HARCO DRUG USES BEAUTY TO BEAT DEPARTMENT STORES AT OWN GAME

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NEW YORK — Harco Drug is trying to level the fragrance game’s playing field.
While department stores may have more elegant trappings and a wider selection of fragrances, Penny Wade, the Tuscaloosa, Ala.-based chain’s cosmetics and fragrance buyer, contends that when drug chains put their minds to it, they can offer up some stiff competition.
Focusing on more creative promotional and advertising programs is one way Harco hopes to compete with department stores in fragrance sales, which account for about 10 percent of the chain’s total cosmetics business.
The 145-store Harco chain had sales of around $225 million last year, with between 6 and 8 percent done in cosmetics, according to industry estimates.
This would translate to beauty sales of around $16 million.
Trying to beat the prestige fragrance business at its own game is a part of Harco’s competitive strategy. Wade is now employing a familiar department store tactic — the gift-with-purchase program — to help move the store’s collection of prestige fragrance brands.
“I’ve planned a number of gift-with-purchase programs with our supplier of designer fragrances,” she said. “We really have to offer the consumer something extra, since they can get some type of free gift practically every week at a department store.”
Wade’s Mother’s Day promotion will give customers a free one-pound Whitman’s Sampler of chocolates with any $20 fragrance purchase.
“For Mother’s Day, we will also be running a promotion that will give away a silk rose to the first 100 customers in each store. Our ads for the promotion will appear on the cosmetics/fragrance page of our circular, so that will tie the promotion back to the fragrance department,” she said.
For Father’s Day, a fake Mont Blanc pen will be given away with the purchase of a men’s fragrance.
In addition, Wade is working with a silver company in the hopes of offering free silver gifts with fragrance purchases during the fourth quarter.
Conventional mass brands at Harco are not often backed with the same types of programs.
“Mass fragrance [gift-with-purchase promotions] are difficult because if you don’t have a cosmetics person, the gwp’s can walk off,” she said. “But stock-on-stock prepacks with mail-in coupons for gwp’s can create an overstock problem. If I’m not getting enough volume from the item, why would I want to bring in more merchandise?”
One of Harco’s most successful internally created promotions, according to Wade, was the store’s Passport to Beauty initiative, a frequent-buyer plan that tied cosmetics and fragrance purchases to discounts on other merchandise.
“We used a booklet that resembled a passport, and each time the customer made a purchase, it was stamped. When the customer finished the booklet, they received discounts on products,” Wade explained. “Our results were terrific. It really increased the department’s exposure.”
Programs like this really bring people into the fragrance section, Wade maintained. “The customer is already in the store to get a prescription, but the challenge is getting her to come into the fragrance department,” she noted.
The company views advertising as another lure. Harco runs an average of 46 print ads a year, according to company executives. Included in the strategy is advertising placed in college newspapers, since many Harco stores are located in college markets. “If we can get a freshman in and impress her with our selection and what we can offer her, we’ll have that customer for four years,” Wade said.
In this fashion, the company hopes to keep customers perusing its aisles, rather than department and specialty store fragrance bars.
“It’s not really price that’s killing us, so we’re not really concerned about competition with the mass merchants in the fragrance category. It’s variety,” Wade said.
“There are so many department store, designer fragrances and they are supported with huge advertising budgets. There are very few fragrance consumers who haven’t heard of [Calvin Klein’s] CK One, for example. I just don’t see that kind of support when it comes to the mass brands.”
Wade said she thinks that Revlon and L’Oreal would be more successful in the fragrance industry if they split their cosmetics and fragrance divisions into more separate entities. “When you mix a cosmetics and fragrance house together, cosmetics always comes out on top because that’s the priority,” she said. “That’s why Coty does such a great job. It’s a separate entity, and they are totally focused on fragrance.”
Many new mass fragrance brands received poor marks from Wade.
“The mass manufacturers are off-base with some of the new launches,” she said. “They haven’t begun to spend what Elizabeth Arden is spending on Sunflowers yet.
“Because they have a nice-looking bottle and good point-of-purchase materials, they think the consumer will pay $20 for the fragrance,” she said. “Why would the consumer pay that much when they can buy Sunflowers for only a few dollars more?”
Wade said the Harco consumer is traditional in her taste. Mass market mainstays such as Chantilly and Tabu are top sellers in some markets. But diverted designer fragrances are the best-selling scents chainwide. Wade said Harco no longer stores those ever-popular designer fragrances in its warehouses. Instead, the suppliers of these gray market goods work directly with the individual stores.
“We came to an agreement with one of our diverters. In exchange for serving as the main source of product, they service the department,” she said.
As for an overall strategy, Wade said she approves a mix, then individual stores tailor that mix to their own market.
“This approach gives the stores some ownership over the category, and that is important to the way it’s sold,” Wade said.
So far, the arrangement has been deemed successful — sales in the scent category have improved since the chain made the change.
Harco currently displays fragrances along a wall in the cosmetics department. In some locations, the counter has service; in other locations, the fragrance section is self-serve.
Wade said she is searching for a better way to merchandise. “Fragrances are either in a showcase locked up or in a metal rack with bar codes in front of them. Neither is a very appealing way to merchandise the category,” she said.
She added that she was hoping that a mass market manufacturer would come up with better ways of displaying, sampling and testing fragrances.
“I don’t think testers are the answer. I hate the way it works at a department store, and it doesn’t work any better at the drugstore chains,” she said. “We really need a new standard, such as full packettes, which would be available regardless of manufacturer.
“As drug retailers, we are looking for a way to show consumers what we have, and we need an efficient way to allow them to sample merchandise,” she continued. “That’s a key to selling the category. I really challenge mass manufacturers to find a better way.”