A Strategic Point of View
out how they can do better with prestige
lines, which they currently tend to obtain
on the gray market.
It seems there is some interesting retail
experimentation on both sides of the Atlantic. Clearly, the size of the prize is considerable for those retailers who come up
with a new model for selling the whole
spectrum of beauty products, from prestige
through to mass—which works. We reckon
the Watsons group will be watching Ulta’s
model in the U.S. with particular care, since
there can be little doubt that this ambitious
Chinese group wants to enter the States
before too long.
The strategic implications for prestige
suppliers are clear. They should monitor
the situation closely, and if one particular
retailer’s model looks to be breaking away
from the rest of the pack, then they should
consider investing heavily in that retailer.
Meanwhile, it seems that retailers are
forging a series of alliances in an effort to
maximize their reach, both geographically and in terms of shopper profiles.
We’ve already started to see Sephora
shop-within-shop units springing up
within department stores in various
countries, not least in Spain’s El Cortes
Ingles chain. The latter is patronized by a
good cross-section of Spanish shoppers,
and already has prestige counters as well
as a strong mass showing, so Sephora
must have been successful in persuading
them that their addition would increase
footfall at the top end of the scale.
Now Sephora has announced a new
partnership with L’Oréal’s The Body Shop,
whereby The Body Shop will develop exclusive skin and body care items for
Sephora to roll out in 170 of the retailer’s
230 U.S. stores. Initially, the new partnership will be limited to the U.S. only, but if
positive results are forthcoming, an international rollout could be envisaged.
Also worthy of note is Alliance Boots’
recent deal with Carrefour, whereby Boots’
contract manufacturing business will take
versions of Boots’cosmetics, hair care, bath
and skin care products and produce these
for Carrefour, albeit under the Carrefour
label. Up to now, Boots has always stopped
short of making private label for other retailers, but times are changing. Indeed, in
the UK, Boots has a trial with upscale supermarket chain Waitrose for the sale of selected products in each other’s stores, with
Waitrose private label food in some Boots
stores and Boots healthcare private label
ranges in Waitrose.
Strategic implications for branded suppliers: take private label (more) seriously!
Savior or Slippery Slope?
On the other hand, if you are a retailer –
especially one in the beauty arena— there
is a danger in taking private label too seriously and expecting it to be the answer
to all your revenue and margin problems.
Earlier this year (see HAPPI, January 2011)
we wrote about the tough time that Germany’s largest drugstore chain, Schlecker,
was having and how it had been cutting
back stores and reducing inventory.
We noted how owner, Anton
Schlecker, had appointed his two adult
children to oversee a new Fit For Future
program of store refurbishment. Now the
chain has said it wants to increase the
amount of private label products it sells,
in order to help offset declining sales, and
is aiming to grow private label to up to
30% of total sales from its current 17%.
We think that such a near doubling of
private label is likely to be the start of a
slippery slope. There is considerable evidence, albeit mostly anecdotal, of retailers
who have over-emphasized private label to
the detriment of brands, and then come
unstuck in terms of shopper footfall.
The fact is that in HBA particularly,
where brands often represent“mums little
indulgence,” if she can’t find it in your
store, she’ll go somewhere else. In reces-sionary times private label has a stronger
role to play, in terms of being given more
fixture space in-store, certainly, but we
still think there are risks in overrating its
So, Schlecker beware!
All sorts of things are being trialed in-store
these days. In the UK, Superdrug has established beauty clinics that offer, among
other things, anti-wrinkle Botox injections.
“I’ll take some toothpaste, soap and, er, Botox?”
The latter will apparently be administered
by doctors from an existing London firm,
called a little disarmingly“Cosmedoctor.”
and will cost some $210…that’s something
we don’t think we’ll be bothering to afford!
Tesco has had considerable success with
its online operation in the UK, using the
slogan“You shop, we drop!” (a variation
on the popular phrase, “shop till you
drop”). But it seems research has shown
that more people might be persuaded to
order online if they could turn up to a
local store and just collect the goods,
rather than wait for hours at home until
the delivery arrives. So Tesco is reportedly
considering a plan to allow customers to
pick up their internet orders from their