Natural Cosmetics Conference 2014: [Show Report] Day Two

The second part of my article about the Natural Cosmetics Conference here in Berlin: again, be warned: this is a long text!

Big data and shopper insights – Payback

Day Two started with an interesting presentation from Stephan Visarius, head of sales at Payback, one of Germany’s largest customer loyalty programmes. Amongst the official partners cooperating with Payback are the Kaufhof department store chain, drugstore chain DM, Rewe supermarkets, Alnatura organic stores and Aral petrol stations, in addition to a huge range of other companies; you can also get Payback points when you order at Amazon, buy something on eBay or fashion store Zalando or book a journey through Expedia.

For my international readers – this is how Payback works: You can sign up for a free Payback card at any of the official partners. The information they request when you sign up are the full name, date of birth and address (i.e. already a very valuable data set!). Every time you make a transaction, the card is swiped at the check-out till. Therefore every single purchase you make is registered by Payback. Every few months or so Payback sends out coupons which can be used online or offline – for example, you might get five times the points of a DM purchase or 30 extra points when you buy a specific beauty product. The points you collect can then be exchanged for products or services, but you can also print out Euro vouchers to be used in participating shops or give the points to various charities.

According to Visarius, in Germany there are 36 Payback transactions per second and 3 million transactions per day at the 600-odd Payback partner shops (online and offline), with 24m active cards in Germany – Payback is major business and you can imagine the gigabytes of consumer data that the company is assembling every day!

I also have a Payback card and it was fascinating to hear what Payback can extrapolate from the data they collect. For example: customer A purchases a significant amount of hamster food, perhaps on a regular basis. Based on the fact of this purchase, Payback (or rather its analysts) will then extrapolate that the household of this customer most likely has children aged, say, 7-10 years old (the age when they can take care of small animals themselves). It is also very likely that soon these children will be old enough for their first mobile phone – which means that perhaps now is the time to offer this particular customer a pre-paid mobile phone contract.

Or, and this example I liked in particular, a 35 year old woman regularly buys the same makeup brands. Then, all of a sudden, she switches brands, buying more expensive products; perhaps using more makeup than previously. Based on this purchase record, Payback extrapolates it is very likely that this woman is no longer single. Who’d have guessed!

Visarius also described the basic parameters of the average organic beauty consumer, based on the demographic profiles derived from the Payback data. 80% of organic beauty customers are female with about half of them aged between 35-55 years. In Northern and Southern Germany more organic products are purchased than in the East and West – this has to do with the varying spending power in the different geographic regions. Urbanites and families with children buy organic C&T more frequently than the average demographic; organic consumers also shop more often online, give more money to charities, frequently buy at DM drugstores and in general buy more healthy products than the average consumer.

According to Visarius, Payback can select from some 70 different criteria to define their target consumer which means that they can do very specific coupon mailings (the “get 30 extra points when you buy a specific product” approach that I mentioned earlier) and therefore steer consumers towards certain brands or products.

Retailing – successful online, offline and multichannel concepts

The next presentations dealt with retailing – online/offline and multichannel, illustrated by two Best Practice examples.

Retail consultant Alexander von Keyserlingk (check out his blog here) spoke about how important it is for independently owned stores to make the retail experience they offer exciting and engaging. Individuality is the keyword here: individuality, authenticity and a well-told brand story.

He illustrated this by introducing some interesting stores in different parts of Germany. Each of these stores has a distinctive and unusual retail concept. In Düsseldorf, for example, there’s a store called Emma’s Enkel (Emma’s grandchildren). Now, an “Emma” or “Tante Emma” (Aunty Emma) store is the German expression for a small, neighbourhood grocery store – you probably know the type; one of those shops where the owner stands behind the check-out till himself/herself, knows exactly what the customer’s individual preferences are because he/she has been running the store for decades; a personalized and relaxed shopping experience – pretty much the complete opposite of what a large, modern supermarket chain does.

