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West Coast Stores Fight Mass Malaise

LOS ANGELES -- Beauty isn't booming at drugstore chains on the West Coast.<BR><BR>While still considered a core category, beauty has become less of a profit center, requiring retailers to focus on tougher editing of lines in their beauty...

LOS ANGELES — Beauty isn’t booming at drugstore chains on the West Coast.

While still considered a core category, beauty has become less of a profit center, requiring retailers to focus on tougher editing of lines in their beauty departments.

Experimenting and trying new trends are out; streamlining and concentrating on in-demand basics are in.

“Beauty does have a niche for us, but for the impact and attraction of bringing customers into the store,” said Bill Roatch, cosmetics buyer for Sacramento-based Raley’s, which has 63 stores. “Since the majority of shoppers are women, beauty is a deparfrtment that brings them into the store to see what’s new.”

At the Wilsonville, Ore.-based PayLess, which has over 500 stores in 12 states, cosmetics and fragrance buyer Sheri Ralston said, “Our history has always viewed cosmetics as a core category. It’s a very large department, and we devote the center space in the stores to it, so it’s attractive real estate.

“We’ve found over the last year that we need to work on getting the turns and the inventory down to get the category more profitable. That’s our main focus today,” Ralston added.

Kelly Francis, cosmetics buyer at Newport Beach, Calif.-based Horton & Converse, which has 17 stores throughout Southern California, noted, “Beauty is still a focus as a profit center, but it has slowed down a bit. Turnover is good, but there’s been a change in the type of turnover.

“We’re turning over everyday items — mascara, powder, foundation, bath products and soap. People seem to be a lot more interested in the basics and less willing to try new items right now.”

Echoed Raley’s Roatch, “We need to focus on the basics of our business and promote the hot categories more, instead of branching off experimenting.”

The retailers were reluctant to cite year-to-date percentage growth in the beauty category.

“1993 was a rather soft year for many of the drug chains,” conceded PayLess’s Ralston. “We received some information from L’OrÄal that showed that the drug chains were down 8 percent in the category last year. We performed better than that. But another decline in the drug class of trade is anticipated for 1994.”

Raley’s Roatch declined to comment on year-to-date figures, but noted he was “starting to really scrutinize [point-of-sale] data and determine where we can be lean and mean, getting rid of some of the dogs we don’t need to carry. We know right now that reducing sku’s within the department is on the horizon.”

The commitment to stricter cosmetics editing at PayLess stores involves “taking a hard and serious look at the mix and the selection in the store, looking to see if we really need to carry every single sku, and being on top of the hot items as quickly as possible,” Ralston said. “We’re beginning to react to what our new [information] systems are telling us, which is that we’ve got to get the category in line from a profitable standpoint.”

Even at Horton & Converse, where business in the beauty category is up about 5 percent, according to Francis, “We have definitely gotten tougher in editing. We’ve found that the items that were new and a little too different really weren’t moving. We rely mostly on the store personnel for that kind of information, and if something doesn’t demonstrate at least a little bit of movement right after we put it in, that’s it.”

Retailers attributed the lack of growth in beauty to several causes, with increased competition at the top of the list.

“Over the last three years, all the retailers in California have expanded, so there are more stores — a store on every block at this point,” said Roatch. “I would also say that Wal-Mart’s entry into the Northern California market has had a big impact on us.

“There’s been a lot of talk about the X generation and that the youth of today probably don’t wear as much makeup as young people did in the past, and I think that’s what’s holding down the whole business,” Roatch added.

On a positive note, drug chains are encouraged by growth in certain areas within the beauty business.

“We’re having some nice success with professional nail products,” said PayLess’s Ralston. “We did some testing with a few of those products and found that there was a market for them in the drug chains. We’ve done an expanded set that recently went out, and it’s done some great business.”

Ralston cited Sally Hansen’s Professional Products, Supernails and Kiss as top companies within the category.

“We’re seeing some nice movement, and the gross is very high on these products,” she said. “They’re a higher ring at the register, a slightly higher dollar than the average nail product.”

Bath products are doing well at Horton & Converse, according to Francis.

“Bath is picking up rapidly, and we’re going to try to expand the bath lines,” she said. “The companies are coming up with different fragrances and different methods of utilizing the same product.”

She mentioned that Sarah Michaels products are “our newest line — a full bath line, and doing quite well.”

Bill Roatch also cited bath products as something of a bright spot at Raley’s.

“Bath has grown as a category, but I think it’s starting to peak out already,” he said. “Face treatments have done real well, but they have hit a plateau right now also.”

The fragrance category in general appears to be a disappointment at drug chains, the retailers concurred.

“It’s not as popular as it once was,” Francis said. “I think disposable income for that is dwindling, at least here in California.”

According to Bill Roatch, “Fragrance has really been dead. I think the majority of major retailers across the country have looked at the return on investment in the fragrance category and realized that there’s not as much there as we thought. However, there are a few new [launches] that are coming out that may revive it somewhat.”

Ralston at PayLess was a bit more positive about fragrances, in particular alternative fragrances.

“Alternative fragrances are doing consistently well,” she said. “In the past, we didn’t think there was a need to carry more than one or two brands, but we’ve found over the last year that that’s not necessarily the case, especially since some of the department store brands, like [Calvin Klein’s] Obsession and Eternity, are virtually impossible to get a hold of now. There seems to be a wider range of products available now: Fragrance Impressions, which is at $12.95, versus Parfums de Coeur, which is at $7.99.”

Ralston also said body sprays are “one of the few bright spots. It has a slightly lower dollar ring, but the turns are very, very high there. They move through quite nicely. We’re putting a bit more emphasis now on body sprays and dedicating a bit more floor space to them.”

The retailers said they employ various strategies in promoting their beauty departments.

“We do mailings. We have right now a dollar-off coupon for Neutrogena that we put in our charge statements, and we do promotions with Revlon geared to in-store discounts,” said Horton & Converse’s Francis. “The beauty companies are more than willing to help.”

She also mentioned that Horton’s has “recently changed the lighting in several of the stores to draw more attention to the beauty department.”

Still, the most inventive programs in the world are not enough to bring beauty back on track at West Coast drug chains, according to the merchants.

“I think what is going to happen is we will get a department that is a little bit leaner and meaner, but that will maintain a wide variety of what the majority of consumers want,” said Bill Roatch.

Added Ralston, “We’re going to continue to monitor our buys and be very selective in what we feel is going to do well. We want to continue to react to what we think is going to be hot in the industry.”