By and  on April 16, 2010

Macy’s is taking a hard look at its beauty business and implementing bold changes, including a shift to a self-serve format, to compete in an environment where the fortified silos of prestige and mass channels continue to erode in the consumers’ eyes.

The retailer is testing the assisted, open-sell concept, called Macy’s Impulse Beauty, in 10 to 15 doors, the biggest departure yet from its long-held tradition of selling mega nameplates from behind glass counters.

The concept, which coexists with beauty counters, is roughly 1,000 square feet and showcases aisle displays of smaller brands, many of which are entering Macy’s for the first time.

The Impulse Beauty section inside the Macy’s at the Brea Mall in Brea, Calif., was located near the entrance from the parking lot, closest to the Benefit Cosmetics and Urban Decay makeup counters. Its most distinct design feature is a series of black gondolas with white lettering indicating the brand or the category. Brands with displays within the concept here include Smashbox Cosmetics, Laura Geller, Laura Mercier, Dior, Stila, H2O Plus Products, Philosophy and Bliss. An aisle labeled “skin care” featured StriVectin, Hylexin, Cosmedicine and MD Skincare. Frédéric Fekkai was the sole hair care brand spotted. But outside of this store, other brands, such as Lea Journo Cosmetique hair care, are included in the concept.

Debbie Murtha, prior to her departure last year from the post of senior vice president of cosmetics, was spearheading the Impulse Beauty effort, along with Cindy Harper, vice president, Impulse stores, who is based in San Francisco. Also on Harper’s team is project manager Trevor Hayes, who is based in San Francisco, according to vendors familiar with the concept.

Industry sources said Macy’s Impulse Beauty is the department store’s answer to a growing crop of open-sell beauty retailers, ranging from Sephora to Ulta and in the mass market, the upscale concepts of CVS Pharmacy’s Beauty 360 and Duane Reade’s Look Boutique. The concept allows niche brands to have a presence inside an established department store in a format that is financially feasible and profitable for the scale of their businesses, as a dedicated sales force behind a counter is cost prohibitive for many companies. A source familiar with the development of Impulse Beauty said the concept allows smaller brands to pool their resources for any required support, although the support necessary is significantly reduced because Macy’s largely funds the employees staffing the sections.

The concept also is a bid to keep Macy’s customers within its stores, as many consumers increasingly shop for beauty across all retail channels, on the Internet and via television.

“Its customer has been leaving Macy’s to buy cosmetics in other places,” said an executive who distributes to Impulse Beauty and who requested anonymity. “What used to be alternative [distribution] is now mainstream. The boundaries have become blurred because the customers’ shopping habits have changed so much. Everyone is shopping everywhere.”

Macy’s declined to comment on the concept, but several beauty executives with knowledge of the retailer’s plans said by year’s end at least 40 more boutiques are slated to roll out inside Macy’s doors across the U.S., including in Philadelphia, New York, Chicago and Houston.

“It’s not being treated as an afterthought,” said one vendor.

“You can’t ignore that women are very self-service orientated,” said makeup artist Laura Geller, founder of the eponymous cosmetics range. “I learned a long time ago when you stand behind a counter and approach a client, it creates an intimidation factor,” added Geller who makes frequent appearances on QVC and sells her brand in 19 Macy’s stores, her own Manhattan boutique and in Beauty 360’s 21 outposts. “It’s about standing with her and not in front of her.”

Budd Taylor, president of Smashbox Cosmetics, which is sold in about 15 Macy’s Impulse Beauty doors and slated to expand to at least 25 by year’s end, explained the margins on products sold in the concept are a tad lower than is customary, but the absence of other expenses outweighs the margin loss. “It is relatively expense free,” he said. “With regards to looking at [return on investment], the early readings are very positive….We are pleased both on the volume and the productivity.”

Approached early last year by Macy’s West to consider Impulse Beauty, Stila saw the concept as a prime opportunity to expose the brand to department store customers in an unconventional department store format, according to Sarah Lucero, Stila’s director of global education. The brand, available at Sephora and Ulta, isn’t carried at other department stores.

“It is such a great way to offer approachable beauty and great, different brands in a department store,” she said. “I find that there are more sections within department stores that offer easy shopping and accessibility. Everyone is understanding that you have to change with the time and…having the option to have both [traditional and nontraditional formats] in a department store is becoming popular.”

Lucero has firsthand experience with the Macy’s Impulse Beauty section, having worked in a San Francisco location over the holiday season in support of Stila. At that time, she recalled the store was bustling, often with mothers and daughters stocking up on gifts across all categories. “It is just a really fun vibe, and you definitely get to spread your word and showcase your brand in an easy, fun atmosphere,” she said.

Because the Impulse Beauty shopper is envisioned as younger than traditional Macy’s beauty customers, Dawn Serpa Duggar, chief executive officer of Lea Journo Cosmetique, worried the hair care brand, priced at $24 to $65, would be too expensive. However, she said, “It has proven to not be an issue.” She credited the brand’s blue and silver packaging — said to be a hit in focus groups with women under 24 years old — and in-store product demonstrations with boosting sales. “Macy’s allows us to interact with the customer,” said Serpa Duggar.

After arriving at the Impulse Beauty location in San Francisco for last holiday season, Lea Journo met or exceeded its sales goal of $4,000 a month. As a result, the brand is slated for 28 more locations by fall, and six more September and later. Its bestselling products by dollars at Impulse Beauty are the Mirroir Glossing Cream and La Forme Styling Lotion.

A spokeswoman for Frédéric Fekkai confirmed the hair care brand was participating in a limited store test.

Several brands involved said the Macy’s Beauty Impulse concept has a bright outlook, although some are cautious. “We firmly believe that there is a future for the Impulse Beauty concept and do plan do be a part of the growth as a key partner,” said Ali Wente, vice president of North American sales and global education of skin care brand H2O Plus.

“I don’t think it is any surprise or a well-kept secret that the department store cosmetics arena was in desperate need of some added vitality,” said Taylor of Smashbox. He added that, in regard to Impulse Beauty, “It still needs a little more time, as far as I am concerned, for it to be nurtured.”

Macy’s has dabbled with store-within-a-store concepts before, including its rollout of the 300-square-foot concept, Beautiful Planet, featuring natural and organic personal care brands.

At the time of Beautiful Planet’s launch in fall 2008, a Macy’s executive stated, “This is our first venture in merchandising a singular [beauty] idea, rather than a vendor statement.” Beautiful Planet has since been removed from the Macy’s where it launched, including the Herald Square location in New York.

“I give Macy’s a lot of credit for trying new things. It’s taking chances,” said Mike indursky, president of Bliss. “Pretty signage isn’t going to win the game. New business models do.”

If successful, Macy’s Impulse Beauty could potentially thwart the momentum of drugstores’ upscale beauty concepts, particularly as they attempt to court more premium brands. After all, Macy’s is already a proven purveyor of high-end beauty brands. But some observers said Macy’s positioning may be muddled, stuck somewhere between Sephora and Ulta.

One executive whose brand is distributed to a major drugstore and to Macy’s new concept, calculated it costs less to do business in Beauty 360 and Look Boutique than Macy’s Impulse, considering the in-store merchandising materials, education, product tester and media support the latter requires.

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