In Germany, the real Tante Emma stores disappeared a long time ago, at around the same time the big German supermarket retailers and discounters started to expand. The Tante Emma approach, however, is now making a bit of a come-back. Germany’s second-biggest supermarket retailer Rewe, for example, launched a new organic retail format a few years ago. The TEMMA chain (yes, TEMMA stands for Tante EMMA) is trying to revive the neighbourhood store atmosphere by offering a premium organic supermarket combined with a stylish restaurant section. Temma recently opened its first outlet in Berlin, by the way; I wrote about the new TEMMA for Mintel and you can read about it in a few months time.

Anyway, to return to von Keyserlingk’s presentation: Emma’s Enkel in Düsseldorf was opened by two young men. The store is an online/offline supermarket with a rather unique concept: they do have groceries on the shelves but the majority of products are listed online. The store has a comfortable café area with ipads; customers can use these tablets to order the products they want (alternatively you can tell one of the supermarket staff or order the shopping on your own smartphone), have a coffee and after 15 minutes or so your shopping basket is waiting at the check-out till, ready to be paid for.

According to von Keyserlingk, Emma’s Enkel is very popular amongst senior citizens who appreciate the personal touch as well as the fact that they don’t have to push a trolley along crowded supermarket aisles. I had never heard of “Emma’s Enkel” before but will check it out the next time I’m in Düsseldorf – what a great concept.

And this was one of von Keyserlingk’s points: concept trumps location – if a store has a retail identity that engages the consumer’s emotions and interest; if the shopping atmosphere (interior design, choice of brands, quality of the advice and so on) forms a cohesive whole, the customer is much more likely to return and to tell his/her friends about this interesting shop he/she discovered. Whether the store is based right in the middle of the city center or in a remoter side street is less important – what matters is the store’s personality.

And one of the Best Practice examples illustrated this aspect beautifully. Organic perfumery Greenglam is both an online and offline perfumery which is very successful indeed. Now, I have ordered at Greenglam in the past, they have a fabulous selection of niche and premium brands. I vaguely remembered reading that they had a stationary store but that was about all I knew. As part of her presentation, Christina Kraus (the founder of Greenglam) explained how she came to open the business – a wonderful brand story.

She and her husband originally ran a pharmacy which focused on herbal products. Then she decided to stock The Organic Pharmacy, a very expensive and exclusive organic beauty brand from the UK. In order to boost sales she launched an online store – greenglam.de – in 2008. After a while she added more brands and now greenglam.de offers some 85 German and international organic and natural labels. The online store became so successful that Kraus decided to close down the pharmacy and instead open a retail store in the Southern German city of Augsburg. The stationary Greenglam store opened its doors in July 2013, offering some 70 brands in a beautifully designed interior. There is also an attached beauty salon.

The second Best Practice example came from the world of digital marketing. Naturtalent2 is an online store founded in 2010 which sells the certified organic cosmetics range of the same name. Founder Philip Grote explained how he started promoting Naturtalent2 through social media and then switched to a digital marketing strategy.

Naturtalent2’s marketing mix utilises pretty much everything the online world has to offer – like SEO (search engine optimization), affiliate marketing, Facebook ads, YouTube videos, Pinterest, online market places, price search engines and social media. Even so, you still need the occasional bricks & mortar presence, even as an online pure player. And Naturtalent2 is going for the tried-and-tested pop-up store concept – they will have a pop-up presence on Alexanderplatz in Berlin later this year.

A reductive modernity – Stiftung Futurzwei

The first afternoon presentation came from Harald Welzer, a future researcher and director of Futurzwei foundation. Welzer is advocating what he calls a “reductive modernity”, a re-thinking of the way we consume things – basically a change in consciousness.

He says that over the last decades consumption has been increasing sharply, with people buying more and more products and brands. Ironically these purchases increasingly include green/fair trade/sustainable products, which created the impression that by buying more green products we can mitigate climate change and environmental destruction, live a more sustainable lifestyle and make the world a better place.

However, the answer would be to buy less, period, not buy more green products. Or at least substitute those products we really need in our everyday life, with green or trade fair brands.

And by the way, as far as food and cosmetics are concerned, Germany is one of the cheapest countries in the whole EU. Germany has a very strong retail sector with plenty of competition between the different retailers, so prices for most FMCG categories are generally low. Unsurprisingly, Germans are enthusiastic consumers!

