WEST WINDSOR, N.J. — Mass retailers are out to prove their mettle in the world of beauty. Bolstered by exclusive offerings, hard-to-find brands, premium products — some of which have been plucked from their upscale counterparts — and tailored marketing messages, a number of retailers have broken the template for selling beauty in the mass channel.
Their efforts have succeeded in boosting dollar volume in the category. After five years of sluggish sales, cosmetics sales gained 6.9 percent to $979.4 million from $911.8 million, excluding Wal-Mart, for the 52-week period ended Jan. 28, according to Information Resources Inc.
Industry experts attribute the stronger sales increase to mass retailers' efforts to distinguish their mix from the competition and establish their stores as a true beauty destination. That agenda began in earnest five years ago with retailers peppering their assortment with exclusive beauty brands, consisting of niche imports and private label efforts. It has since evolved to full-fledged merchandising concepts, many of which tout exclusives from abroad, that rely on impressive in-store displays and marketing support.
These newly emerging dynamics will surely be the subject of conversation as the National Association of Chain Drug Stores' annual meeting gets under way Saturday in Scottsdale, Ariz.
"What's happening is that mass retailers are trying to get out of selling commodity products at discount prices," said industry consultant Allan Mottus. He noted that each mass retail channel — from drugstores to discounters — is attempting to carve out its own strategy for cosmetics. "Each drugstore chain is trying to be different from one another, and in general, they don't want to look like a supermarket or a discount store," he said.
Harvey Alstodt, president of Del Cosmetics, nodded to the merchandising strides, saying: "We find that retailers have a better understanding of their consumers than ever [before]."
That fine-tuning has resulted in very different mind-sets of shoppers, said Wendy Liebmann, the founder of WSL Strategic Retail. In five separate studies, Liebmann probed the characteristics of customers at certain retail chains. For instance, she found that Walgreens' customers were the most cautious about spending money, while CVS' clientele have the highest expectations in the market. Shifting to discounters, she commented: "Target's typical consumer is one who does it all. She manages a home, family and a career, while managing to shop a lot."Because shoppers are expanding their preferences of where they buy, retailers are also attempting to micro-market within their doors to pull in loyal customers and entice shoppers who frequent department stores.
The trend is most evident in specialty stores such as Ulta and Sephora.
Sephora secured a place in beauty retailing by offering shoppers an alternative to department stores and building its assortment with hip, emerging brands. In doing so, it has become the go-to haven for the latest products and trends at varying price points.
For consumers based in markets without Sephora, Ulta has positioned itself as a compelling alternative. Ulta, which is nearly 170 stores strong, always has favored the off-mall sites now coveted by J.C. Penney. Ulta has many of the same edgy brands as Sephora, including Too Faced and Bourjois, but also offers mass lines for cross shoppers, such as Max Factor and Revlon. Recently, Ulta has started to reach out to a slightly younger shopper with the addition of lines such as Rimmel Underground. Ulta also is known for helping to build brands such as Bare Escentuals, which is prominently featured on tables near the store's entrance. Offering a range of prices is key at Ulta, which is why the retailer is beefing up its private label lines. For instance, at an Ulta store here the retailer displayed its Ulta Mineral Face Kit, for $24.99, alongside a Bare Escentuals starter kit for $49.99.
Ulta's roots are in the drugstore business and the company has steadily progressed into a true specialty store that houses salon services, prestige fragrances, salon hair products, premium cosmetics and mass lines under one roof.
In addition to Sephora and Ulta, there are other retailers angling for shoppers who have defected from department stores with an assortment of upscale brands. Douglas, for one, has plans to expand its U.S. reach this year by opening three to four more stores. Beauty supply stores, such as Sally Beauty Supply, remain committed to serving the professional shopper versus attempting — as they have in the past — to also develop consumer trade.
