For supermarket buyers looking at their color cosmetics grid, the tactic has been largely defensive. In order for the food channel to make a significant statement in the over-$3 billion category, retailers must move to the offensive, said industry observers.
Although opportunities abound in hot and trendy new products and special niche areas, it remains to be seen whether supermarket chains can overcome their biggest obstacle: finding enough space to increase their cosmetics business.
"I don't think they will be able to aggressively gain any share unless they are more offensive in terms of what they carry, how they promote, how they market. At the moment it's still pretty much presenting the basics and hoping they [customers] will just pick up their mascara and foundation as they go," said beauty industry consultant Wendy Liebmann, president of WSL Strategic Retail, New York.
Supermarkets, with $388 million in total cosmetics sales (a 12.3% share), have some ground to cover in the color field. Drug stores reaped $1.4 billion in sales over the past year (a 44.5% share) and mass merchandisers garnered nearly $1.3 billion in sales (a 43.2% share), according to statistics compiled by Information Resources Inc., Chicago, for the year ended Nov. 21, 1999.
However, during that period food retailers posted the biggest sales growth of the three channels with an 11.5% sales increase, outpacing mass merchandisers (10.9%) and drug stores (3.3%).
Retailers and wholesalers that SN interviewed agreed that color cosmetics belong on supermarket shelves. "I don't think there's any doubt about it," said Jeff Norris, general merchandise, health and beauty care director for Midwest Grocery Co., Gardener, Kan. "It's a destination category, and that's the way we're going to compete with the supercenters of the world."
Color cosmetics are important, pointed out Mike Greenhaw, category manager for Discount Distributors, Springdale, Ark., because "We have the female shopper in the grocery store on an average of almost three times a week. She's our target audience for cosmetics and obviously we want to attract that business."
"It's a very viable department," added Norris. "The high margins are very nice, but it's difficult for us to pick up all of the major lines. You look at a cosmetics run of 60 linear feet -- that's a huge investment with a low turn. It requires a lot of footage and nine times out of 10 in our industry the footage just isn't available."
Last year retailers were presented with two big introductions and they had to contend with volatility, caused mainly by the uncertain financial stability of market-leader Revlon. The New York-based cosmetics giant suffered a series of setbacks with inventory backlogs, falling stock and a shakeup in top management. Industry observers pointed to consolidation within the drug-store channel as contributing to Revlon's inventory problems. The National Association of Chain Drug Stores, Alexandria, Va., reported earlier this year that, since 1994, 35 chain pharmacy companies have merged or been acquired. Also, major entries by Procter & Gamble, Cincinnati, (Oil of Olay Color Collection) and Johnson & Johnson, New Brunswick, N.J., (Neutrogena) put additional pressure on Revlon, sources said.
Given the state of the market, cosmetics buyers said they were uncertain about the direction of cosmetics in the coming year. "I see a lot of changes and revamping," said Greenhaw.
The debut of the P&G and J&J lines has some in food retailing juggling sets. "We required only minor adjustments to accommodate the addition of Oil of Olay," said Keith McEnaney, nonfood operations director at McKeever Enterprises, Independence, Mo. "We discontinued some lines -- Max Factor and L'Oreal. We targeted those lines with less activity in order to make room," said McEnaney.
Others, however, said they are either unsure about making changes or plan to stick with the tried and true. "We are staying with Cover Girl and Maybelline," said John Light, health and beauty care category manager for Supervalu's Northwest Region, Tacoma, Wash. "We have not experienced an increased demand for new lines and niche products. Our chains are not going with new brands as they are successful with what they're doing now and they don't want to take the space away from other sections. Some brands, Revlon for example, require a very large set."
Said Greenhaw about the Oil of Olay line, which consists of 120 stockkeeping units, including 38 lip shades, "We don't presently carry it but we are looking at adjusting our space -- for the possibility of bringing in Oil of Olay or L'Oreal; one or the other."
To really have an effect, though, according to Liebmann, supermarkets must keep up with what is hot and exciting. "It's no longer good enough to have just the major brands," she said. "Consumers today really expect a broad selection of large name brands and the hottest trends -- and a lot of the hottest trends are coming out of the smaller companies these days."
One of those trends is in the teenage segment. "There's a lot of emphasis on the teen business," noted Liebmann. "And even though teens really don't do the shopping -- they're there with their moms -- there is a sense of 'new' and product differentiation. When teens say 'hey mom, look at this,' it sort of gives credibility to the mix of cosmetics."
McEnaney already subscribes to the teen philosophy. While making adjustments to fit Oil of Olay, space was also made for Bonne Bell (Lakewood, Ohio) products, he said. He believes teens are a viable segment to pursue, saying, "I think there is some real growth there."
But demographics ultimately dictate, others said. There aren't many teens buying color cosmetics in Arkansas and Oklahoma stores supplied by Discount Distributors, Greenhaw said. "More of our business is done in the 55-and-over age group," he said. "So the younger cosmetic lines out there really don't fit into what we're trying to do as a grocer."
Another growth segment is ethnic cosmetics. One example is Milani from Nina International, Indianapolis. The full cosmetics line for ethnic women debuted in June and is being rolled out to several traditional supermarket chains in the first quarter, including Pathmark Stores, Carteret, N.J., and Randall's Food Markets, Houston. Greenhaw said he believes that lines such as this represent growth areas, provided "you have stores in areas that you have a high concentration of that population."
Indeed, ethnic is growing, according to Rebecca Tanner, national sales manager for Nina International. "By the year 2010, about 33% of all Americans will be of ethnic background. And there is a browning of skin tones globally. The impact in the supermarket is the amount of money spent by ethnic consumers. Between 1993 and 1999, the amount spent rose by 58%," she said.
"When there is a full selection of ethnic products available to the consumer in a grocery store," she continued, "the grocer is saying 'welcome to our store.' It's an affirmation of 'we understand you're shopping here and we want to address your needs.' "
Sales growth also is immediately evident in a segment classified by IRI as "kits" -- several cosmetics packaged together. These items work well as seasonal promotions, sources agreed. In supermarkets, kits jumped 52.5% in dollar sales to $1.6 million over the past year, according to IRI. In drug and mass, respectively, kits grew 66.5% and 30.6%. Other growth leaders in the food channel included foundations, up 17.3%; eye shadow, up 15.1%; and lip color, up 13%.
McEnaney could attest to the benefit of holiday promotions. "We've had good luck with several different seasonal promotions," he said. "Cosmetics work well with the holiday season. Cosmetics are a great gift idea and lipsticks and mascara are great stocking stuffers."
He added that, in general, promotions may be the best way to make up some of the opportunity gap. "We're going to begin running ongoing promotions. We're dedicating promotional space with the in-line fixturing. Cosmetics might become a destination buy, as opposed to impulse, if people know you're running promotions on a regular basis."
Said Liebmann, "For the most part, supermarkets have had a right-brain/left-brain philosophy of 'if it's not food-related then we don't place as much emphasis on it.' However, over the last couple of years -- and the last decade with the advent of the combo stores -- there's been much more emphasis placed on the health and beauty side of the business."