Predicting the success of private label cosmetics is proving a tricky business. For sure, the floodgates have opened in the past three years, with everyone from chain drugstores to discounters to specialty chains to department stores putting their imprint on a color collection.
And already, the scorecard is full of hits and misses.
Vicki Williams, president of Signature Sales, a private label consultant, advises that retailers cannot “tiptoe into this and see what happens. You have to be committed to getting into it and do what it takes to get into the business.”
If the only reason a retailer wants to create its own line is because the margin is better, “I wouldn’t do it,” Williams said. “It is just not worth it.”
Thomas Winarick, executive vice president of Prestige Cosmetics, which markets the Prestige brand at mass and also produces private label, advises that retailers, “need to go into it with your eyes and mind open.”
Getting into private label is a give-and-take proposition. “Retailers gain a lot from it. They gain point of differentiation, they gain gross margin. But they also give up all the benefits of buying a third party line, like return privileges and being supplied with fixtures,” Winarick adds.
Reasons a line can fail include a lack of management dedication or logistical issues, he said. “Brands evolve over the years. Some periodically are up and some are down. Sometimes, they need to be redefined. They [retailers] have to be prepared to stick with it. It is really like starting a new business.”
Strikeouts include, surprisingly, Hennes & Mauritz. The trendy Swedish fashion retailer made a big splash when it entered the U.S. in 2000. In between the hosiery and the affordable fashion was a complete beauty collection, including several foundations, lip colors, mascaras, along with shampoos and conditioners. But about a year after the debut, the products were yanked. According to a store source, the beauty products are now only sold in H&M’s European stores.
Of course, one of the largest attempts came from Sears with its Circle of Beauty, a vast store within a store concept that was the centerpiece of the Sears beauty department. Last year, the retailer decided to get out of beauty altogether, discontinuing Circle as well as the other color brands it carried.
And in the first week of August, the three-year-old beauty chain Skinmarket suddenly pulled the plug on its 33 stores, which carried its exclusive Skinmarket product collection.
But then there are the success stories, such as Wal-Mart’s cosmetics private label business. This spring, the giant retailer unveiled the licensed Mary-Kate and Ashley color collection, which was followed by hair care products. Michael Pagnotta, a spokesman for the teen twins, said the line is “doing phenomenally well.”
The brand, he said, has “far outsold the projections — incredibly so. There definitely is an expansion in the works.” The cosmetics, he said, will not be exclusive to the U.S., but will be expanded to other Wal-Mart markets including the U.K. and Canada.
Target has also been expanding its exclusive Sonia Kashuk Professional Makeup line, which launched in September 1999 as a tightly focused collection of foundations, lip color, pressed powders, eye shadows and pencils. Now, it offers nail color, lip glazes and cosmetics bags; a recent major addition has been fragrance. The three-scent collection has been a runaway success, confirmed Sonia Kashuk.
Meanwhile, Shoppers Drug Mart in Canada, one of the first drugstore chains to deliver its own color line — Quo, which launched in June 1999 — is now tweaking the brand. Quo started as Shoppers’ answer to a makeup artist brand. The pricing was slightly higher than the average mass brand; componentry was black and sleek. It was merchandised in a service case, and store associates were taught the products. Distribution was restricted to 250 of Shoppers’ some 800 doors.
Now, the brand is being relaunched to have a broader market appeal. Packaging has been changed and Quo has been taken out of the case and put on an open-sell fixture. It is now in 550 stores and will hit 600 by year-end, according to Meghna Kapadia, assistant marketing manager for Quo.
“Quo has been a success. It is doing really well,” Kapadia remarked. “We do have big private brands within Shoppers Drug Mart.” Quo, she noted, “still has a premium positioning, but it is not prestige.”
Kapadia added: “We have seen great success with the new units. We realized that a lot of color is just bought on an impulse. The more openness you have for [customers] to play around and just buy a product, increases the interaction.”
When launching Quo, a key point was to position the line, “not as a Shoppers brand, but as a brand you can only get at Shoppers,” said a company executive at the time.
Keeping a store’s name off of private label color is a widely adopted strategy. Developing a line is a way to differentiate the store from the competition, say most retailers. Conventional wisdom also suggests consumers don’t have faith in drugstores putting out a color line. That’s probably why Eckerd’s is called Mira, Duane Reade’s is named Apt. 5 and CVS dubbed its private label beauty collection Essence of Beauty.
So, how are those shaping up? Mira, which made its debut two years ago, continues to grow, according to chain executives.
“Eckerd is pleased with the results from Mira and are definitely continuing with our Mira brand in cosmetics in all Eckerd and Genovese stores,” said Kathy Steirly, vice president, merchandising beauty. She added that shade updates will take place with Mira cosmetics at the same time the company transitions shades in the other brands.
And so far, Apt. 5, which hit Duane Reade stores in May, is thriving, said Karen Durham, divisional merchandise manager. The brand has brought new sales to the department. “There has not really been any siphoning of sales.”
The CVS program had been a test, which the chain has opted not to roll out. A handful of stores had full endcap displays, while most of the chain’s stores presented prepacks of Essence of Beauty cosmetics, including nail polish and lipstick, which it will continue to offer. On the other hand, CVS has been “very successful” with an exclusive fragrance collection it brought out this spring, called Perennials, and plans to follow up this fall with a holiday assortment.
Meanwhile, department stores are starting to offer exclusive lines as well. Caboodles, which markets a teen brand under the same name, has now created two department store teen brands — She She and C Me — for retailers to use as exclusive lines. The Macy’s Herald Square store opened a She She boutique in September.
But why are private labels viable now, when cosmetics have been a hands-off category for so long?
“It used to be that everybody was scared of color because it was so stockkeeping-unit intensive,” said Williams of Signature Sales. She points to the rise of national chains as one motivating factor, because now there is so much similarity across departments. For that reason alone, predicts Williams, “we will continue to see more [private labels].”