The partnership of Kohl's Department Stores with BeautyBank, a division of the Estée Lauder Cos., has been closely scrutinized by industry observers from all facets of the business. Was it a success? A flop? Many await the answer, which has yet to officially emerge. What has transcended is a very attractive, on-trend, department that looks better than most mass stores and rivals department stores. Upon a recent inspection of a Kohl's here, visitors were greeted by a beauty adviser, who informed them of a fragrance promotion and offered her assistance. Across each BeautyBank brand — including American Beauty, Flirt, Good Skin and Grassroots — product testers were clean, and displays were well stocked and brightly illuminated. Alongside each brand assortment was a host of colorful brochures detailing product information and tips on how to achieve the look pictured. However, the biggest challenge in beauty retailing for Kohl's may be that the retailer has trained its loyal shoppers to wait for wild-fire sales and deep discounts. To quell those bargain hunters, on this day Kohl's was offering 10 to 20 percent discounts on key fragrances, and as much as 70 percent off select gift sets.DRUGSTORES
To distance themselves from their big-box competitors, drugstores have migrated from convenience stores with a pharmacy counter into health and wellness centers, with a growing emphasis on beauty. In doing so, drugstore chains also are finding that having the lowest prices in the market is not always necessary. In fact, a survey of prices of Revlon Sugar Sugar Lip Topping found that drugstore chains were selling the item about $2 higher than discount stores.
Rather than battle it out over price, many chains are using their beauty departments to mark their individuality by injecting a host of exclusive brands. Drugstores at the forefront of that trend include Walgreens and CVS.
In October, Walgreens began outfitting its stores with its European Beauty Collection, a selection of seven high-end skin care lines — Institut Arnaud Paris, Artdeco, Skincode Switzerland, Spa Aquatique, Red Water, La Fleur Organique and Oli — from France, Germany, Switzerland, Spain and Greece. To date, Walgreens has introduced the complete concept, comprising about 12 to 15 linear square feet in shelf space, in 1,000 of its of more than 5,600 doors. It also rolled out a 13-piece mini-set of products from the different European brands in 3,000 of its doors. Most beauty products in the European Beauty Collection sell for $20 to $40, but prices in the set range from $15 to $60, nearly double the typical ceiling for mass market skin care.
"The initial goal was to bring new technology and premium skin care to Walgreens," said Michelle Hobson, manager of strategic business development of beauty at the drugstore. "It was a void we were ready to fill. We felt that the majority of sales would come from customers who were already in the store, but who previously had not shopped for skin care there."
She noted Walgreens shoppers have responded well to the collection's higher price points, largely because of a comprehensive sampling effort. The full display contains product testers for each brand along the top shelf. The most expensive brand, Artdeco, has eight testers.
Hobson claimed broadly distributed brands, such as Olay and L'Oréal, regard the collection as a complement, not as a threat."Our goal is to become a destination for beauty," she said.
As for whether the new concept is profitable, Hobson said Walgreens will begin an in-depth analysis of the program once it's been in stores for about nine months.
"We are pleased with the initial results," she said.
The Walgreens effort could generate as much as $35 million to $45 million in sales its first year, according to estimates by industry sources.
One of Walgreens' closest competitors, CVS also has dedicated space and marketing muscle to exclusive brands. In November 2003, it made room in its color cosmetics department for Lumene, a Finnish beauty brand. Lumene, which includes skin care and cosmetics, was first merchandised on an end-of-aisle display, but has since been moved to an 8-foot section along the cosmetics wall in 5,000 of CVS' 6,200 stores. Each door carries top skin care items from Lumene, whose prices range from $4.99 to $29.99.
Janice Jacobs, director of limited distribution brands for CVS, said the support of the retailer's management team is key to the success of the program, particularly since competitors are trying a similar approach. She added new programs are typically given six months to work, and are often modified at that point, as well.
"We do have financial benchmarks to meet," she said.
Over the last three years, CVS has built awareness for Lumene through its circulars, dedicated in-store displays and Extra Care, its loyal-customer program with 65 million cardholders. Jacobs said Extra Care allows CVS to share relevant, targeted messages about Lumene, via e-mails, direct mail and cash register receipts, to appropriate customers. The drugstore also relies on its beauty advisers, who are in about 400 doors, to peddle the brand. Testers for Lumene are generally available only in stores with beauty advisers.
CVS' hard work seems to be paying off. Jacobs said 40 percent of its shoppers who purchased Lumene products were not CVS' traditional skin care customers. The drugstore's research also indicated that, of this group, 30 percent typically bought skin care products in department stores. It also found the repurchase rate for Lumene ranks near CVS' top-performing national skin care brands.When considering exclusive brands to add to its beauty assortment, such as Skin Effects by Dr. Jeffrey Dover, CVS executives look for lines with a leading market position. For instance, Jacobs said Lumene is the number-one beauty brand in Finland, and Boots — which CVS and Target carry exclusively in the U.S. — is the top-selling cosmetics brand in the U.K. In March, distribution of Lumene will be expanded to Target doors, as well.
