Cosmetics and fragrances get a trendy new makeover - K Mart Corp's Auburn Hills, Michigan prototype store's cosmetics and perfumes department

Discount Store News, Feb 1, 1993

As Kmart rids itself of its old apparel image with new displays of fashion merchandise, it is also going about the business of transforming its cosmetics and fragrance area to give it a similar trendy and fashion-forward appeal.

Kmart's efforts to offer on-trend merchandise have gone beyond the typical "fashion" categories. Not surprisingly, cosmetics and fragrances lend themselves particularly well to the upgrades put in place by the retailer.

At its Auburn Hills prototype, the effort is two-pronged Displays have been upgraded and so has the color scheme. But especially noticeable in the fragrance area are the high-end brand names that are now part of the mix.

Always a well-priced source for mass market brand names such as Revlon, Maybelline and Cover Girl, among others, Kmart's new Auburn Hills prototype store is reaching beyond these brands to include the likes of Lancome and Elizabeth Arden cosmetics along with Fendi and Chanel fragrances, traditionally department store labels.

Kmart supplied upscale fixturing and signage to accommodate the new products and boost the appeal of the department.

Is Kmart's "busy, budget-conscious mom" consumer ready for this?

During the Auburn Hills opening, Joseph Antonini, chairman, emphasized that Kmart feels a "necessity to sell image items," even as it prices the bulk of its merchandise more sharply.

And according to Bill Underwood, senior vice president, general merchandise manager, hard lines: "The customer wants it."

Various Chanel merchandise at the store sells for between $28 and $32, for instance. Mass market fragrances are primarily under $20 and some are under $10.

Kevin Browett, senior director, pharmacy operations for Kmart, admitted that the new cosmetic and fragrance area requires some micromarketing work.

"We will be looking at the demographics of new prototype stores to determine where the new cosmetic and fragrance department will do best," said Browett. "We are already doing that in the H&BC area with categories such as professional hair care goods."

So far, the results have been positive, but Browett noted that final decisions on rollout have not been made. Kmart, however, has said that it will do as many stores as it can in the new format.

According to Browett, one of the results of the new Auburn Hills design is an increase in sales for the popular mass labels, which have begun to upgrade their own lines partly because of the increased competition from other products entering the mass market.

"Our regular brands--Revlon, for instance--are really upscaling their lines," Browett noted. Revlon executive Joe Lamia, vp sales, acknowledged that a new focus on performance through new formulations was being put on the Revlon brands.

In addition, cosmetic and H&BC brands such as L'Oreal and Plentitude (both part of Lancome), are doing well at Auburn Hills, even with what seems to be greater competition from their own department store brands.

Browett reported that having Lancome under glass in the cosmetics area counter was actually fueling the sales of Plentitude, the mass market line of skin care products from Lancome. "Customers see Lancome in the glass case and are drawn to Plentitude on an endcap. The packaging is similar, they trust the quality and the price points are right," he said.

Kmart is using diverters to obtain some of the high-end merchandise, but Browett hopes to eventually convert to buying its merchandise direct. The problem with diverters, especially when dealing with high-end names for volume retailers, is that consistent supply is sometimes a problem.

In early January, for instance, the Auburn Hills store was already out of much of the Chanel merchandise, with only some bath powder products left.

In this upscaling of the cosmetics area, Kmart is taking advantage of an obvious shift in consumer buying patterns. "We are taking this business away from department stores and drugstores," said Antonini, during a press tour.

That statement is confirmed by industry research, which shows mass merchandisers gaining significant ground in the cosmetics and skin care categories. Overall, merchandisers are growing their market share for all H&BC products.

According to Nielsen Marketing Research, mass merchandisers' sales of cosmetics reached 420 million, an increase of 12.6%. At the same time, sales of cosmetics at drugstores remained flat.

To be effective with the new upscale merchandise, Kmart had to showcase the products in the right atmosphere. Like the rest of the Auburn Hills departments, the cosmetics area was punched up with new fixtures and a dramatic color scheme. Neon lights and graphics were added, giving the department a clean, bright and pretty look.

The organization of the department has also changed. Brand names were always displayed in Kmart's cosmetic sections, but at the Auburn Hills store, the brand name above corresponds with the merchandise beneath it.

A separate staffed service counter houses the high-end fragrances and cosmetics and lends the department a more sophisticated air.