WWD FRIDAY, AUGUST 24, 2012
E.l.f.’s exclusive beauty looks.
Retailers Clamor for Exclusives NEW YORK — Retailers today want something that only they can have, and it is causing a battle for exclusives. And that’s creating a race for beauty manufacturers to launch new items in one chain or create a special stockkeeping unit or display for a specific retail partner. A case in point: Next month Walgreens will offer, in conjunction with Disney, a co-branded cosmetics line called Villains Palette Collection from e.l.f. Cosmetics, available exclusively in 5,000 of its doors and priced at $10. That comes on the heels of a new proprietary end-ofaisle display in Walgreens for L’Oréal’s derm brands, Vichy and La Roche-Posay. The quest used to be to roll out new items to thousands of doors at once. Manufacturers once feared legal issues if special deals were offered to one and not others. But then, rampant sku rationalization three years ago created a problem when all planograms started looking identical. “With every chain selling the same stuff, you need to give a reason to come to your store at a time when people are less inclined to come in any door,” explained Wendy Liebmann, founder and chief executive officer of WSL Strategic Retail. The situation is exacerbated by the compression of retailers all fighting for the same shoppers. “There are only a few big players left,” added Liebmann,
noting the drugstore and discount store industry are dominated by two major players. Explained one industry veteran: “In the drug channel, Walgreens and CVS’ rivalry has become a Coke versus Pepsi situation where, if you are a smaller brand, you essentially are forced to choose between one or the other. They are so big and dominant that they can dictate these terms to you. They are looking for brands and programs to differentiate themselves, and exclusivity certainly does that. They also know the opportunity that they are giving a brand and demand huge margins, zero-liability programs.” Retailers know the power that first to market has over consumers and suppliers. “We have six million customers a day. We want to give them more reasons to shop our stores,” said Joe Magnacca, Walgreens president of daily living products and solutions. “We are very committed to beauty. We felt it was important to bring beauty to her, and we focus on taking leadership positions with the right mix in each store.” He added that, since Walgreens has such a large network of stores in varying markets, the chain can test-market in select types of stores.
Exclusivity can do myriad things. It can net a brand-new entry point into the country, which was the case for Lumene, which launched exclusively in CVS, but, after initial success, is now expanding to other chains in the U.S. Hard Candy became a Wal-Mart proprietary line driving shoppers who used to find it in specialty doors to the mass market. And Physicians Formula got a boost in skin care with its WalM a r t - e xc l u s i v e line in the category. Target has certainly shown the power of exclusives through initiatives including Shops at Target, which helped introduce the country to the chic Cos Bar. CVS puts great effort behind its Salma Hayek collection, and the chain also was the starting ground for hair removal guru Cindy Barshop’s entry into mass with Completely Bare. Ulta has become an incubator, much like Sephora, to launch new lines first, as it did with the Red Carpet Manicure, an at-home gel system now being picked up by others after a limited-distribution rollout in Ulta. In the cases of e.l.f. and Red Carpet Manicure, being exclusive with one retailer helped each brand draw the attention needed to gain entry to other
critical by mass Faye Brookman
stores. “This gives e.l.f. the opportunity to step to the next platform,” said industry expert Allan Mottus. “And for Walgreens, it can help attract younger customers to a chain that’s had an older customer base.” While it may seem that linking with one chain is best for small beauty firms, Liebmann sees the trend for the big guys to step up, too, perhaps offering a special sku for one chain that drives shoppers to that store. She also thinks exclusives can help retailers create a dynamic in-store experience, which is lacking in mass today. Many used Macy’s and its exclusives as an example of what could be duplicated at mass. A final benefit in working out deals is that the product can become the private label for a chain, since most mass retailers have found it too difficult to be acting as marketing mavens behind their own launches. “They need to focus on selling, not creating,” said one private-label resource. While it all seems win-win for one-of-a-kind offers, there are pitfalls, experts warned. The ongoing case over Martha Stewart between Macy’s and J.C. Penney is one example of legal wrangling. But there’s also danger in becoming too associated with one chain, as Sinful nail
colors found when, according to market reports, other retailers didn’t want to take on the brand because it was so dominant in Walgreens. Revlon, Sinful’s owner, purchased another edgy color line called Pure Ice to remedy the situation. “The good news [about an exclusive deal] is that it instantly puts a smaller brand into business, but with an exclusive relationship you have no fallback in case the retailer loses interest or you have a disagreement in direction. The retailer will always dominate the relationship,” said one industry expert. There’s also the question of whether customers actually go to stores for the proprietary names. Liebmann’s How American Shops research finds consumers don’t always know a brand can only be purchased at the exclusive merchant. “Does an exclusive always bring a shopper back to your store?” asked Liebmann. Concluded a manufacturer: “All this, of course, is predicated on the sell-through of the products. When products sell, everyone is in love….It’s when there are sales performance issues [that] the trouble begins. The vast majority of these relationships have not worked out for the long term in the past.”
