July 2, 2007
Retailers Seek to Upgrade Beauty Profile
For many consumers, there is a tendency to look for little indulgences; luxuries, if you will, that provide some sense of comfort in an economic environment that includes higher energy prices, rising personal debt and declining home values.
They seek ways to trade up and reward themselves without breaking the bank on some high-ticket purchase. It could be something as simple as sitting down to enjoy a $4 coffee beverage while relaxing in a Starbucks listening to the new Paul McCartney CD. It may also be a short 15-minute visit to a local salon for a chair massage.
For retailers, this speaks to the question of balancing product and environment. If consumers are looking to possibly make a trade up in cosmetics or other beauty products, will the ambience of the store environment invite them to make that short leap or will it discourage such action? Will getting consumers to move up, for example, from conventional cosmetics to mineral-based formulations be more likely to take place in a self-serve environment or would knowledgeable associates on-hand deliver the sales conversions stores are looking for?
A number of retailers are looking at a variety of means to upgrade the “beauty profile” of stores and, in the process, encourage shoppers to turn to them as a source for those little rewards that make the tough days a bit more bearable.
On the department store front, J.C. Penney added Sephora cosmetics departments to bring some of the upscale glow from that beauty brand to its stores catering to the middle of the market.
CVS, Walgreens and Target have brought in brands such as Lumene from Finland, IsaDora from Sweden, and Boots from the U.K. to create standalone sections and project an aura of exclusivity that had previously been the purview of department stores. A number of Target and CVS stores boast specially trained Boots beauty advisors to assist consumers in making the right purchasing decisions.
Over in the U.K., the Tesco supermarket chain is in the process of testing a new approach to selling cosmetics that seeks to bring the ambience of a specialty beauty boutique or department store into its Tesco Home plus store format.
Working in cooperation with L’Oreal and a London-based firm, Beyond Communications, Tesco has created a 1,000-square foot area with counters similar to those found in department stores. Interestingly, the department is being placed at the front of the stores to make a visual impact on consumers almost as soon as they enter.
Nigel Stern, managing director of Beyond Communications, told Talking Retail, “We have created a customer experience not usually associated with the grocery sector. It’s about making the customer feel inspired and looked after.”
As of now, the new concept is being tested at a store in Liverpool and no announcement has been made as to whether the new merchandising approach will be rolled out as-is or in some modified form to other stores. The test becomes all the more interesting based on Tesco’s planned entry into the U.S. market. While it is widely known the company intends to focus its initial efforts on creating a niche with prepared and fresh foods, it is widely assumed that Tesco will inevitably seek to replicate its non-foods success in other markets here in America.
Discussion Questions: Is there value to upgrading beauty departments in grocery, drug and mass with more upscale counters, improved lighting and added sales staff or are stores making a mistake because premium and even higher quality beauty product purchases are going to be made elsewhere regardless? Do you see Tesco following its food-focused entry into the U.S. with a soon-to-follow push into HBC and other non-foods?
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No doubt about it, many shoppers like upgraded stores. But they’re pretty savvy about the merchandise price/quality equation, so if the decor upgrades disturb that equation, profits won’t increase. The effect of store renovation on sales and profits varies widely by merchandise category, brand positioning, and design quality. A 1,000 square foot cosmetics department can cost $50,000. Or it can cost $250,000. Will people buy 5 times the volume if the design costs 5 times more? Many store renovations don’t raise sales at all. The key is testing. A chain store can test prototypes before committing to a rollout.
Does the industry desire to change its image? If this is an opportunity for the industry, and supermarkets are committed to a more consumer-service needed approach, why aren’t the supermarkets giving their shoppers the already asked for service for catering, meals, and event planning?
Said another way, the department stores aren’t going to give up the very upscale beauty and comestic business that is highly a) service driven, e.g.: ‘make up’ the consumer on the spot; and b) very profitable for them.
So just offering average to below upscale lines, without any in-store service support to the consumer, is like offering meals and catering events without any appropriate in-store support…service or otherwise.
