Value Deals Drive Holiday Sales

Value-priced items and gift sets imported from China gave a modest boost to beauty sales at mass retailers.

On Drugstore.com, Philosophy bath gel served as a gift with purchase; on QVC the brand’s food-based items were bestsellers.

On Drugstore.com, Philosophy bath gel served as a gift with purchase; on QVC the brand’s food-based items were bestsellers.

WWD Staff

NEW YORK — If it was cheap, it sold.

That best sums up the mass market holiday season  from a beauty perspective. When the final receipts are counted, chains expect about a 2 percent increase in beauty over last year.

According to Ellen Tolley, spokeswoman for the National Retail Federation, overall holiday sales will likely increase 4.5 percent over last year to $219.9 billion, spurred by last-minute gift buying and gift cards redeemed the week after Christmas. Several drugstore chains were pleasantly surprised by front-end sales growth of approximately 6 percent, noted Wendy Liebmann, president of WSL Strategic Retail.

However, the spoils of the season went to online retailers, such as Drugstore.com, and TV retailers, such as ShopNBC and HSN. Drugstore.com’s holiday sales, fueled by premium skin care items, increased 25 percent over last year, reported Kristy Mattson, the e-tailer’s senior category manager of beauty. Drugstore.com enticed shoppers into buying more by offering a free full-size Philosophy bath gel with each purchase of $89 or more.

HSN and ShopNBC also reported increases for the month of December — 9 percent and 63 percent, respectively, over last year. HSN pointed to strong sales of Serious Skin Care by Jennifer Flavin; ShopNBC said 15 percent more airtime for beauty items helped propel sales this season. 

However, brick-and-mortar retailers who moved in the budget direction have empty shelves, too, but at a price: Those hoping to trade shoppers up were left holding inventory and forced to take big markdowns after Christmas.

Year after year, consumers have pushed retailers to offer sharper and sharper prices with more value. The result has been a rush to value kits created by Markwins International and other importers. Even traditional fragrance marketers, such as Coty Inc., put a bigger spin on getting more bang for the buck this year. The quest for value is putting a vice grip on already squeezed suppliers.

“[Budget items] have put pressure on the established name beauty manufacturers,” said industry consultant Allan Mottus. There has been an invasion of no-name beauty contenders that have made it more difficult for brands, such as Revlon, to expand.

This story first appeared in the January 7, 2005 issue of WWD.  Subscribe Today.

Mottus also said that consumers are migrating more to extreme value stores that are now offering more of a beauty assortment. A visit to a Five Below store in New Jersey proved that point. For the first time, the value-store chain used local radio advertising to appeal to teens who needed to buy inexpensive gifts. The store had been picked clean of beauty products.

Retailers also used this Christmas to show they could “out Wal-Mart Wal-Mart.” More chains cut back on fragrance sets and displayed blockbuster kits of everything from bath to color cosmetics. Even Dove put together a gift pack for skin care — an unlikely, but successful, gift idea.

Medic Drug was one retailer who cut back on fragrance offerings for the season, seeing that past sales of fragrance gift sets were weak. However, beauty buyer Sally Yankee said the 22-unit chain’s fragrance sales got a boost this year in part by a gift-with-purchase promotion, in which Medic awarded consumers a watch (a $20 to $25 value) with the purchase of a designer fragrance.

Even powerhouse Markwins had to fine-tune this year. According to Bill George, senior vice president of sales, the company took a hard look at the amount of merchandise pumped into each account. Suggestions were made on an account-by-account basis, even if it meant cutting the buy.

“We don’t want to overload the trade with merchandise they’ll have to mark down,” said George. This year’s most popular price points ranged between $9.99 and $19.99 with a Hot Kit priced at $14.99, which moved more than 300,000 units at one chain. Those efforts, he said, resulted in much cleaner sell-through.

Several chains set up direct-ship programs with Markwins’ overseas factory so items were delivered directly to the retailer. That saved time and money, said George.

Markwins, along with other importers, hit delivery snags with backups and delays at ports, especially in Long Beach, Calif. That meant some retailers, like Medic, didn’t get all they had put on their wish lists.

Markwins also learned that its Wet ’n’ Wild brand stands out on its own and doesn’t require blockbuster kits. Wet ’n’ Wild, George said, is perceived as a brand with a value proposition that doesn’t need to be nudged by kits. Wet ’n’ Wild is the fastest growing brand in several major chains.