Boots to Reposition Its No7 Brand AS BRITISH beauty and wellness firm Boots solidifies its foothold in the U.S., it is repackaging and repositioning its entire No7 skin care brand. Come Sept. 1, it will also discontinue a number of No7 products, and add a host of new ones meant for a variety of skin types. “As a brand, we strive to grow with our customers and provide them with the best quality skin care formulations to meet their individual needs at an affordable price,” said Steve Lloyd, chief executive officer of Boots North America. “The relaunch of Boots No7 will allow us to deliver products to cater to skin care needs for every stage of a woman’s life.” For Boots, which celebrates the 77th anniversary of its No7 line this year, one of its goals is making its name as recognizable for American women as it is for their British counterparts. “This is very much a heritage brand in the U.K.,” said Lloyd. “A lot of women were first introduced to it by their mother or grandmother. [There] it’s probably into the fourth generation.” Available in all Target doors since 2007 and Ulta since 2011, Boots products can today be found in more than 30 global markets, including Norway, France, Portugal and Spain. In June, Boots’ parent company, Alliance Boots, entered a “strategic partnership”
with Walgreen Co., which acquired a 45 percent stake in the company, with the option of buying the rest of it in three years. Although its exact distribution plans for the retail pharmacy are not yet defined, it is clear that Boots is focused on gaining critical mass on U.S. shores in terms of American distribution. According to Lloyd, the upcoming No7 restaging is a natural progression, one that New happens approximately every offerings five to seven years. “Every from year we’ve seen increasing No7. customer loyalty,” he said. To that end, according to Boots’ No7 skin care scientific adviser, Mike Bell, the company utilizes its large testing pool of more than 50,000 people to ensure that products work across all ethnicities and skin tones and textures. “We make sure that the claims we make are real and have been validated,” said Bell. According to Lloyd, there are about 450 stockkeeping units currently available on American soil, but between 3,000 and 5,000 Boots branded products — across health, hair and sun care beauty, baby, dental and medical categories — are in the U.K., sold through 2,500 doors. In the U.S., the brand can be found in approximately 2,200 doors. “We have a huge range of products in the U.K., which we haven’t actually tapped into yet across all sorts of categories, categories that are very strong [there],” said Lloyd, who named baby and health care as categories with notable potential for the U.S. “All those categoPHOTO BY JOHN AQUINO
By BELISA SILVA
ries are possible options for growth.” Boots products were launched internationally in 1996, entering markets like Thailand, the Netherlands and the U.S., where they were originally rolled out to only a handful Target doors. “They were our first partner,” said Lloyd, of Target, adding that the brand expanded nationally — entering all 1,750 doors — with the retailer in 2007. In 2008, Boots introduced beauty adviser service to select Target stores. “[This is] unusual in the mass market,” said Lloyd. “We now have beauty advisers in about 360 Target stores and [shoppers] very much value that differentiated option.” For Lloyd, the beauty adviser model allows the brand message to be conveyed directly to consumers. In addition to growing its brick-andmortar presence, Boots is also focusing in its efforts on digital retailing — both on its own e-commerce site, shopbootsusa.com, and on Drugstore.com, which will offer the full collection of No7 products by Sept. 1. Currently in the U.S., there are four different Boots ranges — No7, naturebased Botanics, sustainably-sourced Extracts and dermatology-tested Expert. At this time only the No7 line will be restaged. Products like No7 Moisture Quench Day Fluid and Purifying Sauna Mask will be phased out, while new offerings will include a three-piece antiaging regimen for consumers between 45 and 50 years old, called Lift & Luminate. Also being introduced is a comprehensive two-step cleansing and moisturizing range called Beautiful Skin, available in iterations for normal-oily skin, normal-dry and dry-very dry, and suitable for customers of any age. Within the
A No7 ad from 1935. Beautiful Skin range, which is color-coded and promises “more radiant” skin in two weeks, toners were purposefully omitted. “We are now saying you don’t need that step [toning] because the cleanser is so effective,” said Lloyd. “This saves the consumer time and money.” Other new products within the Beautiful Skin franchise include skin supplements like Beautiful Skin Rapid Spot Rescue and Vitality Eye Roll-On, among others. In total, 25 No7 sku’s will be dropped, while 27 will be added to the lineup, which is priced from $6.99 for cleansing wipes to $23.99 for a serum. Boots executives declined to discuss dollar figures, but industry sources estimate that Boots could generate as much as $60 million in retail sales in the 12 months following the September relaunch.
“With every chain selling the same stuff, you need to give a reason to come to your store at a time when people are less inclined to come in...