Supermarkets with ample space to merchandise cosmetics gift sets and prepacks are pursuing this seasonal Christmas opportunity with renewed energy, driven by new product-pairing strategies and branded offers from the likes of Revlon, Coty and Del Laboratories.
The food chains are training their sights on "drug stores, which typically have a better image as everyday beauty care destinations, are more promotional at Christmas and move with the rhythms of cosmetics manufacturers, who update with new colors and styles twice a year," said Michael Graves, senior health and beauty care buyer, Associated Wholesalers, York, Pa.
"That trains consumers to think of them in the fourth quarter, but it also points to a growth avenue for supermarkets," he added.
While many of the 1,100 stores serviced by Associated are limited in space and can't always make manufacturer minimums to participate in such promotions, Graves sees activity by some of the larger chains in his markets -- Giant Food Stores, Carlisle, Pa., and Weis Markets, Sunbury, Pa. -- as indicators of the potential for groceries to vie for this business.
He noted that "celebrity links can be exciting for supermarkets, especially if when targeting younger- and middle-market consumers." According to Graves, this will drive him to consider what one of his primary sources Procter & Gamble offers, and perhaps "mix with the rest of our orders in order to make minimums."
Space is an issue, agreed Roy White, vice president, education, of the General Merchandise Distributors Council Educational Foundation, Colorado Springs, Colo., and so are in-store ambiance and cross- departmental thinking: "If supermarkets can work around the obstacles in consumers' minds, such as identity, fixturing and assortment, then cosmetics gift-giving might begin to make more sense for them in that setting. It requires that stores upgrade their cosmetics offerings and leverage other departments to go along with it, such as floral and greeting cards. They also need to make cosmetics areas more inviting.
"Supermarkets have plenty of opportunity to make cosmetics gift purchases work, but it takes a lot of creativity and thought," added White.
"Cosmetics gift-giving in supermarkets is opportunistic but extremely underdeveloped," said Jeff Manning, principal, F&M Merchant Group, the consultancy based in Lewisville, Texas. He concurs that food stores have largely abdicated "the big-service cosmetics business, that their locked showcases impede impulse sales, and they have so many opportunities that are easier on an everyday basis. Yet cosmetics gift-giving makes sense for Valentine's Day and Christmas, particularly Christmas for last-minute purchases under $40." That's true, said Marc Jampole, spokesman, Penn Traffic, Syracuse, N.Y. "So many sales occur in the last few days of the season that food stores must keep their displays up through the entire season in order to capitalize. Any kind of nonfood gift in the supermarket is last-minute, otherwise you'd have bought it in Macy's."
Meanwhile, H.E.B. in San Antonio is aiming to lasso a significant share of cosmetics gift sales from department stores and other channels with a packaging-and- merchandising innovation from Allou Health and Beauty Care, Brentwood, Long Island, N.Y., a distributor of many major fragrance brands.
Allou makes clamshell packages of gifts-with-purchase, which successfully adapt the department-store tactic of "buy a $39 fragrance, get a travel bag" for the self-service environment of supermarkets. Chains that have either committed to a full program or are testing the clamshell product pairings include H.E.B., Sears, Eckerd, Wal-Mart and JCPenney, said Stuart Noyes, senior vice president and general manager at Allou.
The clamshell, observed Manning, "is a great idea for supermarkets, as long as retailers display them clearly enough where consumers understand what they're getting." That was the case at one retailer cited by Jack Jacobs, vice president of purchasing at Allou, which "experienced a 13% sales increase in just the first month of use, during a non-holiday mid-year period, when comparing clam sales vs. the locked showcase. So his expectations for Christmas are greater."
Allou offers four variations on the clam, noted Noyes.
H.E.B. is tight on space, so they take a clam that conforms tightly around the product, and they use it to help get designer fragrances out from the locked showcase, where customer waits might otherwise frustrate sales.
Wal-Mart uses a larger clam with a back, and displays its designer cosmetics in the first aisle by the cash registers for maximum visibility and protection against shrink.
The Sears clam has three to four additional inches on each side of the product, though that's being pared back in size. Eckerd ran a back-to-school promotion in June using the clam to combine sunglasses with Hugo Boss men's fragrance," he added, noting the drug chain will expand its clam assortment this Christmas to four stockkeeping units.
One popular pairing among consumers is L'Oreal's Drakkar Noir, the best-selling men's fragrance in mass, with a miniature collectible bottle of the same brand, which has a value-added of $6.99 to $9.99, Noyes estimated.
Among others are: Drakkar Noir with a free deodorant stick; Hugo Boss fragrance with a free mini-bottle; Calvin Klein Eternity for Men and Ladies with a free quartz watch; and sports celebrity premiums such as a Dale Earnhart Jr. watch for men with a fragrance. Each clamshell package includes an electronic article surveillance tag, said Noyes.
"Every chain clamshell program is customized and accounts for regional customer preferences," he added, noting a few examples: Hispanics and African Americans in Texas like to buy the Carolina Herrera brand; people in smaller Western states take Oscar de la Renta. "Brands that are old hat in New York are on the edge out there."
Allou's Jacobs calls the clams a "special opportunity for supermarkets going forward. If they want to be in the designer business, they have to give people something, because people have grown used to it from the department stores. As long as food stores have the right price point -- mostly within the $19.99 to $39.99 range -- consumers will receive them well because it gives them another outlet to buy in. At these prices, cosmetics and fragrance gifts represent significant incremental sales, and the 30% to 36% average gross margin brings in a lot of gross profit dollars."
The Wal-Mart initiative began late last year. Based on that experience and more recent efforts, Noyes advised that "it's best for supermarkets to set the stage for holiday gift-giving by having a year-round presence in beauty care. If they don't have it year-round, consumers won't know they have cosmetics and fragrances for holiday at special prices." He admits there's an inventory management issue "between holidays, when stores concentrate on maintaining their image. But then they get to let-it-fly during the holidays."
Meanwhile, about 80 of the larger Penn Traffic stores with pharmacies will devote space in that area to "promote one complete line of color cosmetics, repeating a program that succeeded last year. We'll offer discounts to our Wild Card holders, our frequent shoppers," explained Jampole.
Besides that, his beauty care buyer anticipates the greatest gift-giving activity will occur in "bath-and-body sets that are wrapped and packaged in wider wicker baskets to look more boutique-y and be more appropriate for display at home. Not only the products will be used, but the baskets will become home decorations."
In addition, Jampole noted that his chain's customers "are concentrating their gift-buying in the $5 to $10 range, although price points range up to $30. The lower-end gifts are appropriate for a child's teacher, or for someone in an office gift raffle. That's supermarkets."
Market innovations will be needed to kick-start cosmetics gift-giving this Christmas, since ACNielsen statistics show a plateauing of such activity in the 52-week period ended July 13. Children's cologne and gift sets, which soared by 48% in food stores during the prior 52 weeks, edged up a mere 2% to $1.4 million in this latest period. Women's gift sets and skin care packages, which slid by 2% in the earlier 52 weeks, fell another 9% to $19.1 million in the most recent period.