Distribution

There is a time to decide which distribution channels Neutrogena has to use in order to promote the WAVE. Let us start from the following fact: when Neutrogena entered Russian market in 2006, many experts were surprised that the company, which always sold its products exclusively in pharmacies, decided to sell its products in Russia in the beauty store called Arbat Prestizh. Such an unpredictable decision was mainly explained by the fact that one year before the launch of Neutrogena, J&J (owner of Neutrogena) introduced the medical cosmetics brand RoC. What we mean is that J&J decided to diversify its distribution channels and to avoid competition of two brands. Anyway, it was planed that Neutrogena would compete both with medical cosmetics, such as Vichy and RoC, and with mass cosmetic brands. Furthermore, it was predicted that L’Oreal would be the main competitor of Neutrogena.

 Nowadays J&J uses various distribution channels in Russia to promote Neutrogena. However, it is necessary to point out that Norwegian formula series is sold both in drug stores and beauty stores, whereas cleansings and lotions for deep cleaning are offered predominantly in pharmacies.

 Let us consider the main tendencies of the cosmetics distribution on the Russian market. The analysis revealed that the role of pharmacies in the cosmetics distribution is increasing gradually. It was forecasted that pharmacies would leave by other distribution channels in the long-run. Nowadays Pharmacy 36,6 represents more than 25% of the Russian market, and more than 1/3 of the Moscow one. Furthermore, it was found that supermarkets and specialized beauty shops strengthen their positions on the markets, taking consumers away from beauty salons. In 2010-2011 the percentage of the largest supermarkets in distribution was 29% and of specialized beauty shops – 23,7%. Additionally, about 80% of sales in specialized beauty shops occurred in such magnates as Letoile, Rive Gauche, Ile de Beaute, Douglas Rivoli,  Podrughka, All!Good.

 Remembering the fact, that initially J&J didn’t want to use the same distribution channels for RoC and Neutrogena, we examined their market shares nowadays.

Source:DSM Group ISO: 9001:2008

 As we see on the graphs, RoC experienced the decrease in sales in Russian pharmacies during the last two years, whereas Neutrogena raised them. Despite the fact that two brands are allocated to different market segments - luxury and the mass one - we decided to concentrate mainly on the beauty shops and to sell 75% of Neutrogena WAVE in them, whereas only 25% - in pharmacies. Such a decision was backed up not only by the situation with RoC and Neutrogena, but also by the high popularity of droggeries among Russians. Furthermore, we will start distributing the WAVE in urban areas of Russia, including Moscow, St.Petersburg and the central part of the country, considering these locations the most promising and the most lucrative ones. After a while we will penetrate further.

  Analyzing the most popular beauty shops and pharmacies among Russian consumers, we decided to offer Neutrogena WAVE to the clients in the following ones:

Pharmacies:

• 36,6
• Pharmakor
• Zdorovie ludi
• Pervaya Pomosh’
• Ozerki

Beauty shops:

• Rive Gauche
• Letoile
• Douglas
• Podrughka
• All! Good
• Spektr
• Ulibka Radugi

 Sources:

http://marketcenter.ru/content/document_r_4B6A225A-6B48-4F91-BFC1-DB80FEAF6AB2.html - Review of the Russian cosmetics market

http://elit-galand.ru/rusmarket - Russian market of cosmetics and perfumery

http://www.dsm.ru/content/file/dsm_11.pdf - Pharmaceutical market of Russia 2011. Group DSM

http://www.dist-cons.ru/PressRelease/PressReleaseShow.asp?id=262916 – J&J introduces Neutrogena to Russia