Personal Care Brands - Digital IQ Ranking Index

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    DIGITAL IQ INDEX

    PERSONAL CARE: U.S. SEPTEMBER 29, 2015

    EXCERPT FROM THE DIGITAL IQ INDEX: PERSONAL CARE: U.S. TO ACCESS THE FULL REPORT, CONTACT MEMBERSHIP@L2INC.COM

    http://www.l2inc.com/research/personal-care-2015mailto:membership%40l2thinktank.com?subject=L2membership

  • 2September 29, 2015

    L2 Inc., 2015 Circulation of the report violates copyright, trademark and intellectual property laws.

    DIGITAL IQ INDEX PERSONAL CARE: U.S.

    EXCERPT FROM THE DIGITAL IQ INDEX: PERSONAL CARE: U.S. TO ACCESS THE FULL REPORT, CONTACT MEMBERSHIP@L2INC.COMEXCERPT FROM THE DIGITAL IQ INDEX: PERSONAL CARE: U.S. TO ACCESS THE FULL REPORT, CONTACT MEMBERSHIP@L2INC.COM

    OFFLINEPersonal Care products do not command the same share of wallet online as in the physical retail environment. During the first half of 2015, Health & Personal Care retailers generated $150 billion in U.S. sales (nearly 10 percent of retail dollars, excluding motor vehicles and parts).1 In contrast, the category accounts for 5.7 percent of e-commerce dollars (flat year over year).2 Second only to Food & Beverage and OTC Health consumers, Personal Care shoppers have been slow to change how and where they shop.3

    UrgencyWhile most Personal Care brands continue to cultivate deeper partnerships with e-tailers, select brands are proactively addressing potential threats. For example, several disruptors have capitalized on the replenishment opportunity in an industry tethered to traditional retail formats. Founded just three years ago, Dollar Shave Club now boasts two million active members and a $615 million valuation.4 More recently, the brand claims to have surpassed Schick in razor cartridge volume sales.5 This July, competitor Harrys latest venture round gave the firm a valuation of $750 million.6 Both upstarts are attempting to disintermediate high-margin, low-competition businesses (e.g., Gillette, Schick). Despite operating on a different order of magnitude ($7.9 billion in sales), Gillette has responded. It recently launched Gillette Shave Club, a new avenue of investment with uncertain return.7 The lucrative diapers business, where Huggies enjoys nearly 40 percent market share, is facing a similar threat from The Honest Co., recently valued at $1.7 billion.8 According to reports, as much as 80 percent of The Honest Co.s revenue comes from its diaper subscription service.9,10 It recently expanded distribution to more retail partners, including Target.

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    Source: BI Intelligence, May 2015.

    Source: Euromonitor International, May 2015.

    Personal Care: Online vs. Offline Retail SalesU.S., 20012020E

    Personal Care: Percentage of Sales Attributed to Internet Retailing, by CategoryU.S., 2014

    1. Monthly Retail Trade Report: Retail & Food Services Sales (June), U.S. Census Bureau, August 2015.2. Beauty Beats Drugstores for Ecommerce Sales, eMarketer, July 7, 2015.3. Though Majority of Americans Have Made a Virtual Purchase, They Still See Virtue in the In-Person Shopping Experience,

    Harris Interactive, July 15, 2014.4. Dollar Shave Club Is Valued at $615 Million, Rolfe Winkler, The Wall Street Journal, June 21, 2015.5. Dollar Shave Club Claims to Top Schick as No. 2 Razor Cartridge, Jack Neff, AdAge, September 8, 2015.6. Harrys Picks Up $75.6M at $750M Post-Money Valuation, Lora Kolodny, The Wall Street Journal, July 7, 2015.7. Gillette wants a slice of the online razor club business, Tracy Maple, Internet Retailer, July 16, 2015.8. Telling the truth pays: Jessica Albas Honest Company is worth $1.7 billion, Valentina Zarya, Fortune, August 14, 2015.9. Jessica Albas The Honest Co. Raises $70M, Preps for IPO, Lizette Chapman, Wall Street Journal, August 26, 2014.10. How Jessica Alba Built A $1 Billion Company, And $200 Million Fortune, Selling Parents Peace of Mind, Clare OConnor,

    Forbes, May 27, 2015.

    $400

    $300

    $200

    $100

    $02001 2003 2005 2007 2009 2011 2013 2015E 2017E 2020E

    BILL

    ION

    S

    OFFLINE SALES

    ONLINE SALES

    14.5%

    SKIN CARE BATH ANDSHOWER

    SHAVING BABY ANDCHILD-SPECIFIC

    SUNCARE

    MENSGROOMING

    ORALCARE

    DEODORANTS

    1.9%0.8%

    4.7%3.9% 3.8% 3.0%

    6.5%

    http://www.l2inc.com/research/personal-care-2015mailto:membership%40l2thinktank.com?subject=L2membershiphttp://www.l2inc.com/research/personal-care-2015mailto:membership%40l2thinktank.com?subject=L2membershiphttp://www.l2inc.com/research/personal-care-2015http://www.census.gov/retail/index.htmlhttp://www.emarketer.com/Article/Beauty-Beats-Drugstores-Ecommerce-Sales/1012686http://www.harrisinteractive.com/NewsRoom/HarrisPolls/tabid/447/ctl/ReadCustom Default/mid/1508/ArticleId/1467/Default.aspxhttp://blogs.wsj.com/digits/2015/06/21/dollar-shave-club-valued-at-615-million/http://adage.com/article/cmo-strategy/dollar-shave-club-claims-top-schick-2-men-s-razor/300247/http://blogs.wsj.com/venturecapital/2015/07/07/harrys-picks-up-75-6m-at-750m-post-money-valuation/https://www.internetretailer.com/2015/07/16/gillette-wants-slice-online-razor-club-businesshttp://fortune.com/2015/08/14/jessica-alba-honest-valuation/http://blogs.wsj.com/venturecapital/2014/08/26/jessica-albas-the-honest-co-raises-70m-preps-for-ipo/http://www.forbes.com/sites/clareoconnor/2015/05/27/how-jessica-alba-built-a-1-billion-company-and-200-million-fortune-selling-parents-peace-of-mind/

