Word-of-mouth aids growing store base

Drug Store News, May 2, 2005 by Mike Duff

The open question after Bed Bath & Beyond purchased the Harmon health and beauty chain in 2002 was whether the housewares retailer would grow the store base or just borrow its expertise to develop cosmetics, OTC and other traffic-driving categories for its flagship operations. Bed Bath & Beyond executives insisted they would look to grow the chain and have remained true to their word, adding Harmon units and even experimenting to determine if new pairings could boost the chain's value.

The result may be potent new competition to draw drug store health and beauty aid customers.

Of course, they've added Harmon departments in many Bed Bath & Beyond stores in the New York metropolitan area. Harmon's core market was central New Jersey, where the store had a loyal following who appreciated its low prices, particularly on cosmetics. Harmon wasn't well-known outside its core market, however. But by placing Harmon shops in its stores, Bed Bath & Beyond has been spreading the word.

So, ironically, as Bed Bath & Beyond has added HBA items designed to build traffic, it has been introducing consumers outside northern New Jersey to the Harmon name.

Bed Bath & Beyond has opened several new Harmon outlets and has established a concentration on New York's Long Island. It also opened a Harmon store in Norwalk, Conn., near the New York state border and not far from the three New York units it operates in Hartsdale, New Rochelle and Yonkers in Westchester County.

Bed Bath & Beyond continues to experiment to determine how it can maximize Harmon's potential.

On Dec. 17, the retailer opened a Harmon in Orange, Conn., its deepest penetration into New England, adding it to a pad with Christmas Tree Shops, another chain Bed Bath & Beyond acquired.

The pairing of the two chains is the first by Bed Bath & Beyond, and the company is using the established Christmas Tree Shops to drive trial of Harmon. The Christmas Tree Shops, with a total of 26 units in six New England states and New York, has operated its Orange location for nine years, store employees said. With the Orange outlet, Harmon now has 35 units in operation.

Word-of-mouth always has been central to Harmon's success. But the Orange store is a bit far afield for word to disseminate, so Bed Bath & Beyond is using the adjacent and clearly popular Christmas Tree Shops to encourage Orange residents to give Harmon a try. At the entrance of the store, a counter was piled high with promotional flyers, including a $3-off coupon for Harmon, and staffers were available to direct shoppers to the Harmon store across the parking lot.

Certainly, the cross-fertilization effort is a positive, said Joan Storms, a Wedbush Morgan analyst. "You can use the brand name franchise that obviously is strong in that neighborhood to build the other concept," she said.

Harmon

Headquarters: Union, N.J.

2004 * sales: $142.8 million

% change vs. 2003: 9.3%

No. of stores: 32

Avg. store size: 6,800 sq. ft.

Sales per store: $4.76 million **

* Fiscal year ended Feb. 28, 2005

** Drug Store News estimate