By  on June 17, 1994

NEW YORK -- Mass market retailers used to pride themselves on the fact that every store within a chain had the same merchandise located precisely in the same location. That's not the case anymore.

Chains including Kmart Corp. Wal-Mart, PayLess Drug Stores, The Rx Place, Gordon's Discount and Thrift Drug are now customizing their merchandise mix based on consumer demographics at each site.

"That way, they are not wasting space by selling items that won't turn in that store," said Monika Torrence, vice president of product management at Spectra Marketing of Chicago, a company that works with retailers and manufacturers to help identify stores suited for specific product launches or promotions. Many retailers have identified their stores that have higher ethnic traffic, in order to insure that those units have a wider selection of color cosmetics.

The use of point-of-sale scanner data is allowing chains to dissect each store's audience and determine which products best suit its complexion.

But today's targeted marketing goes well beyond minor changes in the product lineup. Some chains are going so far as to create entirely different store layouts for their various units.

One of the most aggressive chains with regard to targeted marketing is Thrift Drug, based in Pittsburgh. The 510-store chain has identified several different store prototypes and situates the appropriate style store in each market.

The chain opens more upscale units in selected towns, featuring prestige cosmetics and elegant bath-product gift sets. Thrift has two other designs: One emphasizes convenience products and the other focuses on health care.

Upscale markets such as Princeton, N.J., have stores that are stocked heavily with beauty and treatment items, since more affluent areas tend to sell more cosmetics and bath care, according to a spokesman for the chain. The upscale units have lines such as Caswell-Massey and Cosmyl, whereas other units may only stock mass market products such as Yardley.

Currently, more than 50 of the upscale formats are in business, with 25 on the drawing board and slated to open by the end of the year.

Kmart Corp. of Troy, Mich., has been striving to serve local market needs over the past three years.In the past, Kmart had issued strict merchandise lists from headquarters. Now, according to Kevin Browett, vice president and general merchandise manager, the chain's area market managers have much more of a say when it comes to the merchandise mix of each store and how its items are priced.

In markets with more affluent shoppers, for example, Kmart has enlarged its prestige fragrance offerings.

Wal-Mart also has different store types based on specific markets, with what it calls its Expanded-7 Set strategy.

While older stores or stores where demographics aren't as affluent have only pegged cosmetics, the Expanded-7 stores have enlarged cosmetics departments that include prestige fragrances and skin care. A cosmetician is also on hand to consult with shoppers and spruce up the department.

Woolworth's The Rx Place has even created two different types of stores, for urban versus suburban markets.

The urban stores are smaller and carry only the fastest-turning stockkeeping units. They also stock all the major ethnic cosmetics lines, while the suburban stores have only one or two.

Gordon's Discount, based in Newark, N.J., has three dramatically different merchandising approaches.

Its original store, which services a large Portuguese clientele, carries items targeted to that audience, such as Pavion's Solo Para Ti.

"We buy to reflect what customers want in each store," said buyer Joann O'Connor.

When a department store is located far from one of its stores, Rite Aid capitalizes on that opportunity by carrying more prestige fragrances. Within the last two years, the Camp Hill, Pa.-based chain has started adding glass cases to house more upscale scents.

While stores continue to revamp, many challenges do exist in the area of targeted marketing.

"It makes it harder to advertise products when they aren't available chainwide," said Donna McManus, cosmetics and fragrance buyer for K&B Inc. of New Orleans. Retailers also find that sometimes they can go too far in pruning back their number of sku's.

"We find that sometimes an older shopper may be visiting grandchildren in a market we've identified as young," said one buyer. "We still need products for these customers or they will go elsewhere. The same is true for black shoppers, so we have at least some ethnic items in all stores."But with an emphasis on maximizing every square foot of selling space, retailers agree that targeted marketing is the direction they will follow.

Concluded Gerald Heller, president of May's Drug in Tulsa, Okla., "We're very serious about maximizing our productivity, and tailoring the mix to the market is very important."

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