So what does our industry want to be known as, or represent in the consumers’ minds? If the answer is as service driven and consumer centric in every manner, what is more relevant to developing an expertise that shoppers want and acknowledge, from our industry?
The many unanswered issues for this endeavor from a ‘Mad Marketing’ perspective. Hmmmmmmmm
Realistically, how many of the high-end cosmetic lines will agree to be sold in a supermarket? It’s all cachet, baby!
What is important to note is that customer service goes beyond the human aspect of a store. If a store provides a pleasant and efficient shopping environment, they have succeeded in one part of the customer service puzzle. Now getting back to whether going upscale helps, I would have to say yes. Larger chains have the traffic and they need to capitalize on every customer interaction that goes through the doors. When a customer makes a higher end purchase, they want to know feel good about what they are purchasing so it is imperative that staff really knows their stuff when handling the upper tier products and customers. Target and CVS are making the right moves by having specifically trained associates. I think going upscale is a market that no one can ignore, especially grocery and mass market retailers as the customers of these products are probably already shopping there for other items. Why not make it more convenient for that customer and cash in on the margins that these products offer?
The central question, of course, is whether a high-end cosmetic brand can upgrade the image of a mass retailer, or whether the retailer’s image will downgrade the perception of the cosmetic brand. Will sour milk from the dairy department sour the customer on Cosmetica’s Botanical Milk line?
Also, how will mass retailers recruit, train, and unionize credible clerks for upscale cosmetic counters? Are these employees brand experts pushing a single line, or will they be able to move customers to various brands based on their needs? Can you call on this person to help with a cleanup on aisle 5?
I don’t see a successful future for ventures like this, for a very basic reason: Mass retailers are not in the selling business. Instead, they’re in the inventory and pricing businesses. Upscale cosmetics require an expert sales pitch by a skilled clerk. Try finding one of those in a supermarket.
I believe there is an advantage to upgrading the cosmetic department of the more ordinary retail establishments such as drug stores or supermarkets, if only to get reference to the full blown sections of department store sections which carry the name brand cosmetics. While these stores may be able to sell some of the same items or similar to those of the department and specialty stores, they won’t be able to entice the customer unless they do a bit of silent selling with better or different fixtures and an extra effort to keep the area clean or ‘clinical’.
Shoppers Drug Mart in Canada has an especially well designed cosmetics department within the typical drug store format.
Marble floors, glass display cases, high intensity lighting, rich finishes, and make-up demonstration counters all provide a department store feel within a typical Shoppers Drug Mart format.
I have not seen anything quite like it in the USA.
From a customer standpoint, small upgrades that improve the convenience of shopping for cosmetics at a drug store or supermarket is a great idea (i.e. lipsticks popping out of those auto feed displays could stand to be improved); however, major and expensive upgrades are just costly and will result in an increase in prices unnecessarily. There are the cosmetics that may be considered commodity items; such as base, powder, mascara and eye liner in which purchasing them at a drug store or supermarket is convenient. Yet there are other items that may be considered specialty items; such as the perfect shade of lipstick or eye shadow that may call for a trip to a specialty shop like Sephora. The need to go to a specialty shop will not go away no matter how pretty the cosmetics aisle is at the local drug store. For the customer’s sake, pass the savings from not using an interior designer on to them. They will really appreciate it!
I believe it’s important for non department and specialty store retailers today (i.e. chain drug and MVR) to continue to seek enhanced front end margin opportunities, especially within their respective cosmetic departments. Currently, many retailer cosmetic departments are over-skued resulting in minimum return on invested inventory. There are just too many product duplications in their in-line sets which more often than not result in trading dollars.
Exclusive control label cosmetic lines may create incremental sales but do they truly create incremental margins beyond the usual 40 and 8.33%.
For example, a national brand manufacturer is responsible for consumer advertising and creating brand awareness with no cost to the retailers vs., control label brands which must be funded by those retailers featuring these brands. Additionally, national brands are generally responsible for returns and mark-downs which is not the case with control label brands.
Retailers need to ensure that the initial margin enhancement excitement is not eroded by unforeseen costs of control label cosmetic brands.
