By  on July 20, 2007

BOSTON — New products are the lifeblood of the beauty industry. But failed launches are costly to buyers and sellers.

Mass retailers laud hot beauty launches since they bring shoppers to their doors, often from other channels and outlets.

However, a beauty bomb can be especially damaging since launches in cosmetics typically require major planogram resets and significant marketing muscle. Ask any merchant currently reshuffling space after a few of last year's missteps and you'll hear the lament of new item failure.

With that in mind, the National Association of Chain Drug Stores and PricewaterhouseCoopers conducted a roundtable of manufacturers and retailers to identify key success factors for product introductions. The findings were presented at last month's Marketplace meeting here. That was an appropriate venue, since thousands of new items are introduced at Marketplace yearly. Beauty manufacturers use the venue to introduce items or to float fresh concepts to the retail community.

Retailers attending the session said that the cost of adding new products was the single largest controllable expense for merchants. The number of new items is escalating along with the failure rate. The number of new items jumped 6 percent from 2004 to 2006, to more than 35,000, according to Marketing Intelligence Service's ProductScan. Store footage has stayed static, meaning it is harder than ever to add a new stockkeeping unit — especially with the threat of failure.

The roundtable of suppliers and buyers determined that launches need a structure that was mutually agreed upon by buyer and seller. First, launches need to be classified. "Not all new products require the same amount of resources and support," explained Walgreen vice president of purchasing David Van Howe, who spoke for the retailers' view during a Marketplace session about the study.

Clear expectations can be set by labeling the level of the launch as an A or B introduction. In the past, manufacturers touted every launch as the biggest item to hit the retail shelves.

Four classifications emerged from the brainstorming. The first type of new item is a corporate or market maker, or an item that will create a market of its own. A good example of this are the minerals makeups, which are becoming a separate entity from traditional makeup, or bronzers, which also have become a new classification.There are also core products added to a well-established category. Nice 'n Easy Root Touch-Up could be considered a case study of this since it added vibrancy to the existing hair color category.

Trendsetter items that produce a quick hit in the market need to be treated as a different type of launch with a different set of expectations. This type of launch requires rapid product development and retail deployment. A color cosmetics launch would fit into this area.

Finally, there are line extensions, which are add-ons to an existing brand. Flanker fragrances, such as Britney Spears Fantasy, are prime examples. Flankers come under the most scrutiny since they sometimes cannibalize sales from existing items.

The panel suggested trading partners needed to define what was expected of the launch. Success has a different set of parameters based on the scope of the launch. A hit needs to be measured not only in volume, but by whether the numbers were achieved in the planned time frame and whether each retailer captured the expected level of sales relative to competitors. Whether the item met a projected margin needs to be factored in, too.

Execution is also paramount for launches, and the roundtable suggested monitoring by both buyer and seller. Too often, even the best in-store display gets left in the back room because of poor execution.

There must be contingency plans, such as what to do if there are launch delays, out-of-stocks or excess inventory.

Retailers at Marketplace said small and medium-size vendors, in particular, had to learn the launch ropes. "Especially since we don't have a track record for them," said one buyer.

The suggestions for ensuring successful launches included better partnering between manufacturers and retailers, as well as a candid approach about the commitment to a launch. Advised one supplier, "Don't launch 'em and leave 'em." Continuous review was determined to be critical to both buyer and seller success.

Retailers said suppliers should get rid of preconceived notions and develop what retailers need to consider an item a success. Also, manufacturers were advised to be prepared to support the product launch with customer research and shopper insight. Open data exchange is also a must in today's rapid information-exchange retail world.NACDS hopes roundtables such as this one will give its members more ammunition not only to reduce new product failures, but to provide tools for boosting front-end sales. "The stakes are high and dialogues such as this can reduce failure," concluded Van Howe.

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