Why cosmetic chains have their eye on New Zealand retail space

Why cosmetic chains have their eye on New Zealand retail space

Total Property - Issue 4 2017

THE “SELFIE” GENERATION IS DRIVING demand for bricks and mortar.

The cosmetics industry is riding high and increasing its physical footprint thanks in part to the huge uptake in smart phones, the pervasiveness of social media and a desire among teenagers and young women to look good in the photos they share online.

Globally, millennials are spending big on make-up. In New Zealand, Kiwis forked out $105 million on cosmetics in 2016, up 17.7 percent on the year before and almost double the annual spend five years ago.

But unlike other retail sectors, where digital is fast becoming the dominant sales channel, cosmetic chains are seeing huge growth in sales from physical stores.

New Zealand has experienced a boom in the health and beauty sector, with major international players such as Mecca, M.A.C and Benefit Cosmetics establishing a physical footprint in high-profile retail spots in Auckland, Wellington and Christchurch.

Even individual make-up and beauty brands such as Jo Malone London, Chanel and Aesop see the value in bricks and mortar in New Zealand. Their physical stores here have allowed them to control interactions with consumers at a time when department stores, pharmacies and supermarkets are looking to drive sales through aggressive discounting.

For mall operators and landlords in prime retail strips cosmetic stores can be highly attractive.

Not only is the sector hungry to expand through the addition of new outlets but cosmetic stores have bigger margins than other similar-sized retailers and are more able to pay premium rents.

Australian cosmetic chain Mecca has made big in roads into New Zealand, opening two flagship Maxima stores in less than six months, one in Christchurch and one in Wellington.

Christchurch’s Maxima, which opened in November, occupies 155m2 of prime retail space in developer Tim Glasson’s $80 million ANZ Centre, close to the proposed site for UK fashion retailer Topshop. Wellington’s Maxima, which opened just last month, sits in similar sweet retail spot. It occupies 204m2 of ground floor space of the State Insurance Building at 1 Willis Street, in the heart of the city’s Golden Mile.

Benefit Cosmetics, a subsidiary of French multinational luxury goods conglomerate LVMH, is making a similar play for Kiwi custom. The quirky US boutique chain opened its first New Zealand standalone store and New Zealand headquarters in Auckland in March. The 107m2 retail outlet and the 117m2 head office are situated in the 100 Ponsonby Road retail hub, alongside Bed Bath n Table and fashion chains Seed Heritage and Repertoire.

The chain’s arrival has cemented Ponsonby Road’s reputation for beauty, fashion and lifestyle products, with Mecca Cosmetica’s main Auckland outlet, a branch of M.A.C and the concept store for make-up brand Smashbox all within walking distance. The clustering of health and beauty stores can also be seen at the Britomart precinct in Auckland’s CBD, where cosmetic and beauty stores represent a substantial part of the retail offering. Tenants there include Chanel, Kiehl’s, L’Occitane, Jo Malone London, Bobbi Brown and M.A.C.

“In the South Island, department stores are investing heavily in their cosmetic and perfumery departments, which goes to show the strength of the market,” managing director Chris Wilkinson says.

“Department stores are still dominant players in the cosmetics market in New Zealand, when you consider the sales they achieve. Brands are setting up their own stores to create the best environment in which to educate shoppers about the latest trends on social media, and encourage them to buy. Take for example the new Chanel store in Britomart in Auckland CBD. It’s primarily about representing the brand - sales are secondary.”

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