By and  on April 29, 2011

NEW YORK — Move over cautious and stodgy.

Walgreens is making a bold move to transform beauty into a more slick, glossy offering in a bid to gain the edge against its staunchest competitor, CVS Pharmacy.

The changes come one year after it acquired metro New York drugstore Duane Reade, which caught Walgreens’ attention with its high-end, in-store beauty concept called Look Boutique. Now, Walgreens aims to take the best from Duane Reade’s approach to beauty, while amplifying its strengths across its 7,697 stores across the country. Walgreens also is expected to benefit from the synergy with its purchase of Drugstore.com, specifically knowledge gleaned from Beauty.com and Skinstore.com.

“I talk to Duane Reade everyday. We want to leverage both assets,” said Shannon Petree, Walgreens’ divisional vice president and general merchandise manager for beauty and personal care. As part of its strategy, Walgreens is zeroing in on premium-priced skin care, which dovetails nicely with the role of its 26,000 beauty advisers.

“We want to focus on skin care and make sure customers have trained beauty advisers who they can rely on. We want to provide solutions,” said Petree, who joined Walgreens from Wal-Mart in 2009. “When it comes to cosmetics, we think we cover the category without leaving any white space.”

Standing in Walgreens’ revamped store at 20 Astor Place in Manhattan, Petree said the space showcases its urban beauty format. “It’s open, inviting and airy to let people come in and browse,” she said pointing to a wall of windows that allow natural light to stream into the beauty department. “It lets customers see what we have done.” In this store, a brick gray wall accents the department in keeping with the bohemian feel of the neighborhood.

Along the back wall is a clinical skin care display stocked with French imports, namely Lierac, Vichy and La Roche-Posay. “We see many shoppers coming to us for skin analysis,” said Petree, who added she isn’t ruling out the possibility of adding other services down the road.

Walgreens will assess what stores are a fit for the upscale skin care center, and Walgreens plans to customize the rest of the assortment. In fact, it has a suburban beauty format as well, best illustrated by a unit in Wheeling, Ill. As Petree points out, “Everyone favors their city. The don’t want to feel they are shopping in another city’s store.”

But Ido Leffler, co-founder of Yes To Inc., which got its start in Walgreens, said in reality the secret is that the retailer is “taking New York beauty to the rest of the country.”

The European skin care display bares a striking resemblance to the “healthier skin care centers” found in Duane Reade’s Look Boutique. In fact, this particular store — complete with its well-lit displays and sleek layout — is reminiscent of Duane Reade’s new layout, but the department is branded simply, “Beautiful.” Petree said the official name, along with additional programs to improve beauty, are slated to be revealed this fall.

“There’s an emotional connection between how you feel and how you look,” said Petree, as she toured the store. Her years of dance training are evident as she shuffles from one fixture to the next. “Our shoppers have a high level of trust and that translates to skin as people look for beauty from within. We have a very strong focus on skin care and the lines we’ve added are doing extremely well.”

Industry consultant Allan Mottus gives the nod to Walgreens chasing premium skin care, a category that customers aren’t afraid to buy at drugstores.

“For a company as big and cautious as Walgreens, it is uncharacteristic for them to make merchandising changes unless the strategic potential is positive in upscale beauty,” he said. “The cost of carrying prestige makeup is far too expensive as far as investing in slow-moving inventories. However, the turn rate of prestige skin care is four times or more a year for better recognized skin care in mass doors. Walgreens already has mass skin care products priced from $25 to $50. And skin care fits into wellness.”

Petree, who has worked in beauty for 20 years including an early stint as a fragrance model for Prescriptives’ Calyx, offers a realistic point of view on acquiring department store brands. The environment has to suit them first, she said. But Walgreens is venturing into higher price tiers. This store features window displays of Borba and Cosmedicine, a skin care range that was once sold at Sephora. And a column fixture features a colorful and brightly light display of Essie nail polish. Referring to the display, she said, “A lot of what you’ll see in the urban beauty centers is customized because the space is so constrained.

“About 90 percent of what I use comes from our store,” said Petree, who uses at-home hair color. For the remaining 10 percent she shops department store and specialty brands to keep her abreast of what’s new. Leffler said Petree is a walking endorsement for beauty from within. “She lives and breathes that mantra. She’s a fitness buff and really exemplifies the health and beauty message,” he said.

She said, “I’m proud we have products that satisfy shoppers’ needs looking for an affordable price point. And we have technology on par, such as the Olay Pro-X [cleansing] device,” which is often compared to Clarisonic.

“It takes time to cultivate higher-end brands,” said Neil Stern, a senior partner at the retail-consulting firm McMillan Doolittle. “Look at Ulta, it’s been on a decade-long quest to do just that.…Walgreens needs to balance upgrading with taking advantage of its traffic and not alienating its customer base.”

Candace Corlett, president of WSL Strategic Retail, said of Petree, “She’s practical and realizes the timing is right for derm centers to tie in with Walgreens’ well care message.” Corlett added that her enthusiasm for beauty is infectious. “Everybody has caught the energy at Walgreens. They are bubbling back and making smart choices, like not having a one-size-fits-all approach.”

Walgreens underwent a much-publicized stockkeeping reduction plan as part of its Customer-Centric Retailing format now rolling out. The new stores aren’t so much about what was cut or what stays in, but presenting the beauty products in a fashion that invites and wows customers. “The edits are tertiary; the displays are what’s wonderful,” said Corlett.

Petree acknowledges that in some cases Walgreens has added back products cut from the mix as part of CCR.

“It was the right thing to do,” she said, adding she continues to scout out niche items to weave into beauty. “It’s OK to have some [items] that don’t sell as well because they add fun to the assortment.” Sinful nail color is a perfect example of a fun line that Walgreens helped nurture. It eventually caught the eye of Revlon, which recently purchased the brand.

Walgreens also is working to tout beauty outside the circular, a favorite marketing tool of drugstores.

Petree is big on the Internet and social media to help educate and draw in shoppers. Walgreens recently launched a beauty microsite, Discoverbeautywithin.com. Visitors to the site will find video episodes highlighting everyday women and their personal beauty challenges. In addition, the site offers deals and product information about featured brands and a beauty blog with tips and trends on topics, including proper makeup hygiene and caring for cosmetics tools.

“Beauty is one of the top categories searched and reviewed on Walgreens.com,” said Petree. “This new site plays up on the fun factor and excitement surrounding beauty and allows us another way to connect with our customer to help her quickly find real and sensible solutions. Shoppers are just smarter today and learn from makeup artist’s tips or even physicians online,” she said. She thinks women will continue to seek expertise advice from dermatologists or physicians via the Internet and perhaps in-store systems. Another aspect of the Web expansion has been the ability to test and add back some beauty brands lost in the sku optimization. Physicians Formula, for example, now is available online.

Petree said, “We’re thinking of creative solutions to tap enormous opportunities in the market.”

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