Maybe initial 60%+ margins on control label brands, turn out to be less than the margins currently being provided by national brand manufacturers.
The old cliché “be careful for what you wish for” may also apply here.
Will upscale and premium in non-traditional outlets continue to grow? Absolutely. This trend will continue to expand and flourish. How do I know? The more progressive HBC executives are thinkers and they know that the answer is in the data! Many are well down the path towards discovery on upscale beauty and cosmetic branding. I contend that this is very smart on the part of those brave souls who have decided to forge this new path.
I was recently in an in depth conversation with one of the most high-profile cosmetic merchants in the world. Much of that conversation was tilted toward the best new concepts and the possible innovations that are now or are coming to market. This particular merchant is very smart and aware of the opportunity that surrounds the premium and upscale offering that currently exists or could potentially exist. It’s all about attracting the consumer to the store and providing solutions that make them cherish the experience. By mining the data across varying sources, one can paint a clear picture of what’s now and what’s next.
Historically, consumers have believed that they could only get upscale and premium cosmetics at the larger, well staffed specialty or mall stores. However, arguably, this is a trend ripe for change. By today’s standards, consumers are looking for bargains and convenience. Yes there are many who still look for the recommendation of the pretty lady selling the product. However there are many others who know their brand, color and fragrance and just want a pleasant experience and a fair price. These are the consumers of choice for conversion.
While Europe is further along than the U.S. at the moment in offering such product in a wide array of outlets, the U.S. will catch up. Just think of the reams of data one can avail themselves to around the aging population in America. Like at no other time in history, this aging group is also affluent and very interested in personal appearance. This group will react very favorably to the new wave of Upscale and Premium in a wider variety of non-traditional outlets. Bet on it!
The idea seems good in concept based on the profit opportunities that these upscale brands can produce. However, demographics will play a key role in determining where to place these new and different departments. Serious analytics and some store testing should be done prior to any larger rollout.
The amount of time people spend in a grocery store has decreased over the past several years. Are the managers of the stores planning this experiment looking through the departments in their stores and choosing departments that seem like a good possibility for experimenting or are they choosing the cosmetic department because either many of their customers are now buying cosmetics at the store, used to buy more cosmetics at the store, or have indicated in surveys or interviews that they want upscale cosmetics? If this is not a consumer-driven move I don’t expect it to be successful in grocery stores. It might be successful in discount stores but would be questionable in convenience/drug stores.
Will someone walking into a grocery store planning to get in and out with a list of groceries actually stop at the entrance to spend time at a cosmetics counter and get side-tracked? Will that person stop at a cosmetics counter to spend time once milk products or frozen food is in the cart? Is this really a consumer-driven experiment?
There is a definite value to upgrading beauty departments in grocery, drug and mass with more upscale counters, improved lighting and added sales staff if the philosophy, approach, and overall design stays within a reasonable ways, means and expectations for the channel, the consumer-base it serves, and the overall pricing strategies of the overall retail chain.
o The upgrades should not be overdressed nor underdressed for the occasion.
o I would caution the brand names and manufacturers however to be careful about placement because if a given retailer is not respectful about how the brand is displayed, marketed, and sold, then you are in danger of allowing deterioration in your brand’s image and price point perception.
o Similarly, retailers should NOT try to be in the business of marketing their own exclusive brands that imitate or knock off the prestige brand names and then place these knockoffs next to the prestige brands in the same area.
That type of approach hurts everyone including the retailer and its efforts to achieve the overall upgrade objectives.
The answer is not simply to add or not to add a new department. The idea of upscale HBC in food is unlikely to be successful unless the target market is upscale. For the traditional supermarket, this will be another case of large gross margin and equally large loses.
The drug channel will soon need to define their target market as supermarkets have. Rx and convenience will not survive long term. Market segmentation is the rule for all retailing today. If your target market wants a department and will shop it, good. Otherwise, keep looking.
