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Barneys: Growing Its Beauty Business From The Ground Up

<CS:BOLD>NEW YORK -- Barneys New York is literally building the foundation to become a player in cosmetics and fragrances.<BR><BR>Driven by top-line concerns and a hunger to convert non-selling space to selling space, Barneys is scheduled to open in...

NEW YORK — Barneys New York is literally building the foundation to become a player in cosmetics and fragrances.

Driven by top-line concerns and a hunger to convert non-selling space to selling space, Barneys is scheduled to open in late March or early April its first true beauty floor — called The Foundation — at its Madison Avenue flagship.

It’s an extensive, and in some ways daring, makeover for what has always been an underdeveloped category for Barneys, ever since the retailer began selling cosmetics 15 years ago at its former flagship on 17th Street here. Like Bergdorf Goodman did in November 1999, Barneys will break tradition by moving cosmetics off the main floor to the lower level, where Fred’s restaurant was housed until relocating to the ninth floor last November.

“This is a real opportunity for us,” said Howard Socol, Barneys chairman and chief executive officer, whose agenda includes raising productivity levels through the $400 million chain. “We are more than doubling the space for cosmetics, going from 3,700 square feet to 8,000 square feet and giving it a new home and adding many new products. It’s being done with taste, quality and uniqueness.”

According to sources, Barneys on Madison Avenue does around $18 million to $19 million in annual cosmetics and fragrance sales, and the store expects the business to increase between 25 and 50 percent in the first year after the renovation.

While the volume isn’t huge by big-city flagship standards, Barneys does score big on some individual lines. For example, on Madison Avenue, Barneys reportedly sells more Kiehl’s products than any other retail door, about $3 million worth in a year, and is among the top five retail doors for Chanel, selling about $2 million worth.

“We’ve been held back by space constraints on Madison Avenue,” added Chris Czajkowski, vice president and divisional merchandise manager of cosmetics. “The renovation enables us to pursue cosmetics growth here, and in our branch stores, too. But our customers expect Barneys to have the assortments already edited for her.”

He predicted that based on the growth on Madison Avenue, Barneys branches, particularly the Beverly Hills and Chicago units, would be able to expand assortments within the year, even without floor expansions. Barneys also has branches in Manhasset, Long Island; Chestnut Hill, Mass., Seattle, and a unit in the World Financial Center, which remains closed since Sept. 11.

As main floor businesses, cosmetics and fragrances are inescapable for anyone entering the store and generate plenty of impulse shopping. Barneys will have to compensate for that lost impulse factor through intensified marketing and an alluring floor design that draws shoppers downstairs with ease. Asked if he was worried about how customers would take to descending down a flight for cosmetics, Socol said it won’t really be an issue. “We’ve succeeded in marrying the two floors together. There are so many reasons I feel good about this. It’s not like other lower levels.”

“The staircase is what we spent the most time working on,” said David New, executive vice president of creative services. “We’ve made it as accessible as possible so there’s no chance you’d miss it.”

It’s a scissor-shaped, architectural glass and steel staircase with a light pool at the base, with access right off the main entrance on Madison Avenue and from the other side of the floor. There will also be elevator access.

Barneys collaborated with Kramer Design Group on designing the floor. “The challenge was to make it look likes it’s always been part there, as part of the Barneys aesthetic and not like a shiny new add-on,” said Robin Kramer, president of KDG. “We were very concerned about the flow.”

The Foundation will strive to sharpen Barneys beauty niche, which can be described as high service and less in-your-face promotion. It offers an edited down mix of classic and trendsetting lines, including a core of limited-distribution European products. The bottles and packaging for many of the sku’s appear more pharmaceutical and high tech in character, rather than stylishly designed like many other beauty products.

The Foundation will have a host of exclusives, including:

Sjal, a holistic approach to treatment for day and night and eye care; in the $195 price range.

Nuxe, a French face and body treatment line, ranging from $16 lip balm to $49 anti-age serum.

The By Terry color line with a refined formulation of pigments created by Terry de Gunzberg, sister of the owner of Nuxe.

Editions de Parfum Frederic Malle [nephew of filmmaker Louis Malle], a collection of nine fragrances from the top noses of Paris, priced from $90 to $165.

Somme Institute, an American line of “cosmeceuticals” or vitamin-enriched facial regime, priced from $32 for a basic cleanser to $68 for moisturizer.

Molton Brown color cosmetics, from $17 for eye shadow to $90 for brushes.

On Feb. 7, Barneys will also launch Costume National’s Scent and Scent Intense fragrances, with Scent also available in a roll-on. Other exclusive offerings include Carita, a full-service line of face and body treatments, and a special Kanebo skin care line called Inner Balance done expressly for Barneys.

Other brands being sold are Nars, Stila, Chanel, YSL, Acqua Di Parma, Bobbi Brown, Parfums D’Orsay, Natura Bisse, Prada, L’Artisan Perfumer, and Versace.

Service features include two treatment rooms,with in-house makeup artists, and custom-made colors on an appointment basis. There will be some open-sell areas, such as the Kiehl’s shop, but the most novel service feature is the three “fragrance tubes” about the height of a telephone booth, for the Editions de Parfum Frederic Malle shop. Like something out of Austin Powers, customers will be able to step into the tubes to get a whiff of what Malle offers. A sales associate sprays a bit of a fragrance into the device which aerates it through the tubes, engulfing you in the scent. But fortunately, at least according to Czajkowski, the sensation occurs without the fragrance permeating your clothes.

The unveiling of the new floor comes at a crucial time. Barneys needs increased sales and profits and more buzz — the kind it had prior to its bankruptcy from January 1996 to January 1999 — to restore confidence in its future. With the luxury downturn, the recession and the impact of Sept. 11, Barneys missed earnings and sales plans last year, but was able to renegotiate its bank loan in December, giving it breathing room to operate.

For Barneys, increasing sales and profits is as important as carving a unique niche in a marketplace overwrought by “product pollution,” as creative director Simon Doonan sees it. “It’s not about aggressive promotions, or putting all these brands in for the dog fight,” he said. “It’s about thinking through what the customer needs. We are really customizing your needs in a specialty setting. We’ve always approached cosmetics in a creative way, we were innovative and probably lost out on dollars.”

The Foundation will absorb most of the $10 million capital expenditure budget allocated for renovation projects on three floors, including relocating Fred’s to nine, and expanding accessories and jewelry on the main floor, where cosmetics has been housed. The first floor changes are expected to be done sometime around this summer. Prior to these changes, the biggest renovation at the flagship involved creating the Co-op on floors seven and eight. Aside from accessories and jewelry on one, no other renovations are set, but Barneys is considering enhancements for shoes on the fourth floor and women’s apparel on the sixth. Men’s luggage and shoe departments were previously expanded.

To kick off the Foundation, Barneys is planting a 32-page insert in the March edition of Vogue and distributing a mailer to 200,000 households that should land in mailboxes around March 15, including 100,000 in the New York metropolitan area. A second mailer will go out May 1. They’re sprinkled with clever and absurd tips such as “Always pepper your conversation with words like ‘nifty’ and ‘sassy”‘and “Never underestimate the charm of unusual skills like playing the ukulele and hog calling.” The themes of the marketing efforts are “taste, luxury and humor” and “intelligent beauty,” Doonan said.

“We are thinking way down the road about how to inspire the customer nine months after the floor opens,” he added.