RX CHAINS, DISCOUNTERS DISCOVER MANHATTAN

Byline: Faye Brookman

NEW YORK--CVS Stores of Woonsocket, R.I., wants to nibble at the Big Apple.
CVS plans to open its first unit in Manhattan at a former Woolworth site on Eighth Avenue and 23rd Street some time next year, according to sources.
CVS did not return calls to confirm the opening. The 1,300-store chain already operates units in New York, New Jersey and Connecticut.
After years of being dominated by independent drugstore operators, Manhattan has become a hotbed of chain drugstore and discount retail growth.
Genovese Drug Stores of Melville, N.Y., opened its first Manhattan outlet in 1993 and is on the prowl for more locations, according to chain officials.
Rite Aid will establish a presence next spring in Manhattan thanks to its recent acquisition of nearly 20 New York supermarket locations from The Red Apple Group in New York. About 12 of the 20 units, formerly Sloan's and Gristede's, are within Manhattan's borders.
Rite Aid, based in Camp Hill, Pa., has 2,600 drugstores, mostly in the East and Midwest. The New York supermarket acquisition brings to 50 the number of units it operates in New York City, with a majority of them in the four outer boroughs.
Bradlees unveiled its first Manhattan discount store Nov. 6 and Kmart Corp. announced plans to open its first unit in Manhattan in space currently occupied by F.W. Woolworth.
One of the enticements of entering Manhattan is the envy-inspiring sales-per-square-foot statistics pumped out by chains such as Duane Reade, which exceeds $1,300 per square foot--almost four times the industry average.
In addition to Duane Reade, which has 46 Manhattan stores, the new contenders have to compete with Woolworth Co.'s Rx Drug Mart with 14 units, Love Stores with 24 doors and the six-store McKay Drug group.
All four of these operations have recently opened new units in Manhattan. The borough is also home to Ricky's, a small chain of drugstores selling unique, niche market color cosmetics lines.
There is also a healthy network of independents who control an estimated 75 percent of Manhattan's drugstore business, according to sources. These stores include Tower Chemist and Zitomer.
Then, too, several other major players have reportedly put feelers out for Manhattan locations, such as Walgreen Co. and Wal-Mart. Neither of these chains would comment on the reports, but the advantages of a move into Manhattan are obvious.
"It's a recession-proof business," said Faith Hope Consolo, managing director of commercial real estate agents Garrick-Aug Associates in New York, about the drugstore business. "Plus, women in New York use these stores for everything from pantyhose to cosmetics. And they are getting a lot of business away from the supermarkets."
She added that rents have become more affordable over the last five years. That, coupled with dense foot traffic, have made the city attractive to drugstore chains. "Drugstore chains are taking a lot of the closed Chemical Bank locations and Woolworth sites," she added.
CVS and Rite Aid will encounter stiff competition for the existing mass market beauty business. Both typically have self-service cosmetics departments with a standard menu of mass market brands.
The competition, such as Love and Genovese, have extensive assortments of better brands as well as upscale cosmetics and fragrances secured via secondary sources.
Genovese, Love and McKay all have upscale merchandise presentations with beauty advisers stationed by display cases loaded with fragrances.
The drugstore chains also face formidable pressure from the city's vast array of department and specialty beauty retailers, such as Cosmetics Plus.
What CVS specifically brings to New York, however, is a fine-tuned operation that is known in the business for being aggressive with new products.
CVS also has point-of-sale scanners in place throughout the chain, giving it the advantage over many competitors of knowing just what is moving out the door. Because it has a handle on what is selling, it can purchase merchandise more efficiently and reduce its costs.
The chain's beauty buying staff is considered among the best in the business by vendors, another plus for the chain. CVS is familiar with operating in inner cities such as Washington, where its logo now flies over stores formerly operated by Peoples Drug, which it acquired in 1990.
Also, CVS gained exposure on Long Island after it purchased Austin Drug in 1993.
One mass market retailer, who asked not to be named, summed up the situation. "New York has plenty of opportunity," he said. "Duane Reade is really the only big competition and there is room to improve upon their stores."The Sally Beauty Supply Company, based in Denton, Tex., is entering the Japanese market. Sally, an operating division of Alberto-Culver Co., has entered into a joint agreement with C&C Cash & Carry Beauty Supply, which operates four stores in Japan. "This is a logical next step in our expansion," stated Michael Renzulli, president of Sally. "In addition to our 1,335 U.S. stores, we operate a chain of 43 stores in Great Britain, and our experience in both those markets will contribute to our success and growth in Japan."
Sally ranks as the largest seller of professional beauty supplies in the world and is opening stores at a rate of one every three days, according to Renzulli.

The National Association of Chain Drug Stores said it is unlikely a technology will be developed in the near future that allows implementation of an integrated source-tagging system for all products.
NACDS, based in Alexandria, Va., based its statement on a study conducted by Arthur D. Little Inc.
The study, sponsored by NACDS, concluded that at this time no universal source can be recommended for electronic article surveillance.
Currently different chains in the industry use antitheft systems from a variety of vendors. The technology used from one to another is not compatible. That means that vendors cannot adopt one technology and make it work with all retail chains.
Tagging merchandise to prevent theft is especially critical in the fragrance business, where retailers want to be able to bring bottles out from under lock and key to encourage greater sales.
NACDS president and chief executive officer Ron Ziegler said store theft is a serious problem, and that shrinkage averages about 2 percent of retail sales in the U.S. According to industry sources, total drugstore sales amounted to $61.5 billion in 1995, translating the shrinkage into $1.23 billion.
He said the study will help encourage EAS suppliers to work together for a solution. "This study will provide the foundation for retailers, consumer products manufacturers and EAS vendors to work together to identify and develop techniques that will prove a win for them and for consumers," he said.
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Chain Drug Marketing Associates, based in Deerfield, Ill., has named O.J. "Jim" Curley to the newly created post of senior category manager for health and beauty and cosmetics. He will begin Jan. 2.
Curley is well known to the chain drugstore beauty business, having been a buyer for Walgreen Co., a principal in Doc's Drug and a manufacturer's representative and consultant to the health and beauty aids business.
CDMA is improving its programming for its next cosmetics buyers' forum, which will be held next fall in Boston. In its efforts to bring in larger chains to participate in the forum, CDMA has tapped Steve Lubin, divisional merchandise manager for Walgreen Co., to serve on the planning committee for the forum and to attend the session.

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