To dye for: discounters gaining share in hair color

Discount Store News, May 19, 1997

Hair color has always been a neck-and-neck race between Clairol and L'Oreal. The competition is about to get hotter with Revlon's announcement that it will launch a new hair color product under its immensely popular ColorStay umbrella.

ColorStay was originally the name given to Revlon's break-through transfer-proof mascara. Based on the success of that item, Revlon debuted other color cosmetics with long-lasting capabilities. The tie-in with hair color is a natural.

"We think we've got a real winner with this," said Jerry Levin, chairman of Revlon. "We're going to bring technology and profit to hair color."

The permanent hair color line is a compact selection of 24 of the most popular shades. Not surprisingly, its promise is to provide better color that wears longer. Carrying a suggested retail price of $6.96, ColorStay will ship in August.

Revlon already has a limited selection of hair color, accounting for less than a 5% share of total sales. The strength of the ColorStay launch should send discounters scrambling to reshuffle hair color planograms. Most stores currently devote most of their space to Clairol and L'Oreal, with a few feet for niche players such as Combe or Epna.

"We think retailers are going to have to enlarge their hair color department, rather than eliminate other items," Levin predicted.

Discounters agreed that the influx of new hair color entries--and the growth of the category--will dictate additional space. "Hair color sales are very strong at discounters that have finally given the category the right space," said Andy Giancamelli, senior vice president and gmm, consumables and commodities, Kmart Corp.

With additional space and new emphasis on hair color, discounters have gained share at the expense of drug chains, which for years have dominated the category. According to Information Resources Inc., discount stores now command almost 36% of the $997 million category, up from only 24% in 1994. Discounters closed the gap between their share and drugstores' 38% portion of the business. Fueled by new products and an aging population, hair color sales expanded 9.6%.

Some Kmart stores turn over as much as 20 ft. to color, Target has a 16-ft. section. Even chains that traditionally keep hair color to only 4 ft. to 8 ft. are eyeing expansion.

Indeed, the seams of most discount planograms are starting to burst with the abundance of new product introductions. In addition to ColorStay, L'Oreal recently launched L'Oreal Chunking to appeal to younger shoppers who want blocks of color. Other L'Oreal entries include Excellence Creme Blonde Supreme and Creme Frost. L'Oreal also introduced an entirely new line of hair color in '96 priced lower than traditional L'Oreal called Laboratories Gamier Bell Color. There is a mandate to entice younger users to hair color to build a loyal following.

Clairol is also busy with launches. The company recently extended its popular Hydrience with Hydrience Creme Highlights. For the graying set, Clairol also improved formulations for Loving Care and Lasting Color by Loving Care and tapped Jane Seymour as a spokesperson.

Beyond new items, Clairol is also attempting to draw more customers to its shelf with a new fixture called Merchandising 2000. It features shelf dividers, hair swatches and other point-of-sale tools to help customers pick hair color.

Combe recently introduced Just 5, a hair color for women to cover gray in five minutes. In the meantime, Eugene Color continues to get distribution in more accounts.

Buyers hope the influx of new, more sophisticated hair color products will help break the promotional cycle that has been used to spur sales.

Hair color has traditionally been the highest margin generator in hair care, with gross margins exceeding 35% as opposed to profits in the 20% area for shampoo and conditioners.

But recently those lusty profits have been threatened by aggressive promotions such as two-for-one deals and rampant couponing. While there is no doubt hair color sales are soaring, there is concern that sales are being registered at discount prices.

The problem has been that no one retailer is willing to take the non-discount plunge first, said one retail source. Beyond driving margins, the new launches will potentially convert more women to at-home hair color and encourage more frequent use, sources said.

Clairol estimates that about half of all women color their hair, and those who do purchase products seven times per year.

The goal is to push the frequency up to 12 times per year. Permanent colors, Clairol added, are the fastest-growing segment of the business, accounting for 60% of sales.

"The future is bright," said Arnie Zimmerman, who distributes Eugene in the United States. "More than 22 million women will turn 40 years old over the next few years. By the year 2000, 50 million women will color their hair at home. That's opportunity."