Retail’s Big Bet on Wellness
With recessionary woes looming, retailers are looking to wellness to provide healthy returns in the year ahead.
Consumer interest in the category exploded during the pandemic as many people embarked on self care routines while stuck at home. According to The Global Wellness Institute, the global market is expected to reach $7 trillion by 2025. The trend appears here to stay, despite large swathes of the workforce being called back to the office, as well as an uncertain economic backdrop and soaring inflation.
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An Accenture consumer survey released in September 2022, which polled more than 11,000 people across 16 countries, found that despite respondents feeling increasingly financially squeezed, consumers considered health and fitness to be an “essential,” alongside groceries and household cleaning products.
Around 80 percent intend to maintain or even increase spending on areas related to health and fitness this year, including vitamins and supplements, a major category in retail. Respondents are also taking a more holistic view of wellness, where it is being reframed as more of a consumer staple. Around 42 percent said they are increasing their amount of physical activity, while 33 percent also said they are putting more focus into self care, “indulging in a bath or beauty treatment,” than they were a year ago.
This chimed with a separate McKinsey & Company survey released in the same month, which found that 50 percent of U.S. consumers considered wellness a top priority in their day-to-day lives, up from 42 percent in 2020. It estimated the current spend on wellness products and services to be more than $450 billion in the U.S. and growing at more than 5 percent annually, with Millennials leading the way in wellness purchasing.
“It is something that continues to grow,” said Olivia Tong, an analyst at Raymond James, of the category. “It really kicked up during the pandemic — doing masks at home and other things that maybe you couldn’t do when you had to go to the office every single day. This is an area where, so far, there’s a lot of white space opportunity.”
Those statistics haven’t gone unnoticed by retailers. In May 2021, Ulta Beauty unveiled its in-store wellness shop in 400 stores nationwide, as well as online — a space where consumers could shop all things wellness, from gummy vitamins to skin care to menopause supplements to sex devices (online only) and much more.
It proved to be so popular that the concept has now been rolled out to 800 stores, with chief executive officer David Kimbell telling analysts on Ulta’s most recent earnings call that “while wellness represents a small part of our overall business today, we believe it is a significant longer-term growth opportunity, given…the strong emotional connection consumers have with self care.”
Ulta Beauty has been agile in its response to this demand, dividing wellness into six subcategories: Everyday Care (think daily habits including teeth cleaning); Supplements & Ingestibles (vitamins and minerals); Relax & Renew (incorporating everything from sleep routines to Homebody’s range of superfoods and adaptogens-filled bath soak products); Down There Care (covering the feminine health category, from menstruation to menopause); Spa at Home (personal pampering favorites, like at-home facials and mani-pedis), and the recently added online-only Intimate Wellness (think liquids and devices).
“We’re really pleased with the assortment,” said Monica Arnaudo, chief merchandising officer at Ulta. “We launched this a year and a half ago so we’ll continue to lean in and learn and listen to our guests. Insights really help us drive our assortment so definitely more to come.”
It’s not just Ulta that’s eyeing this growing opportunity to boost profits even further. From department stores to drugstores, retailers are betting big on the category.
“We think it’s a logical adjacency to the strength that we already have in our pharmacy in our over-the-counter medicine business,” said Luke Rauch, senior vice president and chief merchandising officer at Walgreens, adding that wellness products can be found throughout stores. “The opportunity for us is endless here.
“If you think about, at a macro level, the role that we play in both treatment and prevention, we are the market leader of treatment,” he continued. “When you get sick, and you need cough medicine, you come to Walgreens. We think we can play that same market-leading role on the prevention side through wellness.”
In terms of categories, Walgreens is focusing on clean ingredients, from ingestibles to skin care products. For the latter, Heather Hughes, general manager of beauty and personal care at the retailer, believes that while skin care was viewed as being part of wellness by some prior to the pandemic, the rise of self care routines during lockdowns really cemented its place at the cross section of wellness.
“It was happening prior to COVID-19, but as folks had more time on their hands to investigate and really took on the onus of their own health, they built self care routines and so that’s where skin care lies,” she said. “Within that, we find clean beauty to be a massive trend — knowing the ingredients that you’re putting in your body is just as important as knowing the ingredients that you put on your body.”
Wellness also continues to be a “big priority” at Sephora, according to Cindy Deily, vice president of merchandising, skin care. Its primary focus is on supplements, wellness tech, feminine care and sexual wellness, but some of its core beauty categories, such as skin care, bath & body and even fragrance, play a significant role in the wellness space, too.
Topicals, for example, the skin care brand founded by Olamide Olowe in 2020 that sought to reinvent the ointment category, is among the retailer’s fastest-growing beauty brands.
At the same time, Sephora is approaching the category with a broader lens and will continue to explore wellness offerings that may fall outside of these categories, like pregnancy, pre- and post-partum and menopause support, Deily said.
