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.

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