ESTEE LAUDER GAMBLES ON LAS VEGAS

Byline: Pete Born

LAS VEGAS — Estee Lauder USA rolled the dice here Thursday, officially opening its first freestanding store in the U.S. So far, it looks like a natural.
Since this is Las Vegas, however, there is plenty about it that is unnatural. Statues talk and throw laser beams. Waterfalls spew flames. The Forum Shops, the mall where Lauder’s shop is located, is built to resemble an ancient Roman town, and an artificial sky, projected against the vaulted ceiling, changes from sunrise to nightfall every 20 minutes.
In this Oz-like city, it looks as though Lauder’s wishes might be coming true. What was declared as the store of the future by Robin Burns, Lauder USA’s president and chief executive officer, could turn out to be the bonanza of the moment.
Business on Thursday morning was bringing in an average of $1,000 an hour, according to Burns, who was here for a few days of the pre-opening sale before returning on Wednesday. She said she expected the day’s take to range from $15,000 to $20,000.
That figure is twice what Lauder has been averaging since opening its doors Feb. 6 for pre-opening business. The setting for Lauder’s first American retail venture is far from its typical locations in this country. It’s also light years from Lauder’s other freestanding shops, which are in Budapest, Warsaw and Prague. The company also has a boutique in GUM, the giant Moscow department store.
The new 2,100-square-foot shop here — some 1,750 square feet are devoted to selling — had originally been projected to do $1 million at retail its first year, according to Leonard A. Lauder, president and chief executive officer of Estee Lauder Cos.
But after two weeks of pre-opening day selling, with sales averaging $8,000 to $10,000 for a 13-hour day, the projection has been accelerated.
Lauder now thinks the store can do $3.5 million to $4 million the first year. That volume would translate into an annual sales productivity of more than $2,000 a square foot — twice the mall average. According to retail sources, more than $1,000 a foot is averaged in The Forum Shops’ 70 stores, compared with the estimated national mall average of more than $350 a foot.
Lauder, speaking from New York a few days prior to his arrival here Thursday, said the company had originally expected the shop to break even after a year. Now, with the upgraded forecast, he said “we’ll make money” in that period.
He declined to disclose the shop’s building cost, but sources estimate that construction outlays totaled a little less than $1 million.
The store design incorporates some of Lauder’s open-sell design ideas that have been tested in stores in the U.S. and Japan. For one thing, none of the merchandise is under glass.
A curved makeup bar angles back from the entrance like a hook designed to pull in passersby. The right wall is covered with shelving units holding the fragrance stock, plus factice-sized dramming vessels, used to fill empty perfume bottles and atomizers whose price points climb as high as $1,200.
Most items are more moderately priced. One hot seller is an atomizer costing $45. Cherie Flannigan, manager of the Las Vegas shop, said 39 units have been sold since Feb. 6, when the store started doing business. With the purchase of a bottle, a customer can get the atomizer filled for free with one of Lauder’s perfumes, Flannigan noted.
A breakdown of preliminary sales shows what Burns calls “texture items” that account for 13 percent of the volume. They include special edition compacts, displayed in a case at the cashier’s counter and in five freestanding vitrines. One of the better sellers is a compact designed to resemble a roulette wheel, at $60.
“The texture items are a little bit of a magic magnet to dazzle consumers and entice them into the store,” Burns said. “They end up buying fragrance or treatment.”
The skin care section is in the back of the store, where a consultation desk stands in front of a brilliantly lit glass panel. In addition to treatment, terry cloth robes and tops are also sold.
During the initial business, 45 percent of the volume was done in color cosmetics, reflecting Lauder’s strategy of using makeup as a “playful” category to lure customers into the shop.
Burns expects the breakdown of beauty sales to moderate, with color claiming 40 percent, treatment 25 and fragrance 35.
To Burns, the key element of the design is the absence of display cases that would put barriers between consumers and merchandise. She noted that open-sell counters for fragrances had been installed in Bloomingdale’s New York flagship and “lipstick libraries” have been built there and elsewhere in hopes that consumers will stop and dabble.
“But we’ve never pulled it all together with open sell in all the categories,” Burns said, “The idea of traditional case lines won’t even exist by the year 2000. The biggest problem with a line like ours is that it is so big.”
The Las Vegas store holds about 1,200 stockkeeping units.
“Women don’t want to stand behind a case and hear about 800 products. When they walk through a store like this they can discover what they didn’t even know was in the line. It’s like apparel.”
To make the shopping experience more palatable and to be in sync with the city’s funhouse ambience, Lauder’s in-house architects added whimsical flourishes, such as the rigging of shelving units with what appear to be giant picture frames.
Burns said she intends to approach department and specialty store retailers about replicating the design idea, in whole or in part. Asked if she thought that space could be found in a cramped department store, Burns replied, “Certain people are entrepreneurial and want to prepare for the future. It certainly is an option for us to entertain.”
Lauder insisted that contrary to a widely held suspicion in the industry, the new store is not the first step in a chain of shops through the malls of America.
“I do not believe in the strategy of a Liz Claiborne of having shops selling merchandise down the mall from a department store,” he said. “I’m in the department store business and I do business in the department stores.”
In addition, Lauder sees the Vegas venture as a unique situation that can’t be duplicated for the lack of a similar environment. To him, the shop is an expansion on the concept of duty-free retailing.
The Lauder corporation’s biggest volume door in the world is DFS (duty-free shoppers) in Waikiki, Hawaii, where Lauder, Clinique and Aramis do $25 million combined at retail annually.
But that huge business hasn’t cut into the company’s local department store volume at Hawaii’s Liberty House, Lauder noted; the duty-free business is a plus. “There is a tourist shopper who represents a huge, hidden business,” Lauder said. “They may have bought Estée Lauder or Clinique in a department store, but when they get on a plane and arrive somewhere on vacation, they have a wholly different mindset.”
According to Lauder, the Las Vegas store will be a plus business that is also a productive business. Traffic in the Forum mall, driven by the adjacent Caesar’s Palace and other casinos, is expected to approach 20 million people this year. With so much humanity flowing by Lauder’s shop, the company is not even considering a promotional strategy.
“The most exciting part is that this is a whole business [in itself],” Lauder said. “It has nothing to do with gwp’s, pwp’s, ROP advertising, TV or radio or anything.”

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