“There are so many unmet needs when it comes to wellness, and we look forward to continued growth and expansion as we strive to meet the evolving needs of our clients,” she said.
Deily is also looking at services as a primary avenue of growth in the wellness arena. Sephora offers HydraFacial treatments in stores, for example, and plans to incorporate other wellness offerings into its services in the future.
Instead of a dedicated area, wellness offerings are integrated into Sephora’s overall beauty assortment in merchandising areas such as Beauty on the Fly and The Next Big Thing wall, although several wellness brands, such as Moon Juice and Hum Nutrition, also have their own branded spaces.
“As the overall category continues to grow and evolve, we’ll continue to look at different ways that we might optimize the client experience in stores on a longer-term basis,” Deily said. “We’re always looking for brands that will help us deliver on our clients’ evolving beauty needs, as we aim to bring them products and brands they may not otherwise have discovered on their own.
“When it comes to wellness,” she continued, “it’s extra important that brands are poised to help educate clients on their products (i.e., what’s in them, how to best use them, etc.), which is especially critical as shoppers navigate this newer space within beauty.”
Other prestige department stores have followed suit. For example, Bloomingdale’s has an online wellness shop where consumers can shop an array of items, such as a Therabody massager, a Smile Makers sex device and Hum Nutrition supplements, and Nordstrom has leaned heavily into the category as well.
As for products for retailers to choose from, there’s certainly no shortage. But when it comes to bringing wellness into retail, education and merchandising is key.
“We’re going to have a lot of consumers who are starting to say, ‘Wait a minute, what am I buying here? Why am I buying it? What’s different?’ The opportunity is there, but it’s going to require, as we get into 2023 and 2024, a rethinking of what is it that retailers, in particular, are going to have to do to help curate, educate, inform and help shoppers buy the right product,” said Wendy Liebmann, CEO of WSL Strategic Retail.
She likened the wellness boom to the rise of clinical skin care a decade or so ago. “It almost goes back to the days when, in the U.S., people didn’t really use much in the way of skin care. So they used Olay or Ponds or something, and once the new options started to roll in it really required a different level of education.”
Tong agreed: “What is necessary for both the retailer and the big manufacturers is to continue to make sure that they educate consumers so that they’re just not buying whatever the last influencer said.”
Both in-store and online, supplements have been a key driver for the overall wellness category, with vitamins and minerals amassing more than $12 billion in the U.S. over a one-year period.
The category’s recent boom is being driven by unique formats like gummies, chocolates and powders from brands like Olly, Liquid I.V., Hum Nutrition, Source, Smartypants and Moon Juice.
“Categories, like vitamins and mineral supplements, are really expanding into lots of other forms, whether it’s Liquid I.V. kind of things, drips, infused waters, bars or powders,” Liebmann said.
Gummies, specifically, have been an increasingly popular option, experiencing a 74.9 percent growth according to Nutrition Business Journal’s 2022 Delivery Format Report. With the supplement market becoming seemingly oversaturated, brands innovating in the way of formats have an advantage and Liebmann predicts will lead the category in 2023.
Supplement brand Olly, heavily focused on gummy formats, is available at major retailers like Target, CVS, Walgreens, Safeway, The Vitamin Shoppe and Whole Foods, and has been a pioneer in providing condition-based products, rather than those based on ingredients.
“Making sure that we are present and growing and bringing the right products and the right experience to retail stores has been a big cornerstone of how Olly has grown,” said vice president of sales strategy Katie Schultz. The brand has created a successful on-shelf experience with its vibrant packaging and clear, benefit-focused product names, like Sleep and Heavenly Hair, making it easy for consumers to understand, grab and go.
Hum Nutrition, founded in 2012, has taken a more prestige approach with its ongoing Sephora partnership, where it has been the number-one wellness brand since it launched in retail in 2015, according to CEO and cofounder Walter Faulstroh. The brand is available in about 500 doors.
“For us, it was a question of working with someone who prioritizes education, and Sephora has really baked into their DNA this educational piece. It’s always about empowering the consumer with important nuggets on how to be successful with products,” Faulstroh said. “Working with partners like Sephora, you can build out programs around sustainability or clean ingredients that give the consumer further validation about what the brand is all about.…It’s validated by a third-party retailer, who has been in the business of prestige beauty for a very long time.”
On what level of education or expertise is needed in categories like supplements, Walgreens’ Rauch noted that while pharmacists have historically played an important role in education, the retailer is also implementing QR codes for some items that take shoppers to an online quiz to find the best product.
“There’s a big opportunity for us to continue to leverage both a physical footprint to beauty advisers and pharmacists, particularly as it relates to categories like supplements and ingestibles. But also to create new digital tools that we can leverage to make it even easier for consumers,” he said.
For Sephora, Deily said similar to skin care, it’s important to know what the active ingredients are and also how the body will react. Aside from Hum Nutrition, Sephora also sells supplements from Moon Juice, Ouai, Vegamour, 8Greens and The Nue Co.
