More than 9 million posts on Facebook's (FB) Instagram get the hashtag #selfiesunday, 6 million-plus are marked #selfienation, about 275 million are tagged #selfie, and 302 million are simply tagged #me.
So is it any surprise that products like Make Up For Ever's "Ultra HD" foundation, Temptu's airbrush foundation kits, or Pur Cosmetics' "Love Your Selfie" palette exist?
"Millennials have a mindset of being 'selfie-ready,'" Piper Jaffray analyst Steph Wissink told Investor's Business Daily. That has helped drive lip and eye products to become two of the best-performing cosmetic categories for the last three years, she says, highlighting that the beauty sector's growth tracks "almost exactly" with the rise of smartphones and mobile devices.
Camera-friendly cosmetics — once the realm of news anchors and movie stars — are now mainstays at specialty beauty stores Ulta Beauty (ULTA) and LVMH (LVMUY)-owned Sephora. But as Amazon (AMZN) continues to suck up more dollars from consumers, brick-and-mortar chains are increasingly latching on to the social media-driven fire for cosmetics and skin care products, which are proving to be a glimmer of hope for a surprising range of shops trying to lure Instagram-savvy shoppers.
Last year, cosmetics, skin care and fragrance made up a $37.7 billion market in the U.S. vs. $266.8 billion in apparel and footwear sales, according to Euromonitor research. But beauty has been the fastest-growing retail segment for at least the last three years, outpacing apparel, footwear, food, in addition to being one of the fastest-growing segments online, said NPD Group analyst Karen Grant.
Echoing that trend, Ulta continues to crank out double-digit same-store sales gains — 14.4% in its most recent quarter — while the Gap (GPS) and Macy's (M) each posted comps of negative 2% in their latest reports, while Nordstrom (JWN) reported a 1.2% decline. Their respective stocks have followed the diverging sales trajectories as well.
IBD'S TAKE: Robust and reliable growth appeals to institutional investors, so it's not surprising that Ulta has seen eight straight quarters of rising fund ownership. Plus, four typically better-performing mutual funds have reported a position in the stock.
Macy's Selfie-Stick Giveaway
The major chains have taken notice, and are looking for a makeover with some social-media flair.
Retail icon Macy's, which by Cowen & Co.'s estimates will be overtaken by Amazon next year as the biggest U.S. clothing seller, is planning to open more in-store locations of luxury beauty retailer Bluemercury, a 2015 acquisition, and is expanding its brand assortment beyond traditional prestige names to include smaller labels.
And for any shoppers who bought $35 in Rampage accessories, the nation's largest department store also recently offered a free selfie stick.
"Beauty is the new hoodie, in terms of being a product that works well with social media," said Cowen analyst Oliver Chen, noting that retailers are looking for categories that are less vulnerable to promotions and unseasonable weather. "You can't deny the power of social media. On average, someone will spend over 15 hours a week on social media."
Social media help shape and stimulate new trends, he added, as well as educate others about those trends. Makeup lovers now scour Alphabet's (GOOGL) YouTube for contouring tips and skim hashtags for brow-shaping tutorials from the seemingly endless parade of self-appointed beauty gurus with a domain name and an Instagram account.
Department store beauty counters remain a fixture but are in particular danger of losing relevance in this digital age. NPD Group said that compared to two years ago, 11% more women are doing cosmetics product research online.
By the time the customer enters the store, she's frequently past the product research stage, says Wissink. "She walks in, she says 'I need palette 212,' and (the salesperson) goes 'Wait a second, don't you want to see our lip, our eye (products)?'"
The social-media driven shift in habits means retail heavyweights have to enhance the store experience. In fact, chains that previously had no service aspect are adopting in-house experts to guide customers through the beauty aisle.
Beauty Consultants At CVS, Target
For example, CVS Health (CVS) now has in-store beauty consultants and last year upgraded its makeup and skin care offerings in a few thousand locations. In its August earnings call, CEO Larry Merlo said the drugstore chain was focused on shifting its assortment toward health, beauty and store brands, all of which are higher-margin segments.
And Target (TGT) features a "beauty concierge," clad entirely in black and available to answer questions about the big-box retailer's brands.
