Retailers eye health and beauty segment

Retailers eye health and beauty segment

India’s second largest listed retailer, Shopper’s Stop Ltd, is running a pilot project for a chain of beauty and personal care products called Arcilia. The 5,000 sq. ft store, currently being piloted in Pune’s upmarket Kalyani Nagar area, houses luxury and premium brand cosmetics, perfumes, accessories such as watches and sunglasses and other high-end personal care products.

Launched a week ago, the company intends to expand the chain. It is not the only company looking to create a presence in the health and beauty retail segment. Several retailers in India are in the process of testing or entering the Rs25,000 crore personal care retailing segment, which is among the fastest growing retail segments according to AT Kearney, a management consulting company.

Reliance Retail, the retail arm of Reliance Industries Ltd, launched a pilot store for its health and beauty chain, Reliance Wellness, at its first hypermarket in Ahmedabad last fortnight. After gauging the response to its first store, which sells drugs and personal care products, the company intends to roll out stand-alone stores and store-in-stores in its hypermarkets. India’s largest listed retailer, Pantaloon Retail India Ltd, which currently runs hair care chain Star Sitaara, is also planning to revamp and strengthen its offering in this segment. Consumer products company Dabur India Ltd has upscaled its plans to open 160 health and beauty stores from the 120 its had announced ­earlier.

“As disposable income goes up, people will first spend on food and grocery, followed by clothing. And as incomes grow, the next area for spending will be personal care products," said Hemant Kalbag, who heads the retail practice at AT Kearney. “Retailers want to be in this (segment) because it is a high-margin business. Pricing has nothing to do with manufacturing costs, the space required is less than for a supermarket and while the product portfolio is great, there are not many retailers in this space."

Several organized retailers such as Subhiksha Trading Services have set up pharmacy chains, but only the RPG Group has a health and beauty chain, called Health and Glow. Analysts say the success of male fairness creams and Marico Ltd’s Kaya Skin Clinics suggests that Indians are spending more on themselves.

“This is an attractive segment, and is large and growing. And being a speciality segment, it is a smaller format compared to hyper- and supermarkets. Also being branded product driven, supply chain issues are much lesser compared to, say, food, and not as risky as fashion (perishability)," said Harminder Sahni, managing director at New Delhi-based retail consulting company Technopak Advisors.

Several retailers are focusing on offering both products as well as services such as giving professional beauty advice or ayurvedic consultations in this segment. This could help increase margins in a segment where gross margins are 30%, compared with 20% for ­supermarkets, according to AT Kearney.

“Indian retailers have either gone the beauty route or the health route," says Peter Baker, chief executive of Dabur’s health and beauty stores, which will open in January 2008. “There has not been anyone who has offered a good range of health, beauty and consumer products together," he says.