Industry sources estimate that an expansion to Target doors could push Lumene's U.S. retail sales to roughly $50 million to $60 million.
Exclusive lines are giving drugstores a chance to position themselves just below department stores, according to Mottus. "Drugstores want to promote lines like IsaDora [cosmetics] at Walgreens because they don't have to discount to compete with Wal-Mart and dollar stores," he added.
Endemic to a health image is also the extension of more beauty advisers. CVS, Walgreens and Longs remain chains committed to having at least some staffing in stores. Walgreens, in fact, has 21,000 beauty advisers.
Discount stores were leery of beauty until the early Nineties when executives found shoppers were willing to buy cosmetics at a big-box chain. Some developed mini drugstores within their large-format stores. But the reality of discount retailing is that beauty can be too slow-moving to justify massive space. Wal-Mart has been among the first discounters to pare back the number of beauty stockkeeping units. However, Wal-Mart is experimenting with up-and-coming beauty trends, such as natural products. Its current assortment, housed on the header "Natural Beauty Solution," is anchored by Noah's Naturals and features products such as lip balm and hand salve with soy wax.
Wal-Mart's beauty departments are tightly packed, as some space once devoted to counters and beauty now house more skin care, especially the burgeoning number of glow lotions.
Target is trying to do in beauty what it has done across the store: build exclusive, hip labels. Sonia Kashuk has earned her stripes in Target with more than 8 feet of linear space. Last spring, Target revamped its entire specialty bath department, replacing broadly distributed brands with a collection of niche lines. The set featured 20 brands from across the globe, including New Zealand, Scotland, England, Greece, Spain, Portugal and Israel. However, a recent survey of a Target store here indicated that the retailer has pared back its offering of foreign bath and body brands. What's more, the section now includes nationally advertised lines, including Neutrogena, Aveeno and Burt's Bees. It also spotlights a new fragrance, called Tuesday, and a private label line of bath and body products, called Duchess.Target has expanded its ties with the U.K. retailer Boots, rolling out a smattering of its brands, including Botanics and No7, chain-wide. Also, after testing Boots-trained beauty advisers in North America, the British firm has dispatched them to more than 260 Target doors. These advisers, who are outfitted in Boots' uniforms, are available part-time, during the stories busiest hours, said Martin Waters, chief executive officer of Boots Retail U.S.A.
Waters said the Boots rollout to Target stores will give the brand scale to launch a national advertising campaign. Once it does, he said, consumers will understand that Boots is available only in Target and select CVS doors in the U.S. In North America, Boots is sold at Target chain-wide, 500 CVS doors and 400 Shoppers Drug Mart stores in Canada. At $4.99 to $19.99, Boots' product prices are slightly higher than the average mass beauty prices. Industry sources estimate that Boots' recent expansion could push the beauty firm's U.S. retail sales to $50 million.
In addition to putting a premium spin on its bath and body and skin care business, Target is putting the same gloss on its hair care aisle. Its Salon Hair Care section carries several lines from Frédéric Fekkai, an ultra-high-end offering sold in limited distribution. Other salon brands in the set include PureOlogy, Rusk and Bed Head.
At the end of the shampoo aisle is a prominent hair color display, complete with large photographs of models with richly pigmented locks and color selection tips such as "stay two shades within your natural color" and "choose a shade that matches your skin tone."
There are three types of food stores emerging that are playing in beauty — those going full-force into beauty, those eschewing the high-sku's category and those building natural beauty sales.
Wegmans is among those where beauty is important. The chain has endcaps promoting the new Revlon Limited Edition products, as well as Rimmel Underground. H-E-B Grocery Store, which devotes generous space to health and wellness, is also at the forefront of beauty. Several others, such as ShopRite or Stop & Shop, prefer to offer just a limited assortment of necessity and impulse beauty items, such as mascara or blush. Whole Foods continues to scout out natural lines, while remaining dedicated to its core of natural beauty products such as Jason, Kiss My Face and Avalon.An offshoot of the traditional food stores, wholesale clubs also are tinkering with beauty. However, most are eyeing the higher-ticket skin care areas. Sam's Club, for example, has a value kit of Strivectin, Hylexin and Idebenol priced at $69.88, and also carries kits of Olay and Elizabeth Arden skin care items. Its competitor, Costco, offers multipacks of Olay Regenerist, along with an exclusive line from Borghese.
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