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WOONSOCKET, R.I. — CVS Pharmacy is talking about a revolution.

The growth-minded drugstore chain has drafted plans to open upscale beauty emporiums — about the size of a Sephora store — filled with previously untouchable department store brands.

This story first appeared in the August 22, 2008 issue of WWD. Subscribe Today.

To drive home the drugstore chain’s seriousness about tackling prestige beauty, the concept will be called Beauty 360, with no mention of CVS in sight.

The first concept store is slated to open by year’s end in a major East Coast city, Mike Bloom, CVS’ senior vice president of merchandising, told WWD exclusively. Another will open weeks later on the West Coast, he added.

Bloom would not elaborate on the rollout strategy, but sources briefed on the initiative said the initial concept stores are planned for Washington, D.C., and Sacramento, Calif., and long-term plans call for 500 to 1,000 stores, with about 100 slated to open in the next year.

CVS, which generates $85 billion in annual revenue, is closely guarding the brand names in Beauty 360’s portfolio, but Gardner acknowledged there are 32 lines, excluding fragrance, across skin care and cosmetics. CVS executives described the lines as “department store or specialty store brands,” and clarified that at the moment, they do not include proprietary brands developed by prestige beauty firms for CVS, as the Estée Lauder Cos.’ BeautyBank division has done for Kohl’s department stores.

“We’re very excited about the portfolio of brands we have,” said Gardner. “If you create the right environment, you can sell any brand.”

Bloom added, “We’ve allocated all the resources needed for this project.”

A glance at the concept’s renderings — which call for brushed steel accents, white-tiled floors and a wall of sea-foam-colored, hand-cut glass tile — seems to indicate CVS has invested heavily in paving the way for its move upmarket.

The Beauty 360 units will range between 2,500 and 4,000 square feet in size, and will either be housed in an adjacent store, accessible to CVS shoppers via a breezeway, or a separate store within a CVS store.

CVS also is considering adding “express services,” such as manicures and hand massages, to the model, said Mary Lou Gardner, CVS’ senior category manager for beauty, who is leading the Beauty 360 effort. Gardner is recruiting staff for Beauty 360, and is seeking experienced, but not high-pressure, sales associates and licensed aestheticians. The sales associates will receive commissions, but sell across all brands, she said.

Cheryl Mahoney, CVS’ vice president of merchandising for beauty, said, “Initially, we will overstaff [the concept] to make sure we get the service level right.”

CVS’ bold move is similar to a format by its northern neighbor, Shoppers Drug Mart. The eight-year-old Beauty Boutique stocks a host of prestige brands, including Clinique, Lancôme, Clarins and Christian Dior, in a pristine, assisted-sell environment.

CVS’ effort is a culmination of years of knocking on the gilded doors of prestige beauty firms.

Bloom noted the latest round of meetings took place over an 18-month stretch. “Our team has been on the road pitching and selling this concept,” said Bloom, adding, “But this was the first time that the timing was perfect.”

Referring to waning department store traffic, store closures, emerging alternative channels and a sour economy, he said, “It was the perfect storm.”

Consumers may see gray when shopping for beauty products — democratically filling their makeup bags with items from Target, CVS and Neiman Marcus, for instance — but established, luxury beauty companies tend to see distribution in black and white.

For instance, since arriving on U.S. soil in 1997, Sephora has worked to slowly dismantle beauty’s long-standing distribution barriers, opening a passage in the wall for specialty shops like Bluemercury and Space NK, and forging a relationship with emerging brands that had slim prospects of gaining distribution in department stores.

For its part, Ulta has spent the last eight years repositioning itself from a discount store to a purveyor of mass, salon and prestige brands. President and chief executive officer Lyn Kirby told WWD in an interview last year that it took four years for Ulta to begin to gain traction with prestige brands.

Bath & Body Works is more of a cautionary tale. Empowered by then-ceo Neil Fiske’s trademark trading up strategy, BBW began clearing room among its homegrown brands for outside prestige offerings — including Korres, DDF and Peter Thomas Roth — only to largely retreat from the strategy last year.

Still, there are plenty of success stories, including Shoppers Drug Mart, which now has more than 140 Beauty Boutiques; Ulta, which aims to grow to 1,000 doors over the next decade, and Sephora, which has cemented its positioning as the beauty authority.

Several beauty executives, speaking not for attribution, said in the past, brands were apprehensive about participating in new beauty concepts, like Sephora or Ulta, for fear of retribution from Macy’s Inc. (formerly Federated Department Stores). Now, the looming question has changed to, “How will Sephora react,” they said, particularly because the French-based retailer owned by LVMH Moët Hennessy Louis Vuitton can give brands an international foothold.

Others suggested that Ulta has the most to lose as CVS’ Beauty 360 concept grows, because it overlaps the beauty retailer’s positioning of one-stop shopping.

When asked what CVS’ Beauty 360’s competitive edge will be — particularly as Ulta, Bluemercury, Space NK and Sephora continue to increase their U.S. footprints — Bloom declared, “Real estate. We have close to 7,000 choices. Nobody else has that many.” CVS’ plan to buy Longs Drugs, announced last week, will bring its store count to about 6,800 units.

What’s more, CVS has foot traffic, and plenty of it. The drugstore has about four million customers a day, according to the company. Mahoney noted, “Sixty percent of the female population lives within 5 miles of a CVS store.” She added, “One of the things that has made CVS a success is listening to our customers. She wants to shop where she wants to shop. She’s buying mass cosmetics and she’s also buying prestige.”

Given there are CVS stores stationed at major intersections across the U.S., executives behind Beauty 360 are not spooked by a downtrodden economy potentially crimping sales. Referring to the state of the U.S. shopper, Bloom said, “She’s thinking about her shopping patterns differently, and going to fewer stores.” But pharmacies remain on her short list, particularly if she can have a manicure or hand massage while she’s there, added Gardner.

CVS has spent five years working to steadily improve its beauty shopping experience. Since 2003, it has outfitted 545 stores with Healthy Skincare Centers stocked with European brands, inked exclusive distribution deals with Finnish beauty line Lumene and Boots of the U.K., launched a chainwide marketing program called Reinventing Beauty and developed proprietary lines including Cristophe Beverly Hills hair care, Skin Effects by Dr. Jeffrey Dover, and, most recently, 24.7 Skincare, a techie skin care range.

All of those efforts have set the stage for Beauty 360, said executives.

“We think of it as the evolution of beauty. We believe we’ve always been a step or two above everybody else in our class of trade,” said Bloom. “Beauty has always been part of our DNA so we spend a lot of time thinking about strategy.”

The team stressed that it will not shift resources away from mass market beauty to support Beauty 360, and suggested its current beauty brands stand to benefit from their upcoming neighbor.

Mahoney said, “Mass will win, because CVS customers shop across all channels for beauty.”