Specialist chains increasing market share in Central Europe

5 Dec 2012

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Expanding specialised cosmetics chains have been increasing their share among cosmetics distribution channels in Central Europe. On the other hand, direct sellers have been losing their importance due to growing competition not only from retail chains but also from quickly growing internet sales, as indicated in the latest PMR’s report ‘Cosmetics retail market in Central Europe 2012. Market analysis and development forecasts for 2012-2014′

Increased share of specialised chains
Specialised chains have been increasing their share among cosmetics distribution
channels in almost all the countries in question. On more mature and developed markets, like the Czech Republic and Poland, they already account for the largest shares of cosmetics sales.

In the former country, specialised chains boosted their share in the total cosmetics retail to
over 40% in 2011. In 2012, Czechs increasingly opined that specialised cosmetics chains offer a broad assortment of goods at accessible prices.

In Poland, chains are rapidly growing in importance, while independent, traditional
stores are doing worse and worse, and their number and market share shrink from year to
year. Last year, chains already controlled 34% of the market (up from 21% in 2007). This is mainly due to the growing number of their stores, particularly Rossmann, which last year opened 100 cosmetics stores. Chains are also increasing their sales per store. They appeal to consumers by offering attractive prices, frequent special offers, a wide medium-price range and staff assistance.

Chains are also the most important channel in Hungary and Slovakia, while in Bulgaria
they are gaining ground with the expansion of the dm and Lilly chains.

On the other hand, the specialised chains are slow in reaping the benefits of their
investment in Romania, mainly because of the slow change in consumer attitudes. Most of
middle-class Romanians have increasingly turned their attention to large-area grocery stores in the past decades. The group of clients who would switch to a specialised chain is still small, as this is seen as a more high-end channel.

Weakening importance of direct sales
With expanding specialised chains and growing popularity of internet sales, the
declining importance of cosmetics direct sellers can be observed, among which Avon and
Oriflame are the most significant players.

In the Czech Republic and Poland, the channel lost in importance as its share has
been steadily declining. Nevertheless, direct sellers remain among the largest players on the cosmetics market in the two countries. While still popular, in Poland the channel improved its sales only slightly in 2011. Key players in the segment are therefore constantly on the lookout for new ways of keeping their share in the market. Some direct sales companies are expanding to smaller locations where competition is smaller.
In Romania, all direct sellers, except for Avon, were confronted with dropping sales
since 2009. In 2011 the situation reversed and Oriflame managed to impressively rebound, while Avon’s revenues dropped for the first time in ages. As a result, direct sales’ share in the cosmetics market declined by 0.6 p.p. to 19%. Still, this is the highest share of direct sales among the countries under consideration.

In Bulgaria, Avon has been a market leader in cosmetics distribution but nowadays
it is losing share when new strong companies expand. Dm’s rapid development especially
challenges its market position.

With the economic crisis biting into spending on cosmetics and the increasing
competition of the internet, direct selling companies in the past two-three years have been
investing in their online platforms. Avon and Oriflame already have the internet offer.

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