NEW COSMETICS SALES ARE IN THE BAGS

Byline: Faye Brookman

NEW YORK — The spark igniting mass market makeup sales is having an influence on another category — the bags that are needed to hold the products.
What’s attractive to retailers about cosmetics bags is that they carry gross margins in excess of 40 percent — double that of some cosmetics products. Cosmetics bag sales are now paralleling the double-digit inclines being registered by many makeup lines, according to stores.
The consumer interest in cosmetics bags has encouraged chains such as Walgreen Co., Target and Duane Reade to give the department more prominence.
Walgreens, where bag sales are up in excess of 50 percent this year over last, is moving the area to the front of its cosmetics department, instead of the rear aisle.
Retailers attribute the sales gains to interest from younger customers — who are responsible for much of the growth in makeup — as well as those shoppers who are trading up to more fashionable items than their traditional cosmetics bags.
To that end, several suppliers are revamping their designs to appeal to trendy, junior customers.
RGA Accessories Inc., for example, has a new youth-oriented line called Stuff, which is available in black with bright neon trim in various colors. The latest assortment uses a lot of mesh material, according to Sarina Green, vice president of cosmetics bags for RGA.
Beyond young shoppers, RGA is targeting what it deems a more sophisticated mass market consumer. The looks retailers are snapping up for this Christmas and next spring include tortoiseshell designs and florals, Green said.
Bradley Meyers, executive vice president of RGA, said the company is working with an artist to come up with exclusive designs to give it a point of difference.
“Customers are willing to pay more for something that is a little different,” he said.
Although bags sell on a year-round basis, Meyers said there are sales peaks during back-to-school and spring, when people start traveling more. Since the category is impulse-driven, he suggests retailers have obvious signs alerting shoppers to the bags. RGA produces bags under its own name, as well as the Gloria Vanderbilt and Revlon licenses. The other major players in the business include A.J. Sirus, Living Things Mfg. Co. and CosmePak.

QVC unveiled its new broadcast center on Sept. 24 in West Chester, Pa., including a new set to showcase its beauty care products.
“At $2 billion in sales this year, QVC is larger than conventional retailers like Saks and Bloomingdale’s and is almost twice the size of the next largest electronic retailer,” said Doug Briggs, president of QVC, during an event attended by Tova and Ernest Borgnine and Joan Rivers. “And the opening of Studio Park promises to make electronic retailing even more relevant — and more fun for our valued customers in the years to come.”
Beauty products are now sold in a home-like setting, complete with a living room and a kitchen. There is also a 170-seat theater where an audience can watch the programming.
Cosmetics and skin care have become so important to QVC that the electronic retailer has a regular beauty feature every Tuesday. Among QVC’s beauty brands are Pro Strong/Pro Color nail color, Diane Young skin care, Green Valley Spa body treatment, Il Makiage cosmetics, Ellen Lange skin care and Tova Borgnine.

Industry consolidation isn’t limited to retailers and manufacturers. While large chains such as Rite Aid continue to buy regional chains such as K&B and behemoth manufacturers like Estee Lauder grab niche brands like Jane, another link in the retail process is also getting smaller.
McKesson Corp. of San Francisco, the leading North American health care supply company, has agreed to purchase AmeriSource Health Corporation.
AmeriSource is a major wholesale distributor of pharmaceuticals and related products, notably through its Rita Ann beauty division. Although wholesalers primarily supply retailers with pharmaceuticals, most also provide cosmetics for chains that do not have their own warehouses.
Rita Ann has been credited with helping retailers such as Rite Aid make a bigger statement in beauty. Recently, Rita Ann delved into the specialty bath area and assisted Acme Supermarkets in creating a bath boutique.
The merged organization’s sales will exceed $26 billion on an annualized basis.

Rite Aid has been successful in marketing its money-back guarantee for cosmetics with a splashy television campaign and in-store promotional support. Now, the program has attracted other chains to offer cash back for disappointed customers.
In reality, retailers said, they would always accept returns, but the new push is to use refunds as a marketing vehicle.
In addition to Rite Aid, Medic Drug and now CVS and Eckerd Drug are offering refunds.
To date, sources said, the number of refunds has not jumped substantially based on the advertising campaigns. Sales, however, are positively impacted, according to Beth Kaplan, executive vice president of marketing for Rite Aid.
“There is an obvious correlation between the campaign and sales increases,” said Kaplan.

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