CDMA FORECAST: BRIGHT FUTURE

Byline: Faye Brookman

SAN ANTONIO--Steve Lubin, divisional merchandise manager for Walgreen Co., is so exuberant over the prospects of the drugstore beauty business that he uncorked a bottle of champagne Wednesday to kick off the fourth annual Cosmetics Buyers Forum here.
The forum, sponsored by Chain Drug Review and the Chain Drug Marketing Association, was the opening session of CDMA's Fall Conference and Expo that will end on Sunday. Beauty representatives from 25 chains and 21 suppliers attended this year's forum.
Discussing the long-running encroachment on chain drugstore beauty business by competing retail formats, such as discounters and home shopping TV channels, Lubin presented statistics showing drugstores have a comfortable lead in many categories such as eye, facial makeup, lip color, nail polish and nail care.
"These five categories alone account for over $2 billion worth of business of which we [chain drugstores] own a combined 50 percent dollar share," Lubin told the audience.
"Major category after major category, we--the drug chains--are the leaders. We're the class of trade everyone else is trying to catch," he said.
Lubin called for drugstore beauty buyers to keep their departments fast, focused and friendly.
"Studies show that 70 percent of consumers who shop drugstores on a regular basis intend to shop us next year. I'm convinced we drugstores will not only maintain our customer base, we'll actually grow it," he said.
Discussing the various threats chain drugstores have faced over the years from forces such as deep discounter Phar-Mor, Wal-Mart and home shopping, Lubin illustrated how drugstore chains weathered the competition.
"First there was the Phar-Mor scare and that rural chain called Wal-Mart--a.k.a. the beginning of the end," he said. ""Drug retailing will never be the same,' we said. We were right. It isn't because we went out and learned what we had to do to compete and, in the process, we've gotten better."
Lubin suggested that chain drugstore retailers continue to be proactive with new product launches.
"We want people to say, 'If it's new, it's at the drugstore,"' he said, and pointed to K&B's program in New Orleans of in-store employee contests to build displays for new launches.
"It attracts the consumer and promotes sales and helps sell-through," he said.
He also recommended linking cosmetics through promotions with strong drugstore categories like hosiery.
"Hosiery remains a top drugstore destination. Let's capitalize on that and find ways to tie in hosiery with color cosmetics or fragrance companies," he said.
After his words, buyers divided into smaller groups to discuss segments of the beauty business and issues they would like to resolve via the Cosmetics Buyers Forum.
The brightest spot for most chains currently is color cosmetics, with many retailers posting double-digit sales gains. With the product end of the business healthy, retailers directed their efforts to improving fixtures.
Many lamented that most vendors' displays are not flexible and are time-consuming and costly to set up. One chain reported spending more than $98,000 in man-hour costs setting up beauty displays last year. Additionally, buyers said fixtures are frequently damaged.
"What we've asked vendors to do," said Jackie Millon, buyer for K&B, "is to put an 800 number on their fixtures so store people can have a place to call for replacement fixtures."
The new Max Factor Studio Wall--currently being set up in stores--was also said by buyers to need revisions so that product can be seen better.
Buyers also cited a few hot products such as Revlon's Street Wear nail color, R&H's Sweet Georgia Brown cosmetics and pencils such as those from Lord & Berry's, Prestige and Nat Robbins.
"Pencils are still the hottest thing, and I'd take everything else out and put in more pencils," said one buyer. Also singled out as doing well are DCA's lipsticks that mimic Chanel.
"We've done very well with DCA's lipsticks," said Naomi Germano, buyer for Harmon Discount Inc.
In skin care, buyers continue to see interest in products such as Chantal Pharmaceutical's Ethocyn. However, its price points of $75 and up have made it a challenge to merchandise. Several stores have been forced to move it to the pharmacy.
Buyers said they'll ask suppliers for new ways to get products out from behind the prescription counter so shoppers will find it easier to buy.
The fragrance category continues to be a source of disappointment for drugstore chains. As a remedy, at least two retailers said they were turning some of their fragrance business over to a third party to manage.
Penny Wade Hall, buyer for Harco Drug of Tuscaloosa, Ala., said she is putting a plan in place for a wholesaler to manage its mass fragrance program. The third party, which has not been chosen, will provide services such as putting anti-theft devices--source tags--on the fragrances.
"Most mass market fragrance companies don't do that," said Wade Hall. Two years ago, Harco turned over its prestige fragrance business to Sovereign Sales of Livonia, Mich., and the company believes that has saved $70,000 a year in warehouse costs.
Rite Aid of Harrisburg, Pa., has also used a third party, Rita Ann, as its fragrance source for its 700 upscale beauty stores. Although the chain decides what to buy and what to promote, according to Rite Aid category manager Linda Conway, Rita Ann handles the actual distribution of the fragrances to the stores.
During the roundtable discussions, several buyers said they did not want to go as far as relinquishing control of their fragrance area, but many did say they are cutting back on their day-in-day-out selection of scents because of poor sales.
That's been exacerbated, they added, by late shipments of Christmas fragrances from several major players.
"We're three weeks late with Christmas," said one.
Buyers also searched for clues why the alternative designer fragrance, or knockoff, business has slowed.
"One thing is there hasn't been a really big department store launch," explained Lubin. "That business could come back in a second."
Finally, retailers discussed innovative ways to charge up their beauty sales. To attract teenagers, Fruth Pharmacy in Point Pleasant, W. Va., has a teen club. Special mailers are sent from databases collected at each store offering discounts on items teens like, according to Patricia Boster, buyer for the 18-store chain.
Genovese Drug Stores of Melville, N.Y., has formed a teen advisory board to bounce off product ideas. The teens recently were treated to hair and beauty makeovers.
Several other chains said they are looking at gift-with-purchase ideas, especially for holiday. According to Patti Carroll, buyer of Thrift Drug, the Pittsburgh-based chain has been doing gwp's in its upscale units and will be doing a full program this year.
"You have to make sure you are offering something of value," she said. Others agreed and said they are looking at items such as pewter picture frames and serving trays.
Retailers praised the forum as a chance to get together to share ideas.
"Too often we're scared to pick up the phone and call each other, especially when a vendor tells us so-and-so is putting their item in," said one. "Now we can talk and find out that sure Walgreens is putting it in--in a five-store test, not chainwide."
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Kmart Corp. is in hot pursuit of fragrance business this Christmas, according to Mary Prince, divisional vice president. In the stores, Kmart has created a two-sided presentation of fragrances to house the array of new launches. "All of the new scents are showing strong sales," said Prince, who is especially pleased with Quintessence Celebrate, Coty's Exclamation Blush and Raw Vanilla, and Revlon's Cherish.
Kmart will devote full end-aisle displays to fragrances as well as featuring the new brands in its national advertising. The chain will have an important new store adding to its Christmas sales this year--its first Manhattan unit, slated to open Oct. 3 at One Penn Plaza.

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