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Mass Retailers Rush Into Yule With Promotions

Retailers fear discounting on beauty products could nip at their bottom line.

NEW YORK — Maybe there really is a Santa Claus.

Mass marketers are buoyed this holiday season by stores that are already busier than expected. Also, drugstore executives said they are getting register rings earlier than the traditional last-minute rush.

However, retailers fear the promotional activities used to garner the crowds could nip at their bottom line.

A recent visit to stores around New Jersey, including Ulta, Target, Wal-Mart, Walgreens, CVS and Rite Aid, uncovered rampant discounting, including numerous buy-one-get-one-free or discounted offers, $5-off coupons on designer fragrances and spend-$50-and-get-$20-off deals. Rite Aid, for example, has coupons for $5 off fragrance gifts sets priced $24.99 and up; Walgreens touted Color Workshop beauty kits at two for $10. Ulta had an in-store display of vie mix-and-match items for $5 and 20 percent off flat irons.

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“Shoppers know if they don’t like the deal at one store, they’ll find one at the next,” said industry consultant Allan Mottus. The bartering is working, and some suppliers are proclaiming 2009 the best start in recent years.

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Added Tracy Mullin, president and chief executive officer of the National Retail Federation, “Shoppers proved this weekend that they were willing to open their wallets for a bargain, heading out to take advantage of great deals on less expensive items.”

That was true for beauty items priced right. “We are having a robust holiday that is beyond our expectations,” said Shawn Haynes, senior vice president of sales, Global Brand Development, Markwins Beauty Products at Markwins International. He said the company, which offers Color Workshop and other blockbuster kits, worked with each major chain to devise programs right for that merchant’s style of retailing. A kit of note, sources said, has been Color Workshop’s Santa Baby Cosmetics Kit with a suggested retail of $6.99.

In addition to color kits, buyers said they saw a good response to mascaras, lash growers, stocking stuffers under $4, celebrity fragrances and gift sets. At Walgreens, for example, a spokeswoman singled out a few early winners, including “the tried and true,” such as White Diamonds, Curve and newcomers such as Faith Hill and Antonio Banderas.

Gift sets are being heavily discounted. “Our fragrance gift sets did well,” said one merchant. “But, we were running them at buy one, get 50 percent off. Customers are expecting bargains and they expect them to run throughout the entire holiday season. I don’t think anyone will buy anything off ad.” She added that just one-day promotions don’t “resonate” with consumers; the deals have to be ongoing.

Buyers hope a better understanding of what their shoppers want as well as a tighter rein on inventory will help offset the bargain pricing with cleaner sell-throughs. Store checks indeed revealed very lean inventories, especially in beauty. Pegs are loaded with only a few blister cards; fragrances are pared back. No buyer would venture an estimate on sales growth versus last year other than to say any increases would beat the flat volume for the last two holiday periods.

Chains such as Walgreens and Duane Reade have also compressed beauty stockkeeping units as a way to boost productivity. To date, executives from both chains said consumers don’t perceive a lessening of selection. During a recent store tour, Duane Reade’s Joseph Magnacca, chief merchandising officer, said shoppers prefer cleaned-up stores with less clutter and that these moves result in shoppers feeling there is more of a selection.

Wal-Mart, as part of its Project Impact program, has been going in that direction, too. Gone are huge promotional pallets lining aisles near beauty. They have been replaced by more noticeable endcaps that have beauty gift ideas.

As each mass merchant starts focusing on its core consumer, buyers are learning how to stock their stores for specific shoppers. For example, some companies said they created specific types of programs for Walgreens versus how they approach CVS.

Also, several suppliers noted that value and dollar stores are making a bigger splash in beauty. As shoppers look to save even more money, they are giving the dollar stores a fresh look. Dollar General, in particular, is snapping up evacuated stores in more and more towns to facilitate its growth. For instance, in Cranford, N.J., a Dollar General recently took over a former Drug Fair.

Brick-and-mortar stores face more competition this year than ever from cyberspace. “Consumers are really starting to order, not just look, online,” said Mottus., in fact, reported its best day ever. Beauty stood out with hot items being RapidLash Eyelash Renewal system, Beauty by Borghese and DuWop Twilight Lip Venom. Online sales were expected to total more than $900 million on Cyber Monday, according to reports, up 6 percent.