Interestingly enough, my Fourth of July feasting put me in the company of a group of ladies ranging from early 30s to early 80s. The post-dinner conversation turned to the lament of the Macy’s invasion of Chicago and the implications of the fact that the Lake Forest store “doesn’t appear to be doing well.” The primary concern being that this is the only local outlet for “department store cosmetics” and whatever would they do if it closes.
Seeing the opportunity to interject professional knowledge into the conversation, I seized upon it and threw out a comment about Boots now being available at the CVS on the corner. As they turned on me with steely eyed glares, I felt a deep fear for my very life. To a woman, they nodded in support as the matriarch informed me that “those stores don’t have the department store brands.” The closest thing to a concession to shopping drug stores for cosmetics was the youngest, volunteering that “you can buy things like mascara there….”
Professional opinion tells me this is a generational phenomenon that can be changed with time and the upgrades to departments and brands mentioned in the article. But the desire for personal preservation ensures that that opinion will stay in this forum alone!
Creating an exciting shopping experience will benefit the store, the brand and the customer. The question is will the upgrades be valued by the store’s customer base? Prototype stores across various regions and market segments will help determine if it is worthwhile.
Another consideration is training and management focus. Do the stores have the right people to serve customers expecting this enhanced shopping experience? Will management focus on this area of the store take away from their bread and butter business?
Hopefully banners don’t make the mistake of jumping on the bandwagon without doing their due diligence.
With rare exceptions, grocers and cosmetics remain two solitudes. Despite channel blurring and the high margins cosmetics offer, many grocery operators are averse, intimidated, indifferent to the potential of cosmetics. With food prices rising, cosmetics–yes, high-end cosmetics–can provide much financial relief. I realize that certain cosmetics suppliers insist at limiting their channels to preserve the “prestige” of their products. Persuading these suppliers to change their minds is vital, and it’s not impossible. At the end of the day, it’s all about profits.
In many ways, this reminds me of when Kohl’s and a few other retailers brought discounted brand names and other high quality apparel into their stores. They started a trend of providing consumers with broad selections of high quality products at prices lower than the traditional department stores were offering.
Many retailers will push into this space, but far fewer will see the ROI they hope for. In time, the consumer will determine the winners and the losers, however I believe we’re already starting to see some of the winners emerging.
With regard to Tesco, I believe they will experiment and perfect their food-focused model before moving into other areas. However, what Tesco could gain by a delayed entry into this area is allowing the market to determine the winners and losers, and to refine their model before entering this space.
Upscale cosmetics may be just what the doctor ordered … or it may be a recipe for disaster. So many factors need to be considered: competition; market demographics; staffing; physical location in the store; market differentiation; consumer demand; etc.
I think there is a place in many stores for this type of offering — department stores have traditionally owned this space in the U.S. market, but when compared to France or even the UK, traditional pharmacy has also carved a niche. Grocers have been a bit less successful, yet their market profile may be most fitting.
Will Tesco pursue HBC in their U.S. launch? My prediction is not only HBC, but also pharmacy, cosmetics and a deeper emphasis on wellness categories.
True Story, and one that is ripe for Leno.
We were in one of the major Drug Chains looking at their Cosmetic and Skincare Departments when we saw a sign that called out, “Come Visit our New Beauty Expert Today at 12:00!” Five feet away from that sign was another one: “HELP WANTED: Beauty Expert Openings Available. Apply at the Photo Counter.”
This anecdote speaks to the fact that Drug Retailers may not understand the full investment and infrastructure that is needed to go upscale beauty. In addition to merchandise and fixtures, they need the personnel and training to provide that expert recommendation that facilitates the big-ticket purchase.
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No doubt about it, many shoppers like upgraded stores. But they’re pretty savvy about the merchandise price/quality equation, so if the decor upgrades disturb that equation, profits won’t increase. The effect of store renovation on sales and profits varies widely by merchandise category, brand positioning, and design quality. A 1,000 square foot cosmetics department can cost $50,000. Or it can cost $250,000. Will people buy 5 times the volume if the design costs 5 times more? Many store renovations don’t raise sales at all. The key is testing. A chain store can test prototypes before committing to a rollout.
