From WWD Issue 04/01/2011
The cold reality is that 20 percent of beauty products produce 80 percent of the business. It is a tried-and-true rule in the business.
When times got tough, management told buyers to cut items and even brands performing below certain sales productivity scores. Efforts to shore up bottom lines, however, sent some customers fleeing to competitors or online merchants.
Shifting shoppers to another brand or private label can work in some categories — maybe paper towels or even mouthwash — but it can be impossible in makeup, hair care and even laundry detergent.
“My store doesn’t stock my shade of lipstick anymore and it gets me so angry, I just leave without anything,” griped Marjorie Campeas, a die-hard lipstick user who finds it harder and harder to find shades suited to mature shoppers who have followed a favorite hue for years.
“The urgency to improve return on investment by retailers has forced the cosmetics industry to shorten its lines of shaded items and skin care selections,” confirmed industry consultant Allan Mottus. He said this particularly stings market segments such as Campeas, an older consumer, or ethnic shoppers. “In makeup, a multiethnic audience often feels shortchanged by narrower selections and has consequently bought fewer products over the past 10 years.”
In the mass market, Wal-Mart and Walgreens were among the most visible in slashing stockkeeping units — but certainly not alone. Now both of these behemoths are not only bringing back items and lines, but actively looking for new opportunities. Wal-Mart has restocked some 300 items and even added entire new beauty brands, such as a tween offer called GeoGirl.
Of particular note is that Wal-Mart is using its demographics data smarter. According to Carmen Bauza, vice president of beauty for Wal-Mart, the chain can adjust the brands carried to meet demands of customers in specific areas. “Kinerase, a prestige brand, has been brought into Wal-Mart recently, and we’ve gotten a lot of calls from customers telling us their interests. We’re going to soon offer Cosmedicine, Physicians Formula and Problem Solution, which we’ll probably roll into all doors, depending on demand,” she said. The target marketing approach can eliminate the excess stocking in stores where certain brands don’t generate enough demand. The chain is especially finding success in Hispanic markets with specific favorites.
Walgreens is also restocking some of the 3,500 sku’s eliminated in 2009 and using its new beauty Web site (Discover Beauty Within) to “test” market products. Some 45 sku’s will be “reintroduced” from Physicians Formula, a victim of the previous cuts. “And that was a huge mistake,” said one executive.
Some experts think the chopping came too late and too close to the resurgence in shopping. In the recession, customers didn’t spend as much; they didn’t try new items, one retailer said.
“They finished what was in their drawer even if it wasn’t a favorite,” explained Alida Stevens, president of Smith & Vandiver. Just as resets were completed, shoppers started spending again and reloading. The demand for new has merchants trying new lines and major vendors buying niche brands, such as Revlon’s purchase of Mirage Cosmetics.
“The sku-reduction process was definitely a learning experience. Much of it was valid and needed, but mistakes were made,” said Kathy Steirly, a consultant who was at Walgreens during some of the editing. “I think all retailers have admitted going a bit too far in some categories, and adjustments need to be made.”
Concluded Mottus, “The question retailers have to ask themselves is whether to go broader with fewer lines or have more lines with fewer sku’s.”