"It's meant to create retail theater," said Wissink, noting that customers "crave that tactile in-store experience."
Shoppers enjoy sampling new products in store, and the quest for a Holy Grail blush can become a day out with the girls. In the process, it's not uncommon to snap a selfie and send it to a friend — or to Twitter (TWTR) followers — for immediate feedback.
For their part, premium brands like Estee Lauder and Clinique are loosening their grip on exclusivity as they accept that shoppers like to sample different brands from a variety of retailers.
They've broadened their distribution to specialty retailers like Ulta and lower-tier department stores like J.C. Penney (JCP), which nixed creating a whole new in-store beauty experience in lieu of bringing in an already-successful titan: Sephora.
Its in-store Sephora locations were among the department store's top-performing divisions, the company said in its Q2 earnings release in August, and there are plans for more Sephora shop-in-shops to drive beauty-revenue growth.
"Seems like everyone's trying to get a piece of that pie," said FBR analyst Susan Anderson. "It's working, at least for Sephora and Ulta, so everyone jumps on the bandwagon."
And as beauty products increasingly drive traffic to stores, chains that traditionally haven't sold them are now testing them out.
Books, Coffee, Lipstick
A Barnes & Noble store seems like a peculiar place to open up a beauty counter, but it may be inclined to seize trends early, given that Amazon laid waste to book sellers.
The Glossary, as it is cleverly called, is a college-focused shop-in-shop stocked full of makeup and skin care products from Smashbox, Burt's Bees and other millennial-friendly brands, not far from the Jane Austen paperbacks and math textbooks needed to survive freshman year. Barnes & Noble College — a subsidiary of Barnes & Noble Education (BNED) -- has rolled out the pilot program at a handful of locations, including Emory University, Southern Methodist University and the University of California at Riverside.
"(It's) similar to what they did a few years ago with coffee shops," said NPD's Grant. Barnes & Noble wants shoppers "to browse, to know that they can hang out." After all, the longer retailers can get customers to stay in the store, she said, the better the chances of them buying something.
Apparel stores like Urban Outfitters (URBN) and American Eagle Outfitters (AEO) are also cultivating nascent beauty offerings. Teen retailers have broadly been trying to reconfigure their identities now that their millennial consumer base has grown up and out of midaughts trends.
Urban's curated "Back-to-School Beauty" collection showcases a small mix of products, including trendy Korean brand Tonymoly and uberhip Milk Makeup. (Besides select Urban Outfitters, the only other place to buy Milk in a store is Sephora.) In its mid-August earnings call, Urban Outfitters management called out the strength of its beauty segment, as well as its home and intimates divisions.
American Eagle's foray into the beauty space has been more hesitant, though it may have more up its sleeve. Its Aerie Global Brand President Jennifer Foyle noted in American Eagle's May earnings call that the company has assembled a team "to venture into the beauty business, but we are going to walk before we run." It, too, sells Tonymoly face masks, plus some assorted Aerie-branded lotions and body washes.
Rolling out new display cases is one thing, but building up a healthy following on Twitter, Facebook or Instagram is another.
Out of all of its department store brethren, Nordstrom has the strongest social presence, with 2.1 million Instagram followers to Bloomingdales' paltry 608,000 and J.C. Penney's 300,000 follower count. It was one of the first major companies to incorporate Like2Buy into its Instagram profile, allowing customers to click through and buy the pictured products.
All of them pale in comparison to Sephora's 8.8 million followers and Ulta Beauty's 2.4 million Instagram devotees. Still, the department stores are seeing progress at the cash register.
Nordstrom's summer "Glam-Out Days" offered free makeup tips and services during its yearly "anniversary sale" event. According to Piper Jaffray research, beauty products had the highest sellout rate during the promotional period, with 51% of Nordstrom's makeup and skin care products selling out, up from 30% last year and 8% in 2014.
"One of the things that makes beauty important within department stores is (that) it's a gateway," said Grant. "It helps the retailer attract other consumers, whether it's apparel or footwear. One of the things they've used the beauty space to do is carve out new consumers or drive traffic through the rest of the store."
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