Anyway, Welzer says that the assumption: “Everything can stay the same as it was as long as it is greener or more sustainable” is the wrong approach. The answer is to consume less, not more. This will help curb the expansion of our liberal market economy – not bring it to a halt, of course, which would be counter-productive – but rein it in so to speak. Which would also mitigate the drain on our natural resources. And would make a start by changing things for the better.

Welzer’s foundation, by the way, also collects stories – stories of projects that people have started to make a change in their own neighbourhood. After all, lasting change has to begin at a grassroots level. On the Futurzwei website some of these stories are listed in the “Zukunftsarchiv” (futures archives) section and they are entitled “Geschichten des Gelingens” (success stories). Very inspiring to read.

Female commerce – how to women shop online

The next presentation came from Sandra Kröger, ceo of marketing agency Rascasse. She spoke about the different shopping approaches of male and female consumers. Basically, men have a linear shopping approach when they want to buy something: they start researching possible products or brands, draw up a short list, buy the product they decided on and that’s it, they are done.

Women, on the other hand, think in a circular way; when they research brands or products they constantly integrate new impulses and ideas into their purchasing decisions, so their individual customer journey is in a constant state of change. Kröger had all sorts of charts and diagrams to illustrate these gender-specific customer journeys – very interesting indeed.

Both men and women use user-generated content (product reviews, product pictures taken by other users, online discussions) which they perceive as more authentic and unbiased than corporate content (official brand website, official Facebook profile and so on). Which is also why social media multipliers like bloggers or YouTubers are playing such a major role in influencing the purchasing decisions of the average consumer. For many people, peer reviews are one of the most important purchasing criteria.

In her presentation Kröger also listed a whole bunch of interesting facts: for example, women extensively use Google picture search when they research beauty products; YouTube is a super important channel for brands to promote themselves whilst Facebook is less important than in previous years. User-generated content is much more effective than corporate-generated content – we already mentioned that – which is also why an effective social media marketing strategy is so important for any consumer brand.

Organic beauty e-commerce – najoba.de

The last presentation of the day included a Best Practice example from the world of e-commerce: organic beauty store najoba.de was launched in 2013 and has already become a well-known site for customers who want to buy organic cosmetics. Najoba currently sells some 60 German and international organic brands and the store’s manager spoke about the pros and cons of online retail: amongst the pros, for example, is the very wide range of products that an online store can offer in contrast to a stationary store – an online store doesn’t need shelf space for presentation so they can stock more brands, including niche brands and limited editions. You can also react much faster to trends and quickly add new products to your brand list.

As part of an online presence you can also offer your customers a wide range of information resources – ingredients lists, reviews from other customers, info on certifications and seals, how to use the products – perhaps illustrated with pictures or videos – and background information about brands and companies. It is much easier to analyse where the customer is coming from and what he/she is looking for (which articles does he/she put in his shopping basket, for example?) and of course you have a very wide choice of digital marketing channels including social media.

The cons of online retail include the very high expectations that customers have these days when they order online: very fast delivery, efficient customer service, free product returns and so on. And of course, in online retail there tends to be a fairly low customer loyalty. After all, your online store is not the only store around. One quick price comparison and your customer is shopping at another site. And selling cosmetics online is a little tricky anyhow: this product category relies on customers being able to try out the texture or scent of a product, to see how it feels on the skin. And of course this is much easier to do in a bricks & mortar store.

Even so, e-commerce is increasingly steadily in Germany and cosmetics are amongst the top product categories that are purchased online. And although many online C&T stores are still quite boring there are some very stylish online perfumeries around.

The last day of the conference finished with another panel discussion – organic cosmetics in the year 2020: what will the market look like in 5-6 years? The points that were raised during this discussion were pretty much the same topics that appeared in the presentations; The organic market will continue to grow, customers are getting more informed about seals and certificates but there is still significant label confusion; online retail is an important channel for organic beauty in particular although so far it is not a threat to the stationary C&T market, and the influence of the consumer in changing market structures and the way that companies manage their brands will continue to grow. One the whole, the outlook for the organic market is excellent and personally I’m willing to bet that 2014 will be another good year for the German organic C&T market.

And by the way: well done for reading the article all the way to the end! Thanks!