Niche as a category in beauty is often a traffic driver. Consumers will come to the drug channel specifically to see what’s new in niche, embracing a treasure-hunt mentality similarly associated with the dollar store shopping dynamic. In other words, shoppers may not know specifically what product they’re shopping for, but they know they can find the “new” in the drug channel’s beauty section. “Niche products in the beauty store reinforce the message to the beauty shopper that the drug store is the first destination to find out what’s new, exciting and different at mass retail,” commented Joe Millin, president of Woodridge Labs.

“It’s definitely a destination purchase,” he said. “She knows the drug store is filled with those treasure hunt opportunities.”

If retailers stocked only mainstream brands, they’d lose they’re finger to the pulse of “what’s next,” said Joel Cardin, executive vice president of Pacific World. “Because what’s next and what’s growing a lot of times is going to come from niche companies.”
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Niche in personal care and beauty is not necessarily the same as niche in health care. Whereas niche in OTC often services a specific condition for which there is a finite market–a significantly smaller market as compared to mainstream products–niche beauty care items can address mainstream product offerings for such niche demographics as ethnic skin care and hair care.

“Milani as a company was developed five years ago to service a niche market that existed in the cross-cultural, multi-cultural cosmetics industry,” stated Bob Wallner, vice president of sales with Milani Cosmetics. “It blends into the stated desire for most retailers today to micro-market, to try to bring product to the specific demographic that predominates [the local region],” he said. And it’s not a product line that appeals only to ethnic consumers. “Because the color range that we offer is very vivid, high pigmentation … it’s a brand of inclusion, not exclusion,” he said.

Like niche in health care, beauty niche items are characterized as being more profitable on a per-item basis than a corresponding major brand. Niche brands also help define the raison d’etre for a retailer. Wal-Mart, for example, trades on its value concept–shoppers know they’ll be hard-pressed to find a better price outside that mass merchant. Niche helps bring customers through the doors of those retailers not trading significantly on price.

There’s also the chance that a niche brand will bring in a whole new category or consumer habit that never occurred before. Purell, for example, pretty much created the hand sanitizer category. Another example would be Rembrandt, which brought tooth whitening to mass retail.

But seeding niche products onto the shelf can become a balancing act for retailers–stocking mainstream, albeit somewhat commoditized, products that consumers expect on store shelves on one end versus niche products that may not generate the same sheer volume of turns that a mass product generates. “You’ve got to be careful when you cut certain niche products,” said one industry executive who asked not to be named. “Because even if the turns aren’t there, you may be losing the draw of that niche product.”

An example of that would be Corn Huskers, which recently went to Johnson & Johnson with its acquisition of Pfizer. While J&J, and Pfizer before, certainly are not considered niche companies, Corn Huskers skin moisturizer is considered one of those venerable brands that attracts an intensely loyal shopper. “The owner of the brand … spends no money on [Corn Huskers], but it is an item that if a retailer has on the shelf, they’re fulfilling a niche because there is a customer … who’s going to come in there and buy that item.”

Part of the appeal of mainstream brands is not only the national advertising support that helps drive foot traffic through a retailer’s doors, but also the consumer insights and analytics a larger manufacturer can provide to their retail partners.

However, it’s a metric that niche companies can provide to retailers as well. “As a higher and higher percentage of niche companies become analytically armed at a comparable or higher level than major companies, the rationale for major brands winning the merchandising jump ball is diminishing somewhat,” acknowledged Jeff Elderton, chief operating officer for the Joyner Sales Agency. “Retailers are also benefiting from technologies which allow for a more global view of the merchandising. This allows for a total store analytics perspective which will shift merchandising strategy based on store-level category-segment-brand productivity and adjacency optimization.