Many chains said that this year they tried strategies to come out of the season with better profits — even if that meant lower item movement. One major discounter pushed sell-through up two full percentage points with smarter buying.

Retailers such as Wal-Mart and Kmart reported strong sales of holiday gift sets that included bath, fragrance, personal care and color. Sue Knight of Longs Drug Stores said color cosmetics continued to perform well during the holiday season, as did bath products and higher-end specialty offerings. Some sources said it was the best Christmas in the past three years.

“At Coty, we enjoyed one of our best Christmases ever,” said John Galantic, president of Coty Beauty U.S. “We had strength across the board, particularly classic fragrance brands like Stetson, as well as Adidas and Mary-Kate and Ashley.”

He said those retailers who did see action in traditional mass fragrances were aggressive with early advertising and had displays in high-traffic store locations. Galantic said retailers who presented a clear separation from fragrance and bath gift sets also reported strong results.

Valerie Cheyney at Happy Harry’s validated the fact that Coty had a resurgence, including its Stetson gift sets that she linked to advertising featuring Matthew McConaughey. She also applauded Coty bath sets.

Roslyn Griner, vice president for bath and body for Coty Beauty, said that Christmas finished up strong after a slow start. “Despite later shipments of specialty bath products our Christmas sell-through is slightly ahead of last year. That’s very encouraging considering that there is a higher amount of discounted prestige fragrance and Asian imports in stores this year,” said Griner.

The Asian imports were especially prevalent at Wal-Mart where the chain sold sets of three items priced for $2.99 versus Coty’s $3.99 for one Calgon item.

While cheap was chic on the brick and mortar side, TV retailers continued to tally up sales due to higher-priced beauty items.

Television retailers, on the whole, had a very successful holiday selling season.  Allen Burke, director of cosmetics for QVC, said Christmas was “a topper on a great year,” driven by Bare Escentuals and food-based bath and body products by Philosophy. “While they may not be new, they are very mainstream,” said Burke. In color cosmetics, Burke said lip gloss topped sales of all categories, from both the Smashbox and Prescriptives brands. Hair items from Honduran brand Ojon was the season’s sleeper hit. “You wouldn’t think to give hair care for Christmas but it was one of the big hits of the season,” Burke said of the treatment that uses palm nut oil in its formulations, and sells for $42.50 for a 5-oz. bottle.

Burke said it was too early to give solid numbers for the period, but he estimates QVC beauty sales increased in the double digits and outperformed last year’s season.

ShopNBC’s business was strong in December, said Karen Johnston, the network’s vice president of merchandising. Beauty sales for the month were up 63 percent over last year, with beauty receiving about 15 percent more airtime this holiday season compared with last year. European luxury spa brand Channoine was one of the network’s stars, as its $159 Crème Beaute face cream was a bestseller. ShopNBC’s own Isomers brand also sold well, in addition to items from Borghese, Senna and Benefit. The network strategically does not sell fragrance.

HSN also had a stellar season, according to Michael Henry, the network’s senior vice president for health and beauty. The weekend before Thanksgiving, HSN launched RuLinea-FX, an antiwrinkle product in the Serious Skin Care line. More than 65,000 units sold in just five hours at $32.50 each.

Mass retailers also got a taste of the celebrity boom. As mentioned, Mary-Kate and Ashley fragrances sold well; Spirit by Antonio Banderas was singled out by several buyers, and both Celine scents are making cash registers sing. And, many are rubbing their hands in anticipation over getting Curious by Britney Spears this year. Wal-Mart got attention for both its Enchantment scent and Susan Lucci’s Invitation fragrances thanks to personal visits to stores by stars of “All My Children.”

Consumers, looking for an innovative gift idea, found one at Target. The chain offered a four-piece Modella cosmetics bag set for $12.99 that included a train case, a cylinder cosmetics bag, a brush set and a mini makeup bag in black with white dots and a pink bow. The kit was merchandised on a high visibility end cap.

Kits such as these were big last-minute items, according to Barbara Gram, vice president sales and marketing for Allegro. “Most of the buying happened in the last week,” she said.

Mass merchants are typically a last-minute source for gifts. That played in Kmart’s favor this year and several manufacturers pointed to positive moves for the beleaguered chain. “This Christmas showed that Kmart is down but not out,” said one vice president of a beauty firm.

 — By Faye Brookman, Molly Prior and Andrea Nagel