Does the industry desire to change its image? If this is an opportunity for the industry, and supermarkets are committed to a more consumer-service needed approach, why aren’t the supermarkets giving their shoppers the already asked for service for catering, meals, and event planning?
Said another way, the department stores aren’t going to give up the very upscale beauty and comestic business that is highly a) service driven, e.g.: ‘make up’ the consumer on the spot; and b) very profitable for them.
So just offering average to below upscale lines, without any in-store service support to the consumer, is like offering meals and catering events without any appropriate in-store support…service or otherwise.
So what does our industry want to be known as, or represent in the consumers’ minds? If the answer is as service driven and consumer centric in every manner, what is more relevant to developing an expertise that shoppers want and acknowledge, from our industry?
The many unanswered issues for this endeavor from a ‘Mad Marketing’ perspective. Hmmmmmmmm
Realistically, how many of the high-end cosmetic lines will agree to be sold in a supermarket? It’s all cachet, baby!
What is important to note is that customer service goes beyond the human aspect of a store. If a store provides a pleasant and efficient shopping environment, they have succeeded in one part of the customer service puzzle. Now getting back to whether going upscale helps, I would have to say yes. Larger chains have the traffic and they need to capitalize on every customer interaction that goes through the doors. When a customer makes a higher end purchase, they want to know feel good about what they are purchasing so it is imperative that staff really knows their stuff when handling the upper tier products and customers. Target and CVS are making the right moves by having specifically trained associates. I think going upscale is a market that no one can ignore, especially grocery and mass market retailers as the customers of these products are probably already shopping there for other items. Why not make it more convenient for that customer and cash in on the margins that these products offer?
The central question, of course, is whether a high-end cosmetic brand can upgrade the image of a mass retailer, or whether the retailer’s image will downgrade the perception of the cosmetic brand. Will sour milk from the dairy department sour the customer on Cosmetica’s Botanical Milk line?
Also, how will mass retailers recruit, train, and unionize credible clerks for upscale cosmetic counters? Are these employees brand experts pushing a single line, or will they be able to move customers to various brands based on their needs? Can you call on this person to help with a cleanup on aisle 5?
I don’t see a successful future for ventures like this, for a very basic reason: Mass retailers are not in the selling business. Instead, they’re in the inventory and pricing businesses. Upscale cosmetics require an expert sales pitch by a skilled clerk. Try finding one of those in a supermarket.
I believe there is an advantage to upgrading the cosmetic department of the more ordinary retail establishments such as drug stores or supermarkets, if only to get reference to the full blown sections of department store sections which carry the name brand cosmetics. While these stores may be able to sell some of the same items or similar to those of the department and specialty stores, they won’t be able to entice the customer unless they do a bit of silent selling with better or different fixtures and an extra effort to keep the area clean or ‘clinical’.
Shoppers Drug Mart in Canada has an especially well designed cosmetics department within the typical drug store format.
Marble floors, glass display cases, high intensity lighting, rich finishes, and make-up demonstration counters all provide a department store feel within a typical Shoppers Drug Mart format.
I have not seen anything quite like it in the USA.
From a customer standpoint, small upgrades that improve the convenience of shopping for cosmetics at a drug store or supermarket is a great idea (i.e. lipsticks popping out of those auto feed displays could stand to be improved); however, major and expensive upgrades are just costly and will result in an increase in prices unnecessarily. There are the cosmetics that may be considered commodity items; such as base, powder, mascara and eye liner in which purchasing them at a drug store or supermarket is convenient. Yet there are other items that may be considered specialty items; such as the perfect shade of lipstick or eye shadow that may call for a trip to a specialty shop like Sephora. The need to go to a specialty shop will not go away no matter how pretty the cosmetics aisle is at the local drug store. For the customer’s sake, pass the savings from not using an interior designer on to them. They will really appreciate it!
I believe it’s important for non department and specialty store retailers today (i.e. chain drug and MVR) to continue to seek enhanced front end margin opportunities, especially within their respective cosmetic departments. Currently, many retailer cosmetic departments are over-skued resulting in minimum return on invested inventory. There are just too many product duplications in their in-line sets which more often than not result in trading dollars.
