NEW YORK — This holiday season, retailers figure if they can’t beat Wal-Mart, they’ll join the giant. Retailers from every mass-market channel are slashing prices and offering value to keep up with the nation’s largest discount chain.
Speaking this week during National Association of Chain Drug Stores’ meetings in New York, NACDS chairman and Rite Aid president Mary Sammons commented, “We are well-positioned for the holiday season with good values.” She added that drugstore chains have eliminated any notions that the channel is high priced. Top drug chain executives would not name Wal-Mart specifically, but most said they had chopped prices to meet competition head on this year.
While stores lured consumers with rock bottom prices on portable DVD players and digital cameras, beauty buyers duplicated that strategy with markdowns on blockbuster beauty kits and fragrance gift sets.
Taking their cue from Wal-Mart, other retailers learned how to put pressure on vendors for keen prices, while also finding ways to streamline operating costs to offset the crunch of lower retail rings.
Chain stores, including Kmart, Walgreens, CVS, Meijers, Wegmans and Target, priced beauty products to grab consumers’ attention. “We’ve gotten as efficient as Wal-Mart,” explained a buyer for a major mass-market chain. “If they can do it, why can’t we?”
The bold pricing statement is expected to push Christmas sales about 4 percent over last year for the mass beauty category, merchants said. Although that’s a small increase, without the pricing incentive buyers said sales would be flat. And, since the lower prices were created via imports or deals with suppliers, they are not expected to sap profits. Plus, the aggressive pricing has enticed more traffic.
Several buyers asserted that this was their best post-Thanksgiving weekend in years. The National Retail Federation expects $220 billion will be spent on holiday purchases this year — mass merchants are vying to be the place for the bulk of sales.
The decision to emulate Wal-Mart comes at a precarious time, however, as even Wal-Mart revised its sales projections downward in light of the high price of gasoline cutting into shopping visits. However, if the corner drugstore is priced the same as Wal-Mart, it could become the more economical stop. Some top merchants in the country also think Wal-Mart is putting less of an emphasis on the beauty category, clearing the way for other discounters, drugstore competitors and even grocery chains.
This story first appeared in the December 3, 2004 issue of WWD. Subscribe Today.
Tours of discount, food and drugstores in the days after Black Friday found shelves packed with value such as a Markwins Wooden Jewelry box filled with cosmetics and priced at under $12. Several chains took advantage of pallet programs that allow store employees to simply unwrap the package and have a temporary fixture loaded with product.
Wal-Mart, not to be outdone, took its value price points even lower by importing its own sets this year, especially in the bath category. An observation of the merchandise assortment reveals about 99 percent of the bath selection is exclusive to Wal-Mart. This ploy helped Wal-Mart put out gifts for under $3.
Kmart also looked to use the bath category to entice gift buying. The chain featured 25 percent off all bath collections such as Calgon, Dove and an exclusive import that featured bath products in a wicker basket. The push on bath signals a return to using that category as a gift idea.
An emphasis on value has also helped bring excitement to a category some retailers were about to give up on — mass fragrances. One upscale supermarket retailer reported an increase in holiday mass market scents for the first time in years. “We came out with a new pricing strategy and we’re doing well, especially with Coty scents,” she said.
“So far, despite later shipments, our Christmas sell-through is slightly ahead of last year. This is encouraging, considering that last year we had a very strong Christmas and that there is a higher amount of discounted prestige fragrance and Asian imports in stores this year. We are seeing strength across our brand portfolio, especially our older, classic brands,” commented John Galantic, president of Coty Beauty U.S.
He added, “It’s exciting when we consider that our data doesn’t yet include the heavy TV investment which just started last week on Stetson with the new Matthew McConaughey campaign, as well as TV on Celine Dion Parfums.”
Miniature fragrance collections were getting attention at Kmart in New Jersey where shoppers snapped up minis of Gravity, Adidas and Untamed, priced at 25 percent off. Target priced Adidas Moves at a value of $7.99, while Revlon’s Innoscent bath and body set from its Get Reddy collection was also offered at $7.99. Last year the magic price point was $10 — meaning that shoppers are looking for even cheaper prices this year. Once pricing gets this low, shoppers don’t mind buying a mass market scent, retailers explained.
Kohl’s used the first shopping weekend of the holiday season to show off its American Beauty collection. Asking women to “relax, recharge and indulge,” Kohl’s promoted a 10-minute Spare Moment Set including a mask, foot and leg reviver, hand treatment, eye mask, a ‘Do Not Disturb’ sign and lip color all for only $28.50. For those without 10 minutes, Kohl’s had a five-minute Spare Moment set for $21. Kohl’s is promoting all of its fine fragrances such as Escada, Curves and Passion at 10 percent off.
The holiday season is about making kids happy, and products for kids are finally making buyers happy. Licensed children’s merchandise is moving briskly out of stores, buyers said. Some items are being purchased as stocking stuffers, others as gifts. Among the popular licenses are Strawberry Shortcake, Mary-Kate and Ashley, SpongeBob SquarePants, Spiderman, Shrek, SharkTale and The Incredibles.
These characters are starring on everything from toothbrush holders and play shave sets to bubble baths and fragrances. The success of these characters is giving buyers’ interest in licenses again.
Beyond sharply priced value kits, fragrances and licenses, buyers said there were few other must-have beauty items that have emerged at this juncture in the shopping season.
The biggest challenge faced by the beauty business, buyers cautioned, was competition from electronics. “Our chain was giving the store away in electronics,” said one merchant. “We just have to hope that on the way to electronics, they see a beauty items to buy on impulse.”
The NRF study validated beauty buyers’ fears that electronics were the biggest wish list items. Almost 32 percent of those asked about shopping on Black Friday said they bought electronics.
Still, mass marketers tend to get the bulk of sales closer to the holiday and the good news from NRF is that only one in 12 consumers said they are finished with holiday shopping. For many shoppers, a bottle of Chantilly from the local CVS could still be the last-minute answer for Aunt Martha’s gift.