DALLAS--The future of the mass market beauty business may already be a reality in Texas. Drugstores are losing their grip--and Dallas is a prime example. The recent string of drugstore consolidations and the resultant closing of less-productive stores, coupled with heightened competition from other retail venues, has tremendously eroded the drugstore share of the cosmetics business. Many chains--Revco, for example--deserted the Dallas area after deeming their market share not lucrative enough, leaving Eckerd Drug Co. as the only large traditional drugstore player. In addition, the beauty business here is being squeezed by some of the country's more powerful supermarket chains, as well as by two discounting giants, Target and Wal-Mart. Supermarket and discount chains have become so mighty in Dallas that they have cut into the traditional mainstay businesses of drugstores, including over-the-counter pharmaceuticals, health and beauty aids and cosmetics. Many shoppers have turned to Kroger Supermarkets or Wal-Mart to provide the services they used to get from drugstores. The blurring of retail trade classes is illustrated by the fact that while Eckerd has 27 percent of drugstore sales in Dallas, the nation's 18th largest drugstore market, two supermarkets that contain pharmacies--Albertson's with a 24 percent share and Tom Thumb with 10 percent--are the next biggest. Of the 25 biggest drugstore markets in the U.S., only Dallas and Los Angeles have fewer than three major drugstore chains. Los Angeles has Thrifty PayLess and Sav-on. San Francisco--a market similar in size to Dallas--has three strong drugstores divvying the pie. Walgreen Co. has a 28 percent share, Longs Drug Stores a 27 percent share and Thrifty PayLess 13 percent. The supermarket competition is especially keen in Dallas. The city is home to Tom Thumb, a supermarket chain with more than 20 units in the metropolitan area. Owned by Houston-based Randall's, Tom Thumb also operates two upscale supermarkets in Dallas called Simon David. The Simon David stores sell fine wine and the Silver Palate brand of gourmet foods, and shoppers don't unload their own grocery carts. Instead, there are special checkout aisles that allow the carts to be handled by cashiers. All purchases are carried by Simon David employees to customers' cars. The beauty selection at Simon David is also targeted to a discerning customer base. For example, the store stocks several brand names not available in most mass market doors, such as Claire Burke aromatherapy, which is housed in a wood display fixture, Ben Rickert bath products and Bilange sponges. Borrowing a tactic from department stores, the stores offer free gift wrap on bath and aromatherapy items with any $10 purchase. Bath products are housed in displays at the end of the aisles. There are also bath products such as St. Ives and Freeman on shelves opposite the skin care selection. Prestige scents are in two glass cases, one for men's and the other for women's. The selection for men includes Calvin Klein's Obsession for Men, Drakkar Noir, Chanel's Egoiste and Joop. Rounding out the women's section are 360i by Perry Ellis, Givenchy's Amarige and Laura Biagiotti's Venezia. Simon David has a limited array of mass color cosmetics. Only Revlon and L'OrAal are carried. It is a strategy at least one expert expects more retailers to adopt. "The customer today is saying that if they trust a retailer, they want that retailer to pare down the selection for them into a good-better-best offering," explained Anthony Stokan, a retail consultant at Anthony Russell & Associates. The beauty department is serviced by a staff that also handles the floral department. Two other innovative supermarket retailers have a dominant position in Dallas. Many Kroger units include an upgraded cosmetics department with a service counter adjacent to a skin care boutique. Meanwhile, Albertson's, based in Boise, Idaho, places cosmetics front and center in its stores, with a heavy emphasis on secondarily sourced fragrances. Discounters are also expanding rapidly in Dallas. Wal-Mart has a strong presence and its stores include glass counters filled with many fragrance and skin care brands obtained from secondary sources. Target's units have large and well-stocked cosmetics departments and an extensive bath selection highlighted by LaLoren's Sarah Michaels line. Meanwhile, Eckerd, the last remaining drugstore stalwart, has expanded the cosmetics category in its units here. One bustling store in downtown Dallas that serves local office workers has a wood floor, one of a handful of upscale twists. The cosmetics department is about 80 feet long--twice the length of a typical Eckerd's. A large glass counter houses a wide array of prestige scents, and two cosmeticians were servicing the department on a recent visit. Jenny Chen, a shopper in the Eckerd store, said she often purchases cosmetics there on her lunch hour. "At Christmas I bought [Revlon's] Fire & Ice here," she said. "But when I'm out of moisturizer, I usually shop at Wal-Mart because it is cheap." Eckerd, however, says in its ads that it will match or honor any competitor's advertised prices and coupons. Other drugstore competitors in the area include deep discounter Drug Emporium and Texas Drug Warehouse, each of which have a handful of stores. A store manager at one of the chains, who asked not to be identified, said, "This is a market where shoppers are used to Neiman Marcus. You have to offer something different to stand out and survive. I'm getting out of cosmetics because the competition is too tough."
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