Exclusive control label cosmetic lines may create incremental sales but do they truly create incremental margins beyond the usual 40 and 8.33%.
For example, a national brand manufacturer is responsible for consumer advertising and creating brand awareness with no cost to the retailers vs., control label brands which must be funded by those retailers featuring these brands. Additionally, national brands are generally responsible for returns and mark-downs which is not the case with control label brands.
Retailers need to ensure that the initial margin enhancement excitement is not eroded by unforeseen costs of control label cosmetic brands.
Maybe initial 60%+ margins on control label brands, turn out to be less than the margins currently being provided by national brand manufacturers.
The old cliché “be careful for what you wish for” may also apply here.
Will upscale and premium in non-traditional outlets continue to grow? Absolutely. This trend will continue to expand and flourish. How do I know? The more progressive HBC executives are thinkers and they know that the answer is in the data! Many are well down the path towards discovery on upscale beauty and cosmetic branding. I contend that this is very smart on the part of those brave souls who have decided to forge this new path.
I was recently in an in depth conversation with one of the most high-profile cosmetic merchants in the world. Much of that conversation was tilted toward the best new concepts and the possible innovations that are now or are coming to market. This particular merchant is very smart and aware of the opportunity that surrounds the premium and upscale offering that currently exists or could potentially exist. It’s all about attracting the consumer to the store and providing solutions that make them cherish the experience. By mining the data across varying sources, one can paint a clear picture of what’s now and what’s next.
Historically, consumers have believed that they could only get upscale and premium cosmetics at the larger, well staffed specialty or mall stores. However, arguably, this is a trend ripe for change. By today’s standards, consumers are looking for bargains and convenience. Yes there are many who still look for the recommendation of the pretty lady selling the product. However there are many others who know their brand, color and fragrance and just want a pleasant experience and a fair price. These are the consumers of choice for conversion.
While Europe is further along than the U.S. at the moment in offering such product in a wide array of outlets, the U.S. will catch up. Just think of the reams of data one can avail themselves to around the aging population in America. Like at no other time in history, this aging group is also affluent and very interested in personal appearance. This group will react very favorably to the new wave of Upscale and Premium in a wider variety of non-traditional outlets. Bet on it!
The idea seems good in concept based on the profit opportunities that these upscale brands can produce. However, demographics will play a key role in determining where to place these new and different departments. Serious analytics and some store testing should be done prior to any larger rollout.
The amount of time people spend in a grocery store has decreased over the past several years. Are the managers of the stores planning this experiment looking through the departments in their stores and choosing departments that seem like a good possibility for experimenting or are they choosing the cosmetic department because either many of their customers are now buying cosmetics at the store, used to buy more cosmetics at the store, or have indicated in surveys or interviews that they want upscale cosmetics? If this is not a consumer-driven move I don’t expect it to be successful in grocery stores. It might be successful in discount stores but would be questionable in convenience/drug stores.
Will someone walking into a grocery store planning to get in and out with a list of groceries actually stop at the entrance to spend time at a cosmetics counter and get side-tracked? Will that person stop at a cosmetics counter to spend time once milk products or frozen food is in the cart? Is this really a consumer-driven experiment?
There is a definite value to upgrading beauty departments in grocery, drug and mass with more upscale counters, improved lighting and added sales staff if the philosophy, approach, and overall design stays within a reasonable ways, means and expectations for the channel, the consumer-base it serves, and the overall pricing strategies of the overall retail chain.
o The upgrades should not be overdressed nor underdressed for the occasion.
o I would caution the brand names and manufacturers however to be careful about placement because if a given retailer is not respectful about how the brand is displayed, marketed, and sold, then you are in danger of allowing deterioration in your brand’s image and price point perception.
o Similarly, retailers should NOT try to be in the business of marketing their own exclusive brands that imitate or knock off the prestige brand names and then place these knockoffs next to the prestige brands in the same area.
That type of approach hurts everyone including the retailer and its efforts to achieve the overall upgrade objectives.
