OUTPACING THE INDUSTRY AT ARBOR DRUGS

Byline: Faye Brookman

NEW YORK--Mention the current state of the color cosmetics business to typical mass merchants and they'll complain about lackluster unit and dollar volume growth.
But that's not the case with Eugene Applebaum, chairman and chief executive officer of Arbor Drugs, a 156-store chain based in Troy, Mich.
"Our business is just sensational," Applebaum claimed.
While he would not comment on the proportion of his business done by cosmetics, industry experts estimate Arbor rings up 7 percent of its overall sales in beauty, more than twice the industry average.
Arbor exceeds the norm in other key areas, as well. The chain reportedly has sales of around $520 per square foot--a full $200 above the industry average.
A typical Arbor store reportedly rings up sales exceeding $4 million annually, and according to the company, same-store sales are up almost 7.7 percent so far this year.
Helping dramatically to produce the impressive comparable-store sales gains, according to Applebaum, is cosmetics, a category that has always been emphasized at Arbor.
"It is a core category for us. While others went into general merchandise, we never strayed from traditional drugstore format. We never mix mascara and motor oil," he explained.
Cosmetics is in a high-visibility area near the front of the Arbor stores. The merchandise selection includes Revlon, L'Oréal, Maybelline, Cover Girl, Physician's Formula, Cabot, Almay, Wet 'n' Wild and Coty.
The department spans 52 linear feet of peg wall, alongside 12 linear feet for prepacks. The area is staffed with cosmeticians who are trained by Arbor's own beauty supervisors.
Lipsticks are performing particularly well, Applebaum said, noting that among the standouts is Revlon's new ColorStay, which he feels has been supported with impressive advertising.
"We like to tie in with manufacturers' national programs, and we can really get behind new launches," Applebaum said.
As for face makeup, he named Maybelline's Revitalizing, Revlon's Age Defying and L'Oréal's Visuelle as standouts.
While many chains have shied away from private-label cosmetics, Arbor launched its own nail enamel last year, a line called Classic Beauty. It includes 32 hues at 99 cents each. "It is doing very well for us and is purchased by a wide range of customers, not just the budget customer," Applebaum said.
The fragrance assortment features mass market brands as well as high-end scents, such as its best-selling Elizabeth Arden's White Diamonds and Red Door, Calvin Klein's Eternity and Obsession, Ralph Lauren's Polo and Estée Lauder's Beautiful.
In total, Arbor's carries 200 stockkeeping units of women's fragrances, along with 100 of men's.
The beauty category is promoted through Arbor's marketing vehicles, including direct mail, coupon books, and radio and television advertising.
The chain's cosmetics departments also sport a recently updated decor. Bands of yellow, cranberry and green accent the area and separate it from the rest of the store.
What's more, Arbor has been able to manage the category to make it more productive through the use of sophisticated computer systems--the entire chain is equipped with point-of-sale scanners.
While few drug chains are scanner-equipped on a chainwide basis, scan data at Arbor is reviewed weekly--sometimes daily--to determine what is and isn't selling.
This quick response approach was particularly useful last Christmas when the chain could see sales trends developing for fragrances, Appelbaum noted. Arbor was able to ship stock from one store to another to meet various consumer demands.
The chain is also in the process of implementing a merchandising system that will automate its ordering and replenishment. The goal: When a cosmetics item is close to selling off the wall, more is automatically ordered to be delivered just in time to fill the shelf.
The system also offers Arbor the chance to edit merchandise that doesn't move. Industry sources noted that Arbor has been fast to cull slow movers from the cosmetics peg wall.
"Its turns in cosmetics are probably three times a year--that's twice the industry average," said one manufacturer.
Although Applebaum admitted a human element is needed to merchandise cosmetics, he believes a disciplined approach and proper use of technology pays off.
"Technology has played and will continue to have a pivotal role in our ability to achieve significant operating efficiencies," said Applebaum.
Recently, Arbor has added home delivery to its services. Shoppers can get prescriptions filled as well as get beauty products delivered to their house.
Arbor is also credited with selecting key real estate in the greater Detroit market. Its locations have helped it grab a 34 percent share in southeastern Michigan, the top share in that area, according to Metro Market Studies, a tracking firm.
Applebaum, who has already selected 20 new sites to be opened in fiscal 1995, the chain's biggest expansion plan ever, said, "I like to locate my stores at the intersection of Busy Street and Busy Street."

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