By and  on September 23, 1994

NEW YORK -- Despite the strides made recently by Wal-Mart Stores and Kmart Corp. in the cosmetics category, retailers and suppliers still single out Target Stores, based in Minneapolis, Minn., as having perhaps the best beauty format in the discounter arena.

"Chains like Target have seen this (cosmetics) as a category they want to build, and they are going out and doing it," said James McDougald, senior vice president of sales for Coty Inc., New York.

Target, which is owned by Dayton Hudson Corp., does it without fanfare and without stocking a lot of diverted fragrances.

What the chain has done is devise a tightly honed mix of fast-moving stockkeeping units. Sophisticated ordering systems ensure that top products are always in stock, especially brisk sellers like Revlon's ColorStay.

Although industry experts estimated that beauty represents less than 3 percent of average store sales, they say the chain is looking to double that percentage over the next five years.

For the year ended January 29, Target registered sales of $11.7 billion, up 13 percent over the prior year. This figure translates to about $350 million in beauty sales.

"Target has been upgrading its sections and improving the selection," noted Robert Hiatt, president and chief executive of Maybelline Inc.

According to Information Resources, discount stores expanded their share of the cosmetics business last year while drugstores saw their share decline.

Not surprisingly, when drug chains talk about who their competition is these days, more are citing discount stores -- specifically Target.

Target units are always in stock and clean and neat, suppliers said. In fact, vendors singled out housekeeping as one of the trademarks of the chain.

Consumers, according to suppliers, view Target as an upscale discounter with good everyday low prices. Analysts see Target as the expert among discounters when it comes to apparel, which can have a positive ruboff on the cosmetics business.

"Target has an advantage in that customers are in the store for other purchases, too. When they offer the same cosmetics we have, customers don't need to make another trip," said a chain drug cosmetics buyer who competes with Target.While catering to a variety of consumer demands, Target has also been a pioneer in micromarketing. According to Janet Mangano of Burnham Securities in New York, Target customizes its mix to cater to local market needs.

During a recent visit to a Target in Maywood, Ill., the store offered very competitive prices in a typically immaculate presentation. Maybelline mascara, carried by local drugstore operators for $4, was priced at $2.19.

In most stores, cosmetics is near apparel and jewelry, but in newer units, Target has situated the department at the front right side of the store, next to a main entrance and between pharmacy and health and beauty aids. The move was reportedly made to take advantage of the way shoppers are accustomed to finding these products in drugstores.

Huge white signs suspended from the ceiling make it easy to find each relevant area. The aisles have helpful, yet unobtrusive, green markers describing the contents.

Over the peg wall are signs showing customers where Revlon, Cover Girl, L'Oréal and Maybelline are positioned. The first thing to catch the eye is a department store-style display of Revlon's fall colors, including testers.

Target's workhorse lines are L'Oréal and Revlon. The chain also offers its own label called Trend Basics, in which every product is budget-priced at $1.99 regardless of its function.

Target has been one of the leaders in installing Procter & Gamble's new Beauty Laboratory. The Laboratory is a new fixture that helps organize P&G's brands, while also providing point-of-sale educational literature.

Target is positioning a 20-foot-long version of the fixture, according to John B. Devine Jr., business development manager for P&G.

Target also doesn't forget the ethnic customers -- a visitor to the Maywood store noticed Artmatic's Tropez, Maybelline's Shades of You and Revlon's ColorStyle.

The shelves in the beauty department are only five feet high, allowing female customers to have easy access to all of the merchandise. Newer Target units have a 16-foot-long bath department highlighted by LaLoren's Sarah Michaels line. The store also carries Naturistics and Body Beauté.

"Target does an excellent job in bath. They were one of the first mass marketers to get into it. They are proving it can work," said Mark Kaplan, president of LaLoren Inc. in Stoughton, Mass.Target is also one of the launching pads for Jane Cosmetics, a new line from Sassaby, based in Cardiff, Calif., aimed at teenage shoppers. Jane started out as a promotion aimed at increasing sales of Sassaby's cosmetics organizers in Target and Wal-Mart. Based on its success, an entire 144- stockkeeping-unit line was created.

In skin care, Target flexes its muscles with a strong private label program. The Maywood store had Target's own candy pink bottle version of Oil of Olay, priced at $3.73 for six oz. versus $6.23 for a same-size version of the national brand. Target also has a Greaseless Skin Cream similar to Noxzema, though priced at $1.44 versus Noxzema's $2.34.

Fragrances are mostly mass market brands such as Revlon's new Fire & Ice and L'Oréal's V by Vanderbilt. While Kmart and Wal-Mart have delved into secondarily sourced scents, Target -- perhaps because of its sister department store chain -- has remained with fragrances it obtains on a direct basis.

For the back-to-school selling season, Target promoted a Cover Girl "lockermate," which had either makeup, powder and a sample of moisturizer in a soft plastic case, or mascara, eye pencil and a sample of Navy. Each kit sold for $6.99.

Douglas J. Tigert, professor of retail marketing at Babson College in Wellesley, Mass., conducted a study last year gauging the efficacy of the Wal-Mart, Kmart and Target store strategies. He followed up that study by looking at how Target and Wal-Mart are faring in Chicago.

For cosmetics, Target apparently still has some work to do to compete with Wal-Mart, according to Tigert's poll. Thirty-two percent of the respondents indicated they head most often to Wal-Mart when in need of beauty products; 16 percent selected Target.

Although behind Wal-Mart, Target scored higher than Kmart, J.C. Penney and Sears. In the Chicago market, however, Walgreens, Osco Drug and Marshall Field's ranked higher than either Target or Wal-Mart for cosmetics.

Still, Target, according to Tigert's research, has several competitive advantages over other discounters in the Chicago market. Its stores attract the highest proportion of shoppers who are working full-time -- they need apparel and cosmetics.Target's shoppers are also the youngest -- 51 percent are under 35. And, Target has the highest concentration of customers in the over $70,000 income category.

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