The answer is not simply to add or not to add a new department. The idea of upscale HBC in food is unlikely to be successful unless the target market is upscale. For the traditional supermarket, this will be another case of large gross margin and equally large loses.
The drug channel will soon need to define their target market as supermarkets have. Rx and convenience will not survive long term. Market segmentation is the rule for all retailing today. If your target market wants a department and will shop it, good. Otherwise, keep looking.
Interestingly enough, my Fourth of July feasting put me in the company of a group of ladies ranging from early 30s to early 80s. The post-dinner conversation turned to the lament of the Macy’s invasion of Chicago and the implications of the fact that the Lake Forest store “doesn’t appear to be doing well.” The primary concern being that this is the only local outlet for “department store cosmetics” and whatever would they do if it closes.
Seeing the opportunity to interject professional knowledge into the conversation, I seized upon it and threw out a comment about Boots now being available at the CVS on the corner. As they turned on me with steely eyed glares, I felt a deep fear for my very life. To a woman, they nodded in support as the matriarch informed me that “those stores don’t have the department store brands.” The closest thing to a concession to shopping drug stores for cosmetics was the youngest, volunteering that “you can buy things like mascara there….”
Professional opinion tells me this is a generational phenomenon that can be changed with time and the upgrades to departments and brands mentioned in the article. But the desire for personal preservation ensures that that opinion will stay in this forum alone!
Creating an exciting shopping experience will benefit the store, the brand and the customer. The question is will the upgrades be valued by the store’s customer base? Prototype stores across various regions and market segments will help determine if it is worthwhile.
Another consideration is training and management focus. Do the stores have the right people to serve customers expecting this enhanced shopping experience? Will management focus on this area of the store take away from their bread and butter business?
Hopefully banners don’t make the mistake of jumping on the bandwagon without doing their due diligence.
With rare exceptions, grocers and cosmetics remain two solitudes. Despite channel blurring and the high margins cosmetics offer, many grocery operators are averse, intimidated, indifferent to the potential of cosmetics. With food prices rising, cosmetics–yes, high-end cosmetics–can provide much financial relief. I realize that certain cosmetics suppliers insist at limiting their channels to preserve the “prestige” of their products. Persuading these suppliers to change their minds is vital, and it’s not impossible. At the end of the day, it’s all about profits.
In many ways, this reminds me of when Kohl’s and a few other retailers brought discounted brand names and other high quality apparel into their stores. They started a trend of providing consumers with broad selections of high quality products at prices lower than the traditional department stores were offering.
Many retailers will push into this space, but far fewer will see the ROI they hope for. In time, the consumer will determine the winners and the losers, however I believe we’re already starting to see some of the winners emerging.
With regard to Tesco, I believe they will experiment and perfect their food-focused model before moving into other areas. However, what Tesco could gain by a delayed entry into this area is allowing the market to determine the winners and losers, and to refine their model before entering this space.
Upscale cosmetics may be just what the doctor ordered … or it may be a recipe for disaster. So many factors need to be considered: competition; market demographics; staffing; physical location in the store; market differentiation; consumer demand; etc.
I think there is a place in many stores for this type of offering — department stores have traditionally owned this space in the U.S. market, but when compared to France or even the UK, traditional pharmacy has also carved a niche. Grocers have been a bit less successful, yet their market profile may be most fitting.
Will Tesco pursue HBC in their U.S. launch? My prediction is not only HBC, but also pharmacy, cosmetics and a deeper emphasis on wellness categories.
True Story, and one that is ripe for Leno.
We were in one of the major Drug Chains looking at their Cosmetic and Skincare Departments when we saw a sign that called out, “Come Visit our New Beauty Expert Today at 12:00!” Five feet away from that sign was another one: “HELP WANTED: Beauty Expert Openings Available. Apply at the Photo Counter.”
This anecdote speaks to the fact that Drug Retailers may not understand the full investment and infrastructure that is needed to go upscale beauty. In addition to merchandise and fixtures, they need the personnel and training to provide that expert recommendation that facilitates the big-ticket purchase.