DISCOUNTERS’ BEAUTY PUSH
Byline: Faye Brookman / Laura Klepacki
NEW YORK — Are discounters shaping the future of mass beauty?
Drugstores used to worry about losing the beauty battle with supermarkets. Now the threat isn’t combination food/drug stores or even the Internet. The biggest obstacle to controlling cosmetics sales is the discount channel.
For the past three years, drugstores and discounters have been neck-and-neck in market share. In 1998, both trades ended the year with gains in the midteens. But by the dawn of the new millennium, drugstore growth had slowed to single digits, while the mass merchants continued their double-digit expansion. For the 52 weeks ended Feb. 20, discounters edged past drugstores as sales rose 12.9 percent to $1,425,230,784, compared with a 5.1 percent gain at drug for sales of $1,422.230,784, according to Information Resources Inc.
Naturally, fueling discounter growth is the expansive merchandising space available and a willingness of the discount retailers to experiment in beauty departments, say sources. With bigger store sizes than drugstores — an average of 8,500 square feet versus 30,000 square feet — discounters have an opportunity to make a bigger splash with the department. And, while discounters used to treat beauty as a stepchild, they now see the attractiveness of carrying cosmetics. “Cosmetics can help build an aura through the whole store,” said Kmart’s president Andy Giancamilli late last year. Drugstore sales have also been hampered by consolidation of the industry.
But another factor weighing in could be a shift in consumer shopping preferences, as noted in a recent study by WSL Strategic Retail.
While the supermarket/drug combination store remains the most shopped outlet, with 76 percent of the population making a weekly visit, mass merchandisers saw the greatest growth. In 1998, 39 percent of shoppers surveyed paid visits to discounters; that number jumped to 55 percent last year.
And as discounters are becoming a favorite outlet, drugstores were pointed to as a “retailer at risk” because of new attitudes toward shopping, according to WSL. “Consumers now view shopping as part necessity, part adventure, part pragmatism, part emotion,” said Wendy Liebmann, president of WSL, which has been conducting the shopping studies since 1989. WSL described drugstores as the “7-Eleven of the new millennium — a place to fill prescriptions and pick up milk.”
Additionally, discounters have been making experimental moves in their beauty departments. Both Wal-Mart and Target are now testing a universal fixture that gives a chain more leverage in expanding the department, yet allows manufacturers some room for brand identity. It’s an initiative the entire industry is watching. Wal-Mart is also making louder noises in teen beauty. Sources said the company is planning to test a new teen department. Furthermore, each has introduced a proprietary cosmetics line — Rimmel at Wal-Mart and Sonia Kashuk Professional Makeup at Target — to lure shoppers to departments. Kashuk, the line’s creator, makes Target store visits, offering makeovers and beauty tips.
And Kmart may not be far behind with similar efforts.
“There are many opportunities today in the beauty business with things like universal fixtures and private label bath, beauty and cosmetics lines. Kmart, like other retailers, is exploring these opportunities,” said Anne Marie Kehoe, divisional vice president of cosmetics. “We are constantly looking at our fixtures, reevaluating our current assortment of merchandise and testing new and better methods of doing business and increasing sales.”
Meanwhile, mass merchants are opening new stores with beauty departments that have panache. A remodeled Kmart in Hillsborough, N.J., has a bright new look in beauty. There are large graphics and new header signs that direct shoppers to the assortment of beauty items. The beauty area is separate from the rest of the store to give the feeling of a store within a store.
Ames Department Stores, currently on a new store growth kick, is opening beauty departments aimed at teen shoppers, according Ames’ Dave Covitz. Although the footage isn’t larger than older stores, the presentation and location is improved, he said.
While drug chains battle mass merchants, they also do lock horns with some aggressive food chains. Wegmans, HEB and Albertson’s all sport impressive beauty departments that compete with drugstores. And, after years of being scared off by slow inventory turns and the plethora of stockkeeping units, many supermarkets are once again beefing up beauty departments. Still, food chains have less than 20 percent of sales.
Discounters are also heating things up in the bath department.
According to statistics from Information Resources, Inc., for the 52-week period ended January 30, mass merchants now control 52 percent of the $176 million spent on bath fragrances and bubble bath.That’s up from 48 percent for the same period tracked in 1999. Drug chains and supermarkets split the rest of the business at a 24 percent share each.
Bath sales rose 3.8 percent during the period across all three channels — food, drug and mass. The bright spot was the discount channel, where sales soared 10.4 percent in dollars and 7 percent in units. However, bath sales actually declined in supermarkets in both dollars and units. Dollar volume dropped 1.2 percent while units were off 4.9 percent in food stores, according to IRI. Sales also dropped 3.8 percent in drug in dollars and almost 10 percent in units.
Manufacturers said discounters have been successful at bringing the product selection into focus. Wal-Mart is even experimenting with a bath boutique in a few stores.
“We have been finding many of the mass retailers starting to streamline their offerings within the bath category,” explained Marisa Dottori, marketing director for Solar Cosmetic Labs. “Instead of carrying a selection of items from many different manufacturers, they are determining what is most successful and expand the offering from those particular manufacturers.”
Discounters are also aggressive with private labels. Target Stores is a good example. One entire aisle in most stores is devoted to private brands such as Tranquillity Bay. The discount chain will add another exclusive label next month called Buttercup aimed at kids. Across from the house brands are national lines including Dial Corp.’s Sarah Michaels and The Healing Garden.