Battle for the beauty dollar

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Byline: Carolyn Cummins, Commercial property editor

It’s lipsticks opened and ready at 10 paces as the cosmetics world takes on the traditional department stores.

As in the fashion industry, having a stand-alone cosmetics site is proving powerful for consumers, the brands and landlords.

In an age where pampering businesses are among the biggest revenue-generating tenants, more space is being allocated in shopping centres and suburban strips.

In Sydney and Melbourne, leading brands are fighting for stores, which has led to healthy rental competition for landlords.

It is also eating into the heartland of the department stores, where cosmetics account for more than 20 per cent of the total sales at Myer and David Jones nationally, making up 25 per cent of their gross profit.

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They are high-margin products and ones that the chains are keen to keep under their domain.

The biggest splash has been made by overseas giant Sephora, which has opened in Pitt Street Mall, Sydney, and is scouring Melbourne for a flagship location.

Mecca, the Australian-owned business, led the way, and it too is expanding. It was founded by Jo Horgan in 1997 with the first Mecca Cosmetica store in Toorak Road, Melbourne. Mecca Brands has 62 stores across Australia and New Zealand. Horgan said 2014 was a big year of expansion. “We opened 14 new doors around the country,” she said. “This year we have plans to open around 10 new stores with an end goal of 90 stores in total.

“We believe there’s still a lot of opportunity for Mecca Cosmetica in high streets around the country. Our other key focus is the opportunity for further growth with our Mecca Maxima retail concept predominantly in shopping centres over the next two years.”

There is also the L’Oreal-owned Kiehls, which has a strong presence in Australia, as do the Estee Lauder-run Jo Malone and Mac brands – all of which are looking to expand.

CBRE head of retail brokerage leasing Australia Leif Olson said the competition was strong among cosmetic retailers, all of whom want a bigger exposure to Australia. “The pedestrianisation of George Street, Sydney, will provide a bonanza for these stand-alone stores, and we have been fielding many inquiries,” he said.

Knight Frank’s leasing agents secured Cosmo Cosmetic at 460 George St, next to Topshop, in 2010 and in early 2015 secured MD Ranking at 630 George Street, which sells “budget” cosmetics and beauty products.

Knight Frank’s senior director, leasing, Alex Alamsyah, also secured skin-care beauty products Forever Flawless at 413 George St in 2014 and said there would be more and more similar concepts entering, such as Oro Gold at 323 George Street and Origani, which is also coming.

CBRE head of Melbourne retail leasing Zelman Ainsworth said the Melbourne CBD retail market continued to draw international attention from some of the world’s biggest retailers.

“Melbourne is now home to a number of global retailers’ best trading stores, these encouraging retail success stories is what is driving the vacancy rate in the Melbourne CBD down and rental levels up,” he said.

CBRE Melbourne retail leasing team member Stephanie Smith said there was increased demand from cosmetic brands wanting to occupy stand-alone retail shops in the CBD, with the brand awareness and record turnover levels in the CBD as the main drivers.

“Consumers cannot get enough and are happy to pay a premium to buy locally, drawing international cosmetic retailers into the Australian market.

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“Sephora is the brand the consumers want in Melbourne. In April 2015 the international cosmetic brand announced their plans to roll out up to 20 stores in Australia, consisting of two flagship stores in both Sydney and Melbourne.”

CBRE’s Samantha Hunt said there was a market beyond department stores in the $3-billion beauty industry.

Flagship and department stores could successfully coexist in international markets, she said.

CAPTION(S):PHOTO: Crowds inside the store at the opening of Sephora in Sydney’s Pitt Street Mall.