorly due to the expansion of the retail chains. To drive more sales, most brands arrange their products in a proper beauty section at the super stores. The trained staff, expert advice and wide-ranging assistance in choosing products definitely act as a major driving factor.

Potential

Indian market holds a lot of potential for beauty retail brands to flourish. There is still a dearth of quality skin care products, made using natural ingredients and people want more of them. Rustagi of Avani says: “Avani has recently started franchising and are we are looking to start retailing our products in brick and mortar stores rather than just online portals. Even today only 15 per cent of the Indian market is doing the online purchases and majority of the market is still untapped. We are looking to penetrate the demographic in tier II cities where we can easily get a good market share as we will have the first comer advantage. The market holds a lot of potential.” Shahnaz Husain Group recently launched their Just shahnaz retail outlets.  Franchising has been at the core of the success of the Shahnaz Husain brand. All its ventures have extended on the franchise system. In fact, the fast paced expansion is due to the franchise system. The brand believes there is a lot of potential in beauty sector but there are certain challenges also like lack of skilled personnel and professional training in keeping with international standards and also improvement of the services and quality of products, increasing operational costs, etc.

Most profitable format

With availability of number of formats in retailing, brands have now opted for the best ones to retail more number of products. For Aaranyaa, selling via a Multi brand retail outlet is most profitable. For Avani Dead Sea Cosmetics, selling via Multi brand outlets and kiosks or even both is the way to go. In the US, Avani is expanding fast with over 50+ kiosks at multiple locations. The Shahnaz retail format is at various levels, from the shop in shop concept in malls, to the regular FMCG retail system of stores in local markets. With department stores and malls catching up fast as shopping destinations, the brand’s retail format is focusing on the shop in shop concept, with trained beauty advisors. Apart from these, the format includes the Group’s chains of signature salons, which serve as important retail outlets, due to product support by trained therapists and sales person. A Shahnaz Husain franchisee has the opportunity to earn a handsome profit margin on the sale of Shahnaz Husain products at one’s franchise salon, as the brand offers a special franchisee discount on products. Franchisees can open a ‘Shahnaz Forever Beautiful Shop’ or counter at their existing shops and sell Shahnaz Husain products, on a lucrative margin of profit.

Expansion plans

For its expansion, Vedic Natural Care Pvt ltd plans to move to all Metros and State capitals in phase I and then looks forward to cover all tier I towns. Avani Dead sea cosmetics plans to expand its network further in cities like Jaipur, Lucknow, Chandigarh, Hyderabad, Bangalore, Ahmadabad, Ludhiana, Kolkata and Patna.

No matter what, the demand for cosmetics will keep increasing and this surely paves a way for bigger growth of beauty retail which eventually provides dozens of money spinning opportunities to the prospective franchisees and investors.