Posted by: | 3rd Mar, 2011

Goodbye Sephora, Hello Wal-mart!

Our in-class discussions about pricing and a product’s perceived quality from customers had me interested about the story of a certain high-end cosmetic brand originally sold in Sephora that was discontinued but returned last year to be sold in – of all places – Walmart. Products that used to retail in the $20 – $50 range is now being sold for less than $10 at a discount retailer The brand I’m thinking of is Hard Candy cosmetics – it launched a 261-item line exclusive to Wal-Mart last fall to 3000 stores, with expected sales of $50 million in the first year, retailing between $5 to $10 and targeting women between 18 and 35.

This is a company that’s shifting its target market to a wider market of women between 18 and 35 who are looking for affordable, quality cosmetic items. Compared to its lagging sales when it was sold in Sephora at significantly higher prices (and competing against reputable brands such as Lancome, Estee Lauder, Urban Decay) – moving away from the high-end cosmetics market was a smart choice. When we examine the brand and its products – it is colorful, young, and invites experimentation with its bright colors. But low prices does not indicate low quality – it finds itself in an interesting position where the brand’s products are associated with high-end quality but is offered at drugstore-cosmetic prices, accessible by the everyday consumer.

This move is also reflective of Walmart’s efforts to appeal to higher income shoppers, especially taking advantage of increasingly frugal consumer spending habits during economic recessions. Experts have speculated on whether this deal will make Walmart “a more worthy competitor for Target”. Looking at Walmart’s other initiatives to venture into upscale merchandise such as expanding its selection of name brand electronics and introducing a clothing line from the collaboration of Max Azria and Miley Cyrus – it is a possibility. However, Wal-mart’s potential gains from its foray into higher-end products may just be offset by the risk of losing its core low-income customers.

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