  • 3September 29, 2015

    L2 Inc., 2015 Circulation of the report violates copyright, trademark and intellectual property laws.

    DIGITAL IQ INDEX PERSONAL CARE: U.S.

    EXCERPT FROM THE DIGITAL IQ INDEX: PERSONAL CARE: U.S. TO ACCESS THE FULL REPORT, CONTACT MEMBERSHIP@L2INC.COM

    E-Tailer DependencyTo date, Personal Care brands rely on third-party dot-coms for distribution. Among industry brands tracked longitudinally, less than 10 percent offer direct-to-consumer (DTC) e-commerce, and only five (Burts Bees, Gillette, Philips Norelco, Philips Sonicare, and TENA) support auto-replenish services. Meanwhile, more than 80 percent of brands provide an online path to purchase from product pagescommonly pushing visitors to Amazon, Drugstore.com, Walmart, etc. Unlike individual brands, major retail players have cultivated two assets required to challenge how consumers approach Personal Care purchases. First, several omnichannel players have well-established loyalty programs (e.g., Walgreenss Balance Rewards) that are leveraged to personalize and target offers. Second, several e-tailers are cultivating the necessary infrastructure to subsidize shipping costs. In a competitive response to Amazon Prime, Walmart has confirmed plans to offer its own subscription service codenamed Tahoe.11 Despite a well-founded aversion to direct sales, manufacturers can develop a winning e-commerce strategy working closely with retail partners and leveraging their scale and customer dataadvantages no individual brand can match.

    Digital IQ = Shareholder Value This study attempts to quantify the digital competence of 72 U.S. Personal Care brands across 10 categories, with a special supplement on subscription services. Our aim is to provide a robust tool to diagnose digital strengths and weaknesses, helping managers achieve greater return on incremental investments. Like the medium we are assessing, our approach is dynamic. Please reach out with comments that improve our methodology and key findings.

    Regards, L2 11. Wal-Mart Preps Rival to Amazon Prime, Amir Efrati, The Information, May 13, 2015.

    0

    200

    400

    600

    800

    AUG 2013 NOV 2013 FEB 2014 MAY 2014 AUG 2014 NOV 2014 FEB 2015 MAY 2015 AUG 2015

    MON

    THLY

    SEA

    RCH

    VOLU

    ME

    IN T

    HOUS

    ANDS OCT 2013:

    $12MSERIES B

    SEPT 2014:$50MSERIES C

    JUL 2015$75M SERIES D;$615M Valuation

    NOV 2013:$25MSERIES A

    JAN 2014:$123MVENTURE

    MAY 2014:$10MVENTURE

    NOV 2014:$75MVENTURE

    JUL 2015:$76M SERIES C;$750M VALUATION

    AUG 2013:$70MSERIES C

    AUG 2015:$100M SERIES D;$1.7B VALUATION

    Source: Google AdWords Keyword Tool, August 2015.

    *Includes additional product sites for Colgate and Bic. Sites may link to more than one e-tailer.Source: L2 Inc., 2015.

    WALMART DRUGSTORE.COM

    AMAZON CVS WALGREENS TARGET SOAP.COM ANY ENTERPRISE

    STORE

    NO PATH TOPURCHASE

    68% 64% 61% 58% 58% 51% 39%15%

    4%

    Personal Care: Online Search Equity of Emerging Subscription Services August 20132015 dollar shave club gillette honest company harrys

    Personal Care: Share of Brand Sites with Any Link to Given E-Tailer August 2015 n=74 Brand Sites*

    http://www.l2inc.com/research/personal-care-2015mailto:membership%40l2thinktank.com?subject=L2membershiphttps://www.theinformation.com/Walmart-Plans-Rival-to-Amazon-Prime

  • September 29, 2015

    L2 Inc., 2015 Circulation of the report violates copyright, trademark and intellectual property laws.

    DIGITAL IQ INDEX PERSONAL CARE: U.S.

    EXCERPT FROM THE DIGITAL IQ INDEX: PERSONAL CARE: U.S. TO ACCESS THE FULL REPORT, CONTACT MEMBERSHIP@L2INC.COM

    4

    GENIUS 140+

    Digital competence is a point of competitive differentiation for these brands. Creatively engineered messaging reaches consumers on a variety of devices and in many online environments.

    GIFTED 110139

    Brands are experimenting and innovating across site, mobile, and social platforms. Digital presence is consistent with brand image and larger marketing efforts.

    AVERAGE 90109

    Digital presence is functional yet predictable. Efforts are often siloed across platforms.

    CHALLENGED 7089

    Limited or inconsistent adoption of mobile and social media platforms. Sites lack inspiration and utility.

    FEEBLE

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