MEXICO CITY — El Palacio de Hierro’s fledgling Polanco store beauty department is outstripping expectations with sales soaring 160 percent above the 2014 November sales of the old store in its first month of operation since opening Nov. 6, said sales director Adriana Lizarraga.
“The results are amazing,” she said, adding that since the November opening, the new store has matched 30 percent of the total beauty sales for all of last year in the old Polanco store. “We can close the year with 50 percent of those sales,” said Lizarraga, who declined to reveal the exact number, but said the 2014 total was in the 200 million-peso ballpark ($11.8 million at current exchange). That would mean the new beauty department could generate nearly 100 million pesos, or $5.8 million at current exchange, from Nov. 6 through Dec. 31.
So long as Mexico’s volatile economy doesn’t worsen more than expected, the picture looks rosier for 2016, when the luxury purveyor predicts turnover will surpass 250 million pesos, or $14.8 million at average exchange, sharply exceeding its best-selling Perisur store.
As part of a $300 million revamp of the store in Mexico City’s posh Polanco quarter, the retailer enlarged the beauty space to 1,800 square meters from 800 square meters, bringing a string of new exclusive collections and becoming the home of new labels boasting Latin American flagships.
Aqua di Parma, Nars, Benefit, Make Up Store, Anja Rubik and Nest are also new arrivals to the 80,000-square- meter Polanco emporium, which the 13-store chain transformed from a 20,000-square-meter outlet, making it Latin America’s largest high-end department store by many accounts.
The store’s appeal in Mexico’s sprawling capital city area was palpable, with thousands jamming to the Polanco area in the first weekend.
“Sales went up 220 percent over last year,” said Lizarraga, noting that the store’s innovative layout, coupled with an assortment of exclusive labels and collections unseen in Mexico, proved a winning combination.
“This layout is unique in the world,” boasted Lizarraga. “People can circulate freely and feel very comfortable.”
Another first is the brand marketing canopies, which hang from thin metal-tree branches conveying the section’s architectural theme, Mexico City’s Alameda Park.
“[They don’t] take away from the view,” explained Lizarraga, adding that the section is also much brighter than others in the network.
Several trademarks also rolled out exclusive collections, products and packaging for the store, including Guerlain, Carolina Herrera, Loewe, Prada, Dior, Sisley and Natura Bissé. Guerlain’s Les Exclusifs de Guerlain was a first for Latin America, as will be the upcoming launch of Carolina Herrera’s Confidential fragrance collection, now sold only in Dubai.
A new, 15-square-meter corner called La Grand Perfumery will carry new labels, with items that Lizarraga said are “fashionable yet difficult to get and unique.”
The Polanco venture will boost El Palacio’s overall beauty sales 15 percent this year when the store was mostly closed for remodeling. Excluding Polanco, turnover would have jumped 23 percent, Lizarraga said, adding that while two stores (Mexico City’s Satélite and Santa Fe) were down in November, all others are trading up, showing Polanco is not cannibalizing sales.
“This is an aspirational consumer with strong acquisitive power who didn’t come [to El Palacio] before because the shopping offer and environment wasn’t as attractive,” Lizarraga said of the Polanco shopper. “Or a business type that finds the prices attractive because of the strong dollar-peso exchange.”
Lizarraga said the 126-year-old retailer’s beauty franchise will grow above the forecasted 13 percent gain in the selective-beauty market this year, Lizarraga said, though conceding that next year could see a tougher trade amid low oil prices and the volatile peso.
Because of the peso’s devaluation (the Mexican currency has plunged to hover at 17 to the dollar from around 11 a year ago), El Palacio will raise prices 10 percent in January along with the industry which has seen soaring import and other costs squeeze margins.
“This will hurt demand a bit but also, the economy is not doing that well,” Lizarraga added. “It’s not really that buoyant.”
When the going gets tough, Lizarraga said El Palacio will increase gift-on-purchase and other promotions to boost sales, on top of the retailer’s store-card promotions. Though given rivals are also doling out credit like there’s no mañana, that strategy could be a risky bet.
Overall, Lizarraga expects total sales to rise 8 to 9 percent next year excluding Polanco and 15 percent factoring in the new store.