“We are working closely with our supplements/ingestibles brands to optimize storytelling so that the client can shop for their supplements the same way they are shopping for their skin care, with a focus on encouraging transparency around hero ingredients and/or key benefits,” she said. “We also have specific Clean at Sephora criteria in place for supplements/ingestibles that we developed in partnership with a number of trusted experts in the space.”
Retailers like GNC and The Vitamin Shoppe provide employee training and online content for consumers to further educate themselves. Ulta’s in-store event program acts as another means of education for consumers to learn.
Alongside ingestibles, sexual health has become a fast-growing category in the wellness space for many retailers, though mostly online. Over a one-year period in the U.S., the sexual health category grossed nearly $2 billion according to Nielsen, and globally, it is expected to be a $112 billion market by 2030, according to Market Research Future.
Brands like Goop, Maude, Foria, Dame and Smile Makers have been supported by retail partners. While Goop ranges outside of the sexual health category, the wellness-oriented brand is sold at Sephora, Credo, Thirteen Lune, Mecca and more, with business growth over 70 percent.
This January, Sephora launched Dame and Maude on its e-commerce platform, inaugurating the sexual wellness category for the retailer, which for now is only available online.
Ulta also has launched intimate products online only. When asked about the possibility of rolling this out in stores, Arnaudo said: “We’re talking about it. It’s certainly something that we think is an opportunity and I think it’s really going to be about educating our store associates and our teams properly. It’s a consideration.”
At Walgreens, Rauch noted that it has an extended assortment online across its entire portfolio. Brands like Trojan, PlusOne, Skyn, Durex, Lola and Hims & Hers can be found on the site.
“Oftentimes we use online as a laboratory to test whether or not it belongs in the 9,000 locations that we have to serve customers,” he said.
Dame launched in 2015 and is sold at Sephora, Bloomingdale’s and Nordstrom. The willingness of mainstream retailers to enter terrain once considered taboo has accelerated acceptance, according to Alexandra Fine, CEO and cofounder of Dame. “What they’re telling their customers is, ‘Hey this is important. This is a valid thing for you to buy,'” she said. “It gives people access and validates their needs,” she continued, noting that Sephora has supported and educated on the brand through email and influencer marketing.
The sexual wellness category has recently expanded with the emergence of modern menopause brands. The past several years, a litany of brands entered the category, including Cosmoss by Kate Moss, Stripes by Naomi Watts, Womaness, Wile, Kindra, Bonafide, Pause Well-Aging, Better Not Younger and Thermaband to name a few.
With 1 billion people expected to be in menopause by 2025, retailers are beginning to build out sections and end caps for these solution-based brands to educate the consumer and make the products more accessible.
Wile, which launched in 2022 and is backed by actress Judy Greer, made a unique proposition to retailers with its line of products, primarily geared toward women in perimenopause, the stage in which the body transitions into menopause. The market had been primarily focused on only the menopause stage.
“From the beginning, we kept hearing this term future core, like this demographic of women is a future core customer because it’s true. All the retailers we talked to understood there’s a huge whitespace and gap,” said Gwen Floyd, cofounder and CEO of Wile. The brand launched in Walgreens and Whole Foods and was expected to reach $3 million in sales in 2022.
Womaness, a wide-ranging product line to support those experiencing menopause, is another fast-growing brand in the sector, sold at Ulta, GNC, Target and Walmart. Cofounder and CEO Sally Mueller said launching Womaness in stores was a challenge as retailers hadn’t looked at menopause from a holistic approach.
“We have supplements, skin and body products and sexual wellness. We’re the total solution from head to toe, so it’s a new way of merchandising,” she said, noting a lot of customers have done research at home and are entering the store to find something specific.
“The role retailers really have to do is make it easy for those customers then to find the product,” Mueller said. “That’s why I like that we’re merchandised all together in one location at Ulta so that it’s just easy. It’s kind of a trigger for the other needs that she has.”
Aside from merchandising, Ulta has supported the brand through further education. Through its in-store events program, the retailer has raised heightened awareness for Womaness and the menopause category overall. In October, for example, Ulta and Womaness hosted The Menoposotivity Tour, a mobile live masterclass held at three select stores. The event celebrated Menopause Awareness Month and highlighted menopause as a key wellness category.
Experts expect the menopause category to continue to grow, and see white space in other areas. McKinsey cites sleep and mindfulness as key categories that consumers are seeking more of, noting that 47 to 55 percent of Black consumers say they need more in the way of wellness solutions. Nearly a third of respondents are seeking more across the entire category.
And as more brands and subcategories come to market, consumers are looking for innovative products that address several wellness needs, according to experts.
“We’re continuing to see people really trying to be much more proactive in many of the categories and areas…everything from immunity to sexual health and wellness to new technologies,” Liebmann said. “This whole focus on proactive wellness, however we define wellness, will be a really big area of focus for consumers.”
