Fast Five Shorts | How Will E.l.f.’s Dollar General Expansion Impact Beauty Retailing?
In the latest edition of Omni Talk’s Retail Fast Five, sponsored by the A&M Consumer and Retail Group, Avalara, Mirakl, Ownit AI, and Ocampo Capital Chris Walton and Anne Mezzenga discuss: How E.l.f.’s Dollar General Expansion Will Impact Beauty Retailing
For the full episode head here:https://youtu.be/HfqxboxZ35Q
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Transcript
In its earnings call last Wednesday, Elf Beauty's CEO announced plans to expand with Dollar General stores.
Speaker A:Quote we're pleased to announce we'll be expanding, we'll be expanding Elf to a subset of Dollar General stores in November, E L F Beauty CEO Tarang P.
Speaker A: Amin said during the brand's: Speaker A:And as restated by Glossy Quote, Dollar General has a stated strategy of serving the underserved, with 80% of its stores serving markets of 20,000 people or less.
Speaker A:With this launch, we hold true to our mission to democratize access for consumers who otherwise wouldn't have the best of beauty, particularly in rural areas which have traditionally been served by only the major legacy brands.
Speaker A:And yes, how will Elf Beauty's expansion into $ General impact the beauty retail landscape?
Speaker A:What is your take on this headline?
Speaker B:This is a massive opportunity for E L F and I cannot wait to to see what this test proves out for them because I think that you traditionally look at the Dollar Store market and it's the legacy brands that are in there, the Maybellines, the COVID Girls, it's middle of the road product and for those who aren't familiar with E L F, it's really this elevated beauty product.
Speaker B:If you look online, this product wins consistently time after time wins awards for being best in beauty and it really is that upper lower end tier, like the top of the lower end tier pricing.
Speaker B:But you get really great higher quality products than you do with a lot of the legacy brands.
Speaker B:And so I think, you know what really, what really was an eye opener for me when I heard this was an experience I had recently where my kids, they wanted to go to the five below dollar store and I was surprised when I was in there with them like they started carrying some of these products and I was surprised that you know, typically I would just let them run free and like they would pick out their stuff and we'd go check out.
Speaker B:But I was actually surprised that I was, I was in the beauty section just checking it out and sure enough, you know, they have some of these products that ordinarily I'd have to go to a Walmart to get or I'd have to go to a Target to get and now I could get those products in that same place.
Speaker B:So I think as Dollar General especially is continuing this massive expansion, to be able to have yet another product for me to pick up while I'm on that Dollar Store trip could prevent me potentially from having to make another trip to a Target or Walmart and could start to steal share from some of those stores.
Speaker B:So I love this move.
Speaker B:I think tons of opportunity, especially in some of these rural areas where again, like you said in the intro, there's not access to these high quality beauty products, especially at this price point.
Speaker B:So I love it.
Speaker A:Right, so, and let's play a game here.
Speaker A:So let's say, let's say like 10 years from now, ELF has expanded across the country in Dollar General stores.
Speaker A:They've expanded their beauty lines in general across Dollar General Stores.
Speaker A:Who wins and who loses in that?
Speaker A:I mean, I guess we know who wins, who loses in that.
Speaker A:If in that eventuality, should that happen in your mind in the landscape?
Speaker B:I mean, I think that you start to look at the product set, the exclusivity that some of these dollar stores are getting with some of these brands.
Speaker B:And I think, like I said, I mean, I think you start to look at Walmart and Target, really, really starting to be Walmart.
Speaker B:Even, even, you know, and potentially even Amazon for some of these same day purchases.
Speaker B:Like, you know, beauty is still not a place where I think a lot of people are going to Amazon first for these products.
Speaker B:But yeah, I mean you've got a great quality product here.
Speaker B:You're saving yourself a trip.
Speaker B:And I think, you know, we've, we're starting to see so many more categories and so many more reasons to shop the dollar concept both from a product availability perspective and from a price point that, that yeah, I think, I think we could start to see some share stolen from, from a Walmart.
Speaker B:But what about you?
Speaker A:That's.
Speaker A:Yeah, no, I mean I, I don't disagree with you, but I think, I think, I think about it a little bit differently.
Speaker A:I think if you're Walmart, I think you're okay because you are bolstered by the grocery trip.
Speaker A:You might lose a little bit of your business in the category, but if you're the beneficiary of an auxiliary trip, like your point about the trip is really interesting.
Speaker A:So by that I mean if you're a Target or an ulta, this move I think hurts you big time over time.
Speaker A:And it all goes back to me to that age old action.
Speaker A:We've discussed and debated on this show a lot and involves Clayton Christian's theory of low end disruptions.
Speaker A:That customers who do not need the full performance valued by customers at the high end of the market will therefore always go where their needs are met at the lowest cost to them.
Speaker A:And so Dollar General is serving that need in this case.
Speaker A:And so that cost could be the low cost of the items at Dollar General or the fact that as you mentioned, that you no longer need to take that extra chip to a Target or Ulta.
Speaker A:And the other part about this and I think is really interesting if we step back, Target particularly has a ton of risk here in the long run because you have a one stop mass merchant competitor that basically is Walmart so far to date.
Speaker A:But with this elf beauty news, you've got dollar generals pushing to food as well.
Speaker A:You've got their pop shelf concept expanding.
Speaker A:That day could be coming soon when there's a dollar store one stop shop concept here in the next five to ten years and, and that when that happens, Target's not going to know what hit it, I think.
Speaker A:And that's why this is a really interesting headline too.
Speaker B:Yeah, I don't, I don't think you can just put Target in that category though, Chris.
Speaker B:I still think Walmart's at risk too, especially when you look at the, because of the footprint like where people are going to get and especially if they do start to have groceries that are available.
Speaker B:Like even the people that still have to drive 25 minutes to a Walmart, if they can go to their dollar store that's on their main street in town, that could start to steal share too I think.
Speaker B:But I think your points are solid in that the Dollar store is coming for the mass merchant and our economy especially right now is absolutely ready for a lower price option.
Speaker A:Yeah, the dollar store one stop shop is an untapped idea, you know, and what does that look like and how big is it and what products are in it?
Speaker A:Like that's what's happening here in our minds, I think.
Speaker A:Yeah, great discussion.
