TAKING ON THE GOLIATHS
Byline: Amy B. Barone
ASCOLI PICENO, Italy — Starting in 1995, regional retail associations have been springing up throughout Italy as a defense against the onslaught of a handful of aggressive national chains that threatened the survival of lone stores.
Now these buying groups and marketing consortia are fine-tuning their approach to differentiate themselves from competing groups.
Arcobaleno Profumerie was founded last June as a marketing consortium to communicate an upscale image to the public and garner stronger ties with manufacturers for promotional support and special purchasing deals, although the members of the group do not do their buying jointly.
Sofia Micheli, founding partner and Arcobaleno president, recently outlined her group’s ambitious objectives at headquarters in Ascoli Piceno in Le Marche region, located south of Bologna near the Adriatic coast.
A former physics and mathematics teacher who opted for early retirement, Micheli opened Profumeria Victoria in 1983 to take advantage of the dearth of prestigious perfumeries in the city.
According to Micheli, “The market of the future will offer three types of stores: The convenience-type perfumery that promotes a wide variety of brands and special prices, the more upscale perfumery that also offers a wide selection and emphasizes special offers, and the boutique with a range of prestigious names and optimal personalized service.
“Arcobaleno’s philosophy mirrors the final category,” continued Micheli.” Every store has to define its target and choose who it wants to do business with.”
Arcobaleno’s main focus is image and marketing with emphasis on service and building consumer loyalty. Associate members downplay discounts and low-price specials. Profumeria Victoria discounts all products by 10 percent, but affiliated stores in more competitive cities like Pescara have resorted to discounts of 20 percent.
“Although Ascoli Piceno is a small city with a population of 50,000, some stores offer discounts as high as 30 percent,” stated Micheli. “From our viewpoint, what counts most is service and professionality.” Arcobaleno plans to set itself apart from the competition with a merchandising strategy based on the most upscale treatment brands.”
Currently, all members don’t have the same brands, but we represent the best names in each city where we’re present,” said Micheli. “Seventy percent of us carry Estee Lauder and Clinique.”
Affiliated stores have at least four brands in common, and Micheli hopes to eliminate brands poorly represented by the group. Umberto Femminella Profumeria, a consortium affiliate in Pescara, has eliminated four cosmetic brands from the store this year. One high-profile French brand is now sold in so many neighboring stores that after 30 years, Femminella has discontinued selling it.
“The market is changing,” stated Femminella, a board member of Arcobaleno. Profumeria Victoria carries such upscale names as Carita, Estee Lauder, Shiseido, Sisley, Clarins, Terme di Saturnia and Chanel. “Companies fear not making their figures.” In February, it added the Murad skin care brand, best known for its glycolic acid ingredient.
In Ascoli Piceno, the store holds exclusive sales distribution for Estee Lauder, Sisley, Carita, Clinique and Chanel. It also carries the exclusive Acqua di Parma and Floris fragrance brands. Micheli has had to draw the line at selling certain brands.
Space limitations at the 900-square-foot store and manufacturers’ sales expectations present difficulties. Women make up the majority of clients at the perfumery. Excluding beauty services, treatment and makeup account for 60 percent of sales, followed by fragrances at 25 percent and accessories — leather handbags, silk scarves and costume jewelry — at 15 percent.
Best-selling fragrance brands at the store are Calvin Klein, Chanel and Bulgari. Among the newest fragrances, Clinique’s Happy, Calvin Klein’s Contradiction and Cartier’s Declaration for Men are leading sales. Added Micheli, “A good perfume is what sells a fragrance today, but name and image help. By now, prices seem uniform; there’s little differential.”
Two years ago, the perfumery opened an on-site beauty institute that offers Carita, Clinique, Clarins and Sisley cabins. Among the myriad face and body services, the hottest treatments are facials and massages. Men, mostly in their 30s, have started to make an appearance at the center. Best-selling services for them are facials and sun lamps. Micheli considers the institute a big boost to client loyalty and would like to see all Arcobaleno members offer similar services. Arcobaleno invests about three percent of sales volume in advertising.
The most effective media for the group are ads in local newspapers, billboards and direct mailings for launches and in-store product demonstrations. It has also experimented with radio and print ads in women’s magazines.
The best in-store promotions are those that best foster client fidelity, like accumulation of points or special holiday promotions. Stated Micheli, “Clients do appreciate free gifts.” From April 10 through Nov. 30, the consortium will give away a twin sweater set to Arcobaleno clients who accumulate 95 points; each minimum purchase of $11.42 equals a point. Last fall, the group launched a similar promotion and gave away terry bathrobes and towels.
During the Christmas season, Arcobaleno distributed special coupons of $14.29 and $22.85 for multiple purchases of particular designer perfumes. The group also gave 10,000 loyal clients a large calendar, which highlighted a particular beauty brand on each page.
For Valentines Day, purchasers of Gai Mattiolo women’s perfume received a box of Perugina chocolates. A local artist from Ascoli Piceno created the consortium’s striking logo, a silver silhouette of a woman shot from above and framed in a rainbow of colors. “Arcobaleno” is translated as rainbow. All affiliated stores must affix the logo to store exteriors and interiors, and it appears on the consortium’s promotional materials.
Training courses for the group’s sales personnel are conducted three times a year, under the direction of Giancarlo Brenda. Brenda formerly worked for the Gold Profumeria initiative founded in 1994 by Gruppo Sfera of Milan and serves as Arcobaleno’s external marketing consultant.
From its conception a year ago, Arcobaleno has grown from a network of 10 associates with 10 stores to a total of 20 associates and 30 perfumeries, encompassing the regions of Le Marche, Abruzzo, Umbria and Emilia Romagna. By August, the group expects to assume two more partners from Emilia Romagna with a total of four stores and has recently been contacted by a 10-door chain in the Liguria region.
A seven-member executive board authorizes all group activity. In 1997 Arcobaleno generated annual sales volume of approximately $11 million. By 2000, the group hopes to have a network of 50 stores.
Profumeria Victoria has experienced a rise of 10 percent in sales since Arcobaleno formed, a fact that Micheli credits to the group’s marketing strategy. “There are few serious business people in the trade. Our future is service rather than convenience, and good salespeople are the key to success.”