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Cosmetics Firms Dash to Prevent Diversion

NEW YORK -- In the aftermath of the Northridge Quake, a number of cosmetics companies are trying to retrieve their inventories from condemned stores at almost any cost, to prevent the stock from being diverted.<BR><BR>According to the vendors, when a...

NEW YORK — In the aftermath of the Northridge Quake, a number of cosmetics companies are trying to retrieve their inventories from condemned stores at almost any cost, to prevent the stock from being diverted.

According to the vendors, when a store’s inventory is turned over to its insurance company because of a natural disaster, the stock is liquidated and could end up in all variety of mass market outlets. This runs counter to prestige manufacturers’ plans to tightly control their product distribution.

While most stores are cooperating with the beauty companies, the procedure has not been easy.

“We learned a hard lesson in Florida with Hurricane Andrew [in August 1992],” said Robin Burns, president and chief executive officer of EstÄe Lauder USA. “We had a difficult situation where the insurance companies were coming in and taking control of the inventory right away. We ended up trying to outbid liquidators for our own products.”

Burns said she emphasized to stores that Lauder preferred to buy back its stock at wholesale prices.

According to Katherine Meals, vice president and national sales manager at Calvin Klein Cosmetics, the product retrieval has been tough.

“Our staff [near Los Angeles] has been physically exhausted. We have to box goods, tape them up and transport them out. It’s a cumbersome job.

“No one has a good grasp of what they own,” she continued. “The computers are down, and it’s a logistical nightmare.” However, she said, all of Klein’s retail accounts were cooperating with the effort.

Dick Furlong, vice president of finance and administration at Lancome, also noted that most stores were being cooperative.

“I’ve already spent a lot of time in the market, contacting stores and telling them we’re interested in purchasing any damaged goods,” he said. “We’ll do whatever it takes to prevent the products from being diverted, and we’ve had good luck so far.”