Mass-market beauty retailers have their backs against the wall.
This story first appeared in the March 28, 2014 issue of WWD. Subscribe Today.
Sales growth in the sector remains marginal and trails far behind that in the prestige tier, leaving mass retailers rushing to close the gap. As a result, stores such as Target, CVS Pharmacy and Rite Aid are rolling out new formats designed to attract consumers and jump-start sales. Ulta Beauty — the leading purveyor of mass, class and salon — also continues to tinker with its layout, making improvements such as opening up the salon space, better integrating its prestige offering and introducing new fixtures for its mass brands.
Ulta chief executive officer Mary Dillon told Wall Street analysts during the retailer’s earnings call on March 13 that the chain intends to accelerate an already-strong category. “We plan to remodel about 12 stores to our latest store format this year, and reflow the mass cosmetics planograms in about 60 stores to replace some dated fixtures and to create a more vibrant and consistent shopping experience in that category.”
The upswing in remodeling activity across these retailers comes after a tough holiday season for many in mass. Total beauty sales in the U.S. mass market ticked up 1 percent in 2013, compared with the prior year. They were eclipsed by U.S. prestige beauty sales, which gained 5 percent last year, according to Karen Grant, vice president and senior global analyst of The NPD Group.
Prestige players are emboldened by the divide, but mass merchants have sprung into action by upgrading the in-store experience.
CVS Pharmacy in East Windsor, N.J., is currently testing a dramatic new store design that completely reconfigures the beauty department. It seems like the boldest of the moves now under way in the market.
A faux-wood floor runs throughout the department, and glossy-black fixtures house the cosmetics wall. Skin-care, hair-care and personal-care products sit on low-profile shelves, set at an angle to the cosmetics wall, replacing traditional gondolas. In the center of the department is a counter for consultations. A sign above it reads, “Talk to your beauty consultant.”
The fragrance area, although still under lock, requiring a buzzer to summon help, represents a huge advancement with full-size testers affixed to the displays.
The concept, which features mass beauty brands aside from salon hair-care lines, is a departure from CVS’ bold experiment with higher-end brands several years ago. The chain shuttered its upscale concept called Beauty 360 nearly two years ago, opting instead to focus on its core beauty business and exclusive brands, such as Nuance Salma Hayek.
But some of the merchandising elements from Beauty 360, such as sleek, well-lit displays, seem to have informed its new beauty department.
A store clerk referred to the design as “a store of the future,” but a CVS spokeswoman said that is not the name of the concept, which the retailer continues to evolve. The spokeswoman said, “We are currently testing a new store design concept informed by ExtraCare [loyalty and rewards program] data and in-depth qualitative customer research. We will continue to experiment with this format over the next several months in a handful of stores in various markets, so this concept will continue to evolve.”
The recently remodeled CVS in East Windsor — which still smells like fresh paint — is a sparkling example of how with small twists, mass market can build its beauty business, despite formidable competitors such as Sephora and Ulta.
Wendy Liebmann, ceo of WSL Strategic Retail, said the need for mass merchants to update was long overdue.
“At the speed at which the retail environment is changing, you just can’t put a stake in the ground anymore and say this is my concept and think it is going to be relevant for 10 years,” said Liebmann. “CVS, Rite Aid, Walgreens and Target are all at the beginning of a journey to update and make beauty departments more relevant, so that’s good news.”
Rite Aid’s Wellness format now includes an updated beauty department called Beauty Vision in select stores. The design reconfigures the beauty space, complete with a consultation area and lighted displays. In a store in Waldwick, N.J., a lighted nail polish bar is given prominent placement. Woodlike flooring also sets the department apart from the rest of the store. The Beauty Vision concept also introduces new brands to Rite Aid, including Pop Beauty, Beautyblender and Eddie Funkhouser.
Five miles from the East Windsor CVS is a Target store in the same town showcasing the company’s new beauty department, which has been overhauled this spring.
The refreshed department, Target’s most extensive update to the category since 2001, includes the addition of a premium skin-care assortment comprised of specialty and dermatological brands in 750 doors. In the store here the premium skin-care assortment, which is just hitting stores, featured specialty brands Laneige by Amore Pacific, Borghese Age Defying Cellulare Complex, 29 by Lydia Mondavi and Own Beauty, but not the dermatological brands, such as MD Complete, Vichy and La Roche-Posay. A Target spokesman noted that smaller stores will only carry the specialty skin-care brands, but most of the 750 doors will carry the full range of seven premium brands.
Target’s beauty department in East Windsor features huge end-caps with bold graphics, illuminated displays and signs that help shoppers navigate the products. There is a touch-screen display in the hair-color aisle to help consumers choose the appropriate product.
Like CVS, Target is looking to boost fragrances with full-service testers affixed to its display.
Walgreens, for its part, continues to expand its Look Boutique concept, the upscale beauty boutique imported from its regional chain Duane Reade.
On Tuesday, during the company’s earnings call with analysts, Walgreen Co. president and ceo Greg Wasson declared, “We do think we have an opportunity to go bigger in beauty.”
During the call, Wasson said Walgreens is expanding the distribution of its Boots No7 beauty brand across its New York City store base. “We completed the rollout to 10 stores in February and plan to reach 150 stores in the city,” Wasson said. “Our New York City expansion follows our successful launch of Boots No7 and other Boots brands in our Arizona market and in our flagship stores across the country,” Wasson added. “We feel good with our pilot rollout of the Boots brands in Arizona.…We’re seeing some pretty good results, not only with the brand specifically but in the total category itself, which is encouraging.”
Alex Gourlay, executive vice president and president of customer experience and daily living at Walgreens, added, “It’s about the whole experience, it’s not just about the product. It’s about the customer care that surrounds the product.”
Adding service is a case of “blocking and tackling,” said Liebmann. “For the most part, chains are cleaning house, getting beauty looking better and adding service where appropriate.”
Although service is a financial investment, she said the cost is much lower than just a few years ago since training can be done online rather than by teams who visited stores.
Other physical enhancements are also more economical today, she added, such as LED lighting, which has come down in price.
Another factor driving the rollout of new formats is consumer research and learning derived from retailers loyalty programs. In fact, CVS segments stores into clusters — high income, rural pharmacy, emerging metro and core — and has special sets for each. Walgreens and Rite Aid also similarly offer slightly different merchandise mixes based on store locales.