Byline: Faye Brookman

NEW YORK — Although drugstores have done much to update their beauty departments, the cosmetics category still has huge untapped potential.
That’s the view of Ronald L. Ziegler, president of the National Association of Chain Drug Stores, who detailed his perspective just prior to the NACDS annual meeting, slated for Saturday through Tuesday at The Breakers in Palm Beach, Fla.
Ziegler believes the cosmetics department is one that drugstores can use to further stand out from their competition, and he applauded those chains that have been putting a new focus on beauty.
“There are many challenges at the pharmacy,” said Ziegler, referring to the costs of processing third-party prescriptions. “A number of chains are looking to the front end of the store and enhancing their marketing in those areas.”
He cited Rite Aid’s recent money-back offer for cosmetics shoppers who aren’t happy with a purchase as a prime example of a chain stepping up its beauty marketing strategies.
“Rite Aid in general is a good example of a chain that is doing a good job of merchandising cosmetics,” said Ziegler, noting that Rite Aid has enlarged its beauty departments and added a wider array of prestige fragrance brands and bath items.
Ziegler — yes, it’s the same Ron Ziegler who once served as President Nixon’s press secretary — was particularly vocal in warning that cosmetics is a category where drugstores must not abandon merchandising ideas in favor of data-driven decisions. Many drugstore chains are currently using sales data to drive the purchasing process, rather than relying on marketing instincts.
Instead of dictating decisions, he reasoned, point-of-sale data and category management principles should free up merchants to be more creative in the beauty department.
“Personal care and beauty can’t become mechanical or run by some graph,” he said. “These categories appeal to people based on the excitement they bring to one’s life. The human element must remain.”
Greater efficiencies, the streamlined ordering and distribution process that is one of the outgrowths of the ongoing consolidation in the industry, can also give retailers more time to focus on efforts in beauty, Ziegler said.
“Retailers are looking to keep the spark going, and we’re finding a great deal of optimism; they are looking for creative and innovative products from cosmetics manufacturers.”
While he made it a point to encourage creativity on the part of retailers, he also made a plea to purveyors of upscale beauty items not currently sold in drugstores to give the mass industry another look.
The in-store beauty layout has been vastly upgraded, he said, adding, “The stores have made a real commitment to cosmetics and the entire ambience of their stores.”
When Ziegler was presented with industry views that rampant consolidation is a trend that detracts from the health of the chain drugstore business, he claimed that if anything, the acquisitions forge a more productive marketplace for beauty products.
“Consolidation of a mature industry, such as traditional chain drugstores, is a sign of strengthening and it brings efficiency to the marketplace,” said Ziegler. “Now the challenge [to drugstores] is to continue to work toward the definition and ultimate role that it will play.”
Ziegler also said most of the consolidation and aggregation of stores is complete. And surprisingly, he added, the loss or swallowing up of several major chains has not hurt NACDS membership or meeting attendance.
In fact, those levels continue to grow thanks to the membership of discounters and food and drug combination stores. The NACDS now counts 130 chains as members, along with 1,250 suppliers — a number that has doubled in the last 10 years.
“And more and more of the larger retailers send additional executives to the meeting,” Ziegler noted.
The mergers and acquisitions in the business have some industry experts alarmed that drugstores will become more and more homogeneous across the country — especially in the cosmetics area.
That could have a detrimental impact on the drugstore share of the cosmetics business vis a vis department and discount stores.
But Ziegler is sanguine.
“Consolidation is not causing the industry to lose its individuality,” he said. “Instead, it is providing tremendous potential for more aggressive and greater marketing of items such as cosmetics, health and beauty aids and over-the-counter medications. I’m optimistic about the front-end portion.”
As NACDS members convene in Palm Beach for the meeting, Ziegler thinks issues surrounding change will be at the top of the agenda. Many of the speakers, Ziegler added, will be addressing change in everything from wider economic topics down to drugstore-specific matters.
As for technological change, drugstores, he acknowledged, have to do more to keep up with other retail sectors with regard to inventory control, automated ordering and delivery.
The NACDS itself is attempting to keep up with change, said Ziegler. For example, he said, the organization is looking at new avenues to serve its constituency, especially smaller chains.
“We are strengthening in terms of dealing with all front-end issues for both smaller and larger chains,” he said. “For smaller chains, we’re concentrating on programs to help them deal with change — such as electronic benefit transfer for pharmacy, security systems and logistics systems.”
Ziegler’s organization is even looking into issues such as ergonomically designed equipment and computer standards.
“We’re not rushing into anything. We’re looking at needs that aren’t being met by other types of services,” he said.
Paralleling an industry that has been in flux, Ziegler said he is plotting a new format for the NACDS Marketplace meeting, typically held in June. the meeting has grown so fast, some buyers have become overwhelmed with its size.
“In longer-term thinking, we have to consider breaking out the general merchandise category from the meeting,” he said, referring to products apart from health and beauty aids and cosmetics. “However, we aren’t contemplating that in the next year — but there may be a need.”
Prior to the advent of the Marketplace meeting, NACDS held a special cosmetics-only meeting that many cosmetics buyers would like to see reinstituted.
Several other organizations, however, have tried to meet a need for a more personalized beauty forum. The Chain Drug Marketing Association, for example, holds a Cosmetics Buyers Forum and the Efficient Promotion Planning Session is generating interest in the makeup industry.
Meanwhile, the NACDS Annual, which is expected to be attended by more than 2,300 people this year, will continue to be held at The Breakers through 2000, according to Ziegler.
He promised that beauty will be a major emphasis when top officials from suppliers such as Revlon and L’Oreal meet with presidents and chairmen of major drug chains such as Walgreen Co. and Rite Aid.

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