BATTLING APATHY WITH A SHIFT IN STRATEGY
Byline: JENNY B. FINE and CARA KAGAN
NEW YORK — Department store beauty vendors are looking for new ways to do business at Christmas — and throughout the year.
Many fragrance manufacturers are still reeling from underwhelming Christmas sales, although for prestige cosmetics companies, the news wasn’t at all bad.
Some department and specialty store merchants cited gains of more than 10 percent and as high as the mid-20s at cosmetics counters. But in contrast, except for some of the better-known and well-supported classics, the fragrance bar eked out only the most minimal growth.
The result is that many in the industry are taking a long look at what may be an overreliance on Christmas, as well as at marketing techniques that may need an upgrade. In many cases, they added, it is up to the manufacturer to inject new life into a business that many see as resting on laurels of mediocrity.
“Business is there if you go after it,” said Leonard Lauder, chief executive officer and chairman of the Estee Lauder Cos. “New ideas, new presentations and new products always sell. It’s only when we wind up doing the same thing year after year in the same boring way that business gets flat.”
Norbert Becker, president of Lancaster USA, agreed.
“We have to get away from copying old concepts and, instead, create something new that gives consumers personal value and excitement,” he said.
Providing excitement at the counter will be crucial next Christmas, many executives noted, especially since the holiday shopping season will be one week shorter this year.
“There are fewer shopping days this year, and that means the pressure for sell-through is really on,” said Muriel Gonzalez, senior vice president of marketing at Estee Lauder. “There is always that last-minute surge of shoppers, but this year it is going to be doubly important to start off strong and stay that way.”
While admitting that department store vendors need to rethink their gift offerings, product assortments and promotions, the marketers also said that retailers need to take a good, hard look at themselves and make some changes.
“Department stores are very concerned with closing stores and financing the debt they’ve incurred from making so many purchases,” said Guy Peyrelongue, president and chief executive officer of Cosmair Inc. “The first priority of both retailers and manufacturers should be to make shopping as positive an experience as possible, and that means focusing on service, displays and lighting, in addition to the quality of products being offered.”
Philip Shearer, LancOme’s senior vice president and general manager, noted that servicing the customer could be the best catalyst for the beauty business.
“With all the emphasis the industry has placed on [gift-with-purchase promotions], beauty analysts are really clerking, not advising or selling,” he said. “The trick is to keep promotional activity while building up the base business through sampling and more follow-up calls from the beauty advisers.”
To that end, LancOme is more than doubling this year’s treatment sampling effort, Shearer said, while stepping up training sessions to stress more follow-through with consumers.
Lancome is also experimenting with different types of counters and tester units that are more flexible and accessible, so that consumers can get closer to the products and test them.
“I think that the industry is guilty, especially at holiday time, of having too much going on at once that is similar,” Shearer added. “It is confusing for the consumer. Everyone has to work harder to make their offerings more attractive and distinctive.”
He noted that Lancome met with success this year when it decided to go off the beaten path gift-set-wise, and the company is now exploring different gift concepts for the next holiday season.
Retailers praised the company’s train case with brushes and color cosmetics, as well as its value-based skin care sets that contained Primordiale with either Bienfait Total or Renergie.
For Lauder, gift sets that offered more products, rather than accessories such as mirrors and cosmetics bags, were the strongest sellers.
“We found that consumers this year are more interested in the basics than in novelties,” Gonzalez said. “Our ‘blockbuster’ made a very strong product presentation, and we had our fastest sell-through ever.”
The company’s blockbuster was a portable makeup vanity tray containing a collection of brushes, four lipsticks, three nail enamels, pencils, mascara, 16 shades of eye shadow and two blushers.
Lauder also expanded its Small Wonders offer, a gift set that contains five different perfume miniatures for $25, into two other gift concepts: Precious Perfumes, a collection of five miniature spray fragrances for $35, and Five-Star Skin Care, a collection of travel-sized versions of Lauder’s top selling treatment items for $25.
Gonzalez noted that this year’s Christmas array will focus on similar types of gifts, but that the company was planning to tighten its assortment of sets and offer more of the ones that seem to sell the best.
Origins is adjusting its holiday offerings to include more custom-made gift-giving opportunities than premade gift sets.
