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Revco on Rebound after Chapter 11

HUDSON, Ohio -- A Revco beauty department, suppliers say, is like a road map: Every aisle and avenue is reliably and clearly marked, and everything is where it is supposed to be.<BR><BR>"When a promotion is supposed to be out, you can go into any...

HUDSON, Ohio — A Revco beauty department, suppliers say, is like a road map: Every aisle and avenue is reliably and clearly marked, and everything is where it is supposed to be.

“When a promotion is supposed to be out, you can go into any store and it is there. They have strong systems in place,” said Harry Hart, senior vice president of corporate trade development for Revlon.

Revco’s tight operating philosophy, coupled with its sharp new prototype, have earned the chain honors. And Revco, beauty suppliers added, has achieved its success in just two short years, after filing for Chapter 11 in 1992.

With the addition of the Hook and SupeRx units Revco acquired in April of this year, Revco’s sales are expected to reach $4.7 billion this year.

That would place Revco, which is based in Twinsburg, Ohio, in a tie with PayLess/Thrifty as the nation’s second-largest drug chain in volume. Walgreen Co., based in Deerfield, Ill., remains the market leader, with sales of $9.2 billion in the fiscal year ended August 31.

Revco had net income of $14.2 million on sales of $2.2 billion in 1993, with an estimated $110 million done in cosmetics.

The chain used to operate tiny stores with a pharmacy located in the front. Little attention was paid to beauty, which consisted of only low-end selections and mass fragrances.

Now Revco situates its pharmacy in the rear of the store, leaving room to bring cosmetics up to a prominent location in a front corner.

The chain’s 12,000-square-foot store in Hudson, Ohio, is a perfect example of the new beauty power of Revco. Most of the chain’s 2,100 units are in the process of renovating with the updated look and all are slated to have it by June 1996. All told, the chain is spending $100 million on the store-renovation plan.

The cosmetics area in the Hudson store is to the left of the entrance, with the centerpiece being a glass fragrance case.

Revco wanted to enter the lucrative prestige fragrance business, but since most of its stores are self-serve, the chain needed a way to prevent pilferage of the pricey brands.

The result was the case, which houses mass and class brands under lock and key. Customers needing assistance at the fragrance counter press a button to summon help. A clerk is then paged to cosmetics, and the announcement continues until the case is unlocked.

The fragrance display provides space for testers, enabling customers to try on a scent without assistance.

The fragrance array, merchandised by vendor rather than by type of scent, includes V by Vanderbilt, Exclamation and Lady Stetson among mass market items, and Passion, Guess, Chloe, Realities, Halston and White Diamonds among the secondarily sourced prestige scents.

A new fragrance is put on sale weekly. During a recent visit, Giorgio Beverly Hills’ Red was featured at $26.99 for a 1.7-oz. bottle, an $11.40 savings, according to Revco.

Revco also offers a large selection of Designer Quality Impressionists’ alternative scents, which a beauty adviser said have been selling well.

The pegged cosmetics selection includes Almay, Revlon, L’Oréal, Max Factor and Maybelline. A full aisle is devoted to nail care, which includes Sally Hansen Professional, Kiss Products, Fingers, Nailene, Orly, 5 Minute Nail Glue, Cutex, La Cross and Revlon.

Revco also offers customers a choice beyond traditional mass market color cosmetics by stocking a large display of Coty color cosmetics.

To get more display space into the existing space, Revco broke up its long shelf fixtures in two. Then it added two more end aisle displays for promotional merchandise. Research has found that shoppers are more likely to buy items when they are on end-of-aisle displays, executives explained.

The department is accented with plenty of mirrors for customers to see how products look on them. A Revco spokesman said the boutique approach makes shopping easier.

Shelves are positioned on angles so that a customer entering the store can see more of the merchandise, as compared with traditional stores where the fixtures are positioned in a row.

Revco promotes its beauty selection with an in-store handout called Beauty and the Budget. The most recent edition, with a cover of Lauren Hutton, features coupons for Designer Quality Impressionists fragrances, Almay Time-Off products, Clairol hair color and Revlon Results.

In its newspaper flyer, Revco promoted Coty Stetson cologne or spray for $4.99, versus the regular price of $6.95. Max Factor’s collection of face makeup was promoted at 30 percent off the original price. Coty Silksticks were priced at 2 for $3 instead of the regular price of $1.99 each, and Fing’rs nail products were 40 percent off.

A Revco unit in Chagrin Falls, Ohio, that opened only a few months ago shows a few signs of the experiments Revco is making in cosmetics. The store has a service counter — a departure from the self-service approach favored by the chain.

However, during a recent visit, the booth was merely being used to house new product promotions. The store also had updated graphics in the cosmetics area, including neon signs.

Revco has enjoyed a meteoric rise back to prominence after filing for Chapter 11. With its April 1994 acquisition of the 1,200 stores operated under the names Hook, SupeRx and Brooks, it became the second largest drug chain in the country.

On Sept. 12, Revco divested 221 of the units. The block of stores, former Brooks drug units in New England, was purchased by the Jean Coutu Group of Longueuil, Canada. Jean Coutu will now operate 243 units in the U.S. under the Douglas-Maxi Drug name.

Revco sold off the units because they “lacked sufficient market share to keep them,” in those markets, according to president and chief executive officer Dwayne Hoven.

Like Walgreens, Revco has been implementing sophisticated technology as a way to hold costs down. Revco installed a $50 million chainwide point-of-sale scanning system in 1990, making it the first large chain to be totally scanner equipped.

The efforts apparently have paid off. Vendors say Revco is easy to work with because buyers have actual product-movement information. The movement data has made it easy for Revco to determine where to make merchandise cuts and where to add.

The scan data, for example, was used to make the decision to enlarge the nail care selection.

“When a product goes into Revco, you know they know it is going to sell,” concluded one vendor. “If it doesn’t, it is out of the mix fast.”