NEW YORK — Penny-pinching consumers are looking for bargain basement beauty.
This story first appeared in the July 26, 2002 issue of WWD. Subscribe Today.
That’s fueling the growth of value stores, where much of the merchandise is sold for $1. Cosmetics and health and beauty care items are among the biggest pulling items at value stores. “If a customer buys something and it is the wrong color or they don’t like it, they are only out a buck,” said industry consultant Allan Mottus.
Ames Department Stores, joining the bargain brigade, announced on Monday it is expanding an existing value program. A “Dollar Bargains” format is being rolled out to all of the discount store chain’s 327 doors, according to Joseph Ettore, Ames chairman and chief executive officer.
A company spokeswoman said beauty items such as nail files, hairbrushes, potpourri, lipstick holders, compact mirrors and lash curlers are among the items now offered for $1.
Ames, which is struggling to find a market edge against competition such as Wal-Mart and Target, hopes the bargain tactic will attract new consumers without abandoning loyal Ames shoppers. “For years,” said Ettore, “customers have come to Ames for our unique ‘Special Buy’ program in apparel and other soft lines categories, as well as for the broad selection of every day low items we carry. Dollar Bargains strengthens the reach of these successful programs.”
The Dollar Bargains department comprises between 32 to 96 linear feet of shelving on the sales floor. Merchandise will be replenished weekly and include seasonal items.
Ames, which is operating under Chapter 11, isn’t the only merchant banking on bargains. The entire value segment of retailing is flourishing at a time when many upscale merchants are limping. The leading value chains such as Family Dollar, Dollar Tree, 99 Cents Only, Dollar General and Bill’s Dollar Stores comprise a thriving business typically.
As beauty marketers look for new doors, many are finding a nice fit in these “dollar stores.” AM Cosmetics, for example, has beauty products under its Emerge label just for these stores. Several other companies are also moving merchandise through them. Others use the channel as an avenue to move discontinued or excess goods.
A visit to a value store in central New Jersey revealed beauty items from companies such as Naturistics, Vogue and Townley.
The largest of the value stores is Dollar General in Nashville, Tenn., with sales exceeding $5.2 billion pumped out by its more than 5,500 doors. Family Dollar is the second largest and its 4,000-plus units pump out sales of $3.6 billion. Dollar Tree Stores amass sales of almost $2 billion with close to 2,000 stores.
Health and beauty care items are often featured in dollar stores. Family Dollar has more than two full aisles of beauty products near the entrance of its stores. The merchandise mix often changes, based on opportunistic buys the retailers can secure. The stores lack upscale fixtures and are often crowded and confusing — but that only fuels shoppers’ confidence that they are getting keen prices. “We’re not fancy, but we have 9.7 million customers per week,” said a source at Dollar General. Consumers don’t seem to mind that they don’t always see nationally known beauty brands. “The proliferation of private labels has made brands less important,” observed Mottus. A teenage shopper at a dollar store in New Jersey added, “At these prices, I can buy so much more.”
Dollar stores are filling a market gap created by the demise of deep discount drugstores. Popular in the Eighties, these chains disappeared in the Nineties as manufacturers reduced advantages of forward buying practices. When that happened, retailers such as Drug Emporium, Discount Drug Mart and Phar-Mor could no longer secure super bargains they could pass on to shoppers. The growth of discounters such as Wal-Mart also zapped deep discounters’ popularity.
Although there are a handful of stores sticking with the deep discount format — Marc’s in Ohio, for example — most have either closed or been transformed into traditional drugstores.
The demise of the business is illustrated by the recent sale of Phar-Mor, once one of the most robust low margin operators in the business. One of the pioneers of deep discount retailing, Phar-Mor’s Rx business and assets were put up for auction last week. The troubled chain started closing stores over the past few years and the remaining 73 stores will be closed as part of a $141 million sale to a joint venture of Giant Eagle and CVS and investment firm Ozer Group of Boston and Hilco Merchant Resources. Giant Eagle and CVS will assume the prescriptions lists and hire up to 80 pharmacists. The investment firm will liquidate Phar-Mor’s inventory and Phar-Mor will auction off its remaining store leases. Although it is the end for Phar-Mor, there was intense interest in the bidding. There were eight formal bids, including one from another drugstore chain, Snyder’s Drug.