“We noticed that our customer seemed to prefer making their own gifts, even though many of our premade ones sold really well,” said William Lauder, vice president and general manager of Origins.
He reiterated that the cosmetics portion of the business didn’t fare too badly last year.
“Retailers may have had a very bad Christmas, but cosmetics was still ahead, even though store traffic was not up to expectations,” he said. “Of course, total fragrance was weak; there were extremely strong numbers to anniversary, fewer launches and less money supporting the category. But in spite of the serious weather that hit everyone, cosmetics really did quite well.”
He noted that on a year-round basis, Origins will continue its several-year-long strategy of launching two or three new products per month, rather than one or two major items a year.
“New products are a substantial part of our business,” Lauder said. “Our customers have been trained to believe that nearly every time they come to one of our counters or stores, they will find something new. It is what they are largely interested in and what they have come to look forward to.”
Elizabeth Arden, which had its share of corporate turmoil last year, is banking on a series of launches to draw consumers back to its counters. The strategy was kicked off with the relaunch of Elizabeth Taylor’s Black Pearls fragrance and the introduction of Ceramide Night Intensive Repair Cream and will continue throughout the year, according to president and chief executive officer Peter England.
Upcoming introductions will include a new Arden fragrance, color cosmetics and treatment items.
England noted that all of the company’s new products will be supported with what he termed “substantial” advertising. Last year, Arden’s presence was lessened when it dropped cooperative advertising with retailers.
“There will be more excitement in the market this year with all of the launches, and we are planning a substantial increase in advertising to support new activity,” he said, declining to reveal the firm’s advertising budget. In addition, England is planning on stepping up the firm’s training of its in-store beauty advisers.
“The consultants are important because they are the last contact between ourself and the consumer — they separate class from mass,” he said. “We are stepping up our training, so that we have major and ongoing initiatives through the year.”
Chanel, which has had 22 consecutive months of growth in its fragrance, treatment and cosmetic divisions, according to Jean Hoehn Zimmerman, senior vice president of marketing and sales, plans to continue its campaign of actively drawing consumers to its counters in department stores.
“We drive traffic into our stores with new products and strong advertising. The message to consumers is, ‘These are our new products, and here’s where you can buy them,”‘ Zimmerman said. “People don’t have time to browse anymore. They need a reason to shop, and you have to give them one.”
Rather than lure customers with promises of discounted gift sets or gifts- with-purchase, the company prefers to focus on its basic business.
“We’ve chosen to limit the availability of gift sets and keep it to only about 10 percent of our volume,” Zimmerman said. “We would rather do something such as special gift boxes and ribbons than expensive, high-cost-of-goods gift sets.”
Although some fragrance companies did experience gains at Christmas, the increases were hard won, according to many manufacturers.
“Christmas was a fight to the finish,” said Jack Wiswall, senior vice president of Cosmair and general manager of the European Designer and Ralph Lauren Fragrances divisions. He added that at the end of the season, the company “came out just fine.”
Last season’s battle for profits has prompted Wiswall to reformulate the division’s strategy for the 1996 yule season.
“We’re going to try to push the Christmas season forward this year,” he said. “We have to work with the department stores to find ways to get more productivity in the months ahead of Christmas.”
Wiswall’s strategy includes staging holiday promotions earlier in the season.
“Normally, we would start a promotional push around Thanksgiving, but we’ll probably move our activity to the beginning of November this year,” he said.
The company has also reexamined the timing of its major fragrance launch this year, deciding to introduce its new scent Ralph Lauren Polo Sport Woman early in the year — in February — rather than closer to the Christmas selling period. The product is reportedly off to a strong start.
“Our strategy is to launch in the springtime versus the fall, in an effort to develop a longer season and generate brand awareness and energy as we go into Christmas,” he said.
To help generate brand awareness, the launch will be supported by an extensive advertising campaign. Industry sources estimate the firm will spend $15 million on print and TV advertising for the new fragrance this year, with a total budget of $20 million for the scent, including in-store promotions. In addition to the usual print advertising, scented strips and television flights for the new brand, the company is exploring new mediums in an effort to attract a broader — and younger — consumer base.
“We’re expanding the mix of our advertising. We’ve added cable TV, buses, billboards, and we’ve built a Web site on the Internet for information and education,” Wiswall said. “We’re working very hard to find our customers and go after them.”
After a Christmas season in which classic fragrances sold better than newer ones, Sanofi Beaute is also altering the way it does business. Those results have prompted the company to reduce the number of yearly launches, according to Donald Loftus, president and ceo of Sanofi Beaute.
Indeed, the firm’s sole U.S. launch this year will be Yves Saint Laurent’s Opium for Men.
“We made an agreement with our parent company that we would launch only one fragrance a year, because in the past we have been guilty of doing as many as three a year,” Loftus said. “If you look at how many of the launches in the past 10 years have really been successful, it’s not a lot, yet this is where the industry was putting its focus.”
The result, according to Loftus, was consumer confusion and diminished sales. “We were so busy telling customers about what’s new that we forgot to tell them how great our existing products are,” he said.
Loftus plans to correct that this year by concentrating resources on Sanofi’s classic brands — particularly Opium and Oscar, both of which experienced double-digit gains during the holidays, he said.
“Christmas taught us that customers are into classics, so we need to maximize that and invest money into what customers are interested in,” he added.
Loftus noted that while Sanofi is not increasing its advertising budget this year, the company will funnel more money to its core businesses.
In addition to increased advertising, Sanofi will do more in-store promotions and tie-ins. Loftus said one such promotion done last year, a tie-in with the James Bond movie “Goldeneye” and Yves Saint Laurent cosmetics, in which a lipstick called 007 was marketed, was extremely successful.
Fighting diversion is another weapon in the company’s business-building arsenal.
“We’ve made a major, worldwide effort to control diversion. We now have a system to code all of our products,” he said. “Previously, only selected products were coded. If someone is violating the distribution agreement, they are shut down.
“We are realistic enough to know we can never stop it completely, but if we could reduce it by 80 percent, I would be pleased,” he added.
Shutting down the gray market is also a way Robert Brady, president of Parfums Givenchy, plans to insure that his company’s sales increases continue.
“We’ve done a tremendous amount of legal work to combat the gray market, and it’s fair to say there is a direct correlation between our control of gray market activity and the success of our business in authorized distribution,” he said.
Like other purveyors of classic fragrances, Parfums Givenchy had a strong Christmas, according to Brady. “Amarige ran about 22 percent ahead at retail. Ysatis ran ahead roughly 10 percent, and Xeryus ran about 2 percent ahead,” he said.
Despite the successful numbers, Brady says Givenchy will continue its strategy of not centering most of its activity on the Christmas season.
“Christmas comprises a relatively small proportion of our overall business,” he said. “I would rather have a more balanced business on an annualized business, and financially, I would prefer to be selling [basic] items, as opposed to wrapped items and coffrets, which provide a smaller margin.”
To fuel growth, Brady said Givenchy will spend more money on advertising and promotions this year than in 1995, but he declined to specify how much more. “If you have the reserves and the formula to be profitable, you can continue to spend in a selective and efficient fashion,” he said. “It’s a real opportunity to pick up market share.”
Guerlain is looking to increase its wholesale volume in the U.S. by about 20 percent this year. To achieve that, the firm will launch a new women’s scent in the fall and significantly increase its advertising budget, according to Patrick Waterfield, president and ceo of Guerlain.
“Our name is not as well known as some of our direct competitors from France, such as Chanel and Christian Dior,” he said. “It’s important to us to get our name out there and have it associated with the different range of products we offer.
“With the need to sustain growth, plus the need to support a major new women’s fragrance, it’s important to increase our media budget,” he added.
Christmas will remain a crucial season for Guerlain, which experienced growth last season with classic brands such as Shalimar and Samsara.
“December represents about 35 percent of our total sales,” Waterfield said. “A dollar spent at that period is crucial, because it can bring back more than a dollar spent in July.”
Guerlain is also focusing on tailoring a different mix of products for its retail outlets in the same market.
“Because we have a wide range of fragrances and price points, we have a lot of flexibility,” Waterfield said. “It allows us to offer something to a store at one end of the mall that is different from what we offer to the store at the other end of the mall.”