NEW YORK — J.C. Penney’s announcement this week that it will open 1,500- to 1,800-square-foot Sephora departments in its stores marks a 360-degree turnaround in Penney’s beauty strategy.
Penney’s has flirted with cosmetics on and off for years, with mixed success. A decision to just about exit the category was made in 2003, and the company yielded much of beauty’s space to accessories.
In the Eighties, Penney’s had full-service counters and was a major account for brands such as Color Me Beautiful and Ultima II. Two years ago, Penney’s was a hotbed of activity behind the launch of an “American Idol” fragrance. Shoppers in Woodbridge Center in New Jersey stood in line to meet the scent’s frontwoman, Kimberly Caldwell. And, of course, Penney’s was one of the testing grounds for Avon’s BeComing line.
Still, beauty was never a huge producer for Penney and the growth of specialty stores, such as Sephora, actually siphoned off the department store’s sales.
Now, beauty is an afterthought at the retailer. Inspection of stores in New Jersey and Pennsylvania reveal some with no beauty and others with limited bath and body and fragrance assortments. The department still has prime real estate in stores that stock beauty — just off the mall entrance. But the selection is so small, many shoppers may miss it.
At the Lehigh Valley Mall in White Hall, Pa., men’s and women’s fragrances are sold at a counter with locked cases. No testers are available and a store clerk sharing time between jewelry and fragrances helps upon request.
There is some effort to make a scent statement, especially with celebrity fragrances such as Curious Britney Spears, True Star — trumpeted by Beyoncé Knowles — and Paris Hilton scents. Elizabeth Arden’s fragrances are also included. The mix is rounded out by Red, Poison, Anais Anais, Chanel No.5, Paris by YSL, Giorgio, Lacoste and Bob Mackie. Few shoppers paused at the area, and one customer said she only bought fragrance at Penney’s for Mother’s Day.
In men’s, the image of Andre Agassi is promoted for Aramis. Hummer and Corvette scents, packaged in gift sets, are also featured. Other brands include Cool Water, Curve and Escada.
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Near the fragrance assortment is a small selection of bath items called Because I Am by Paris Presents. The gels and body washes range from $8 to $10; gift sets, up to $30. Other offerings in the bath section included a seven-scent travel set from Tricoastal, Perlier, Vitabath and Shonfeld’s. At the store WWD visited, the only color cosmetics line was Jasmine La Belle, a brand made by Merestone consisting of kits and cosmetics bags. One sign of upscaling was a line of Chris Madden candles, linked to the Chris Madden home décor collection. The department is reminiscent of the limited array of beauty items stocked at Kohl’s prior to Estée Lauder Cos.’ arrival.
Penney’s has ventured so far from beauty that many shoppers aren’t even aware it is or ever had been in the business.
That’s where Sephora enters. Shortly after taking over the helm, Penney’s chairman and chief executive officer, Myron Ullman 3rd, made it clear he wanted to make beauty more of a destination at Penney’s. He’s no stranger to the pulling power of the category since he dealt with it during his time at LVMH Moët Hennessy Louis Vuitton and Duty Free Stores. His resume also includes posts at Macy’s and Foley’s. While at LVMH, Ullman hired Sephora USA’s current president and ceo, David Suliteanu, from the Home Depot.
The deal with Sephora sent shock waves through the industry. The first Sephora departments at Penney’s are set to bow this fall. The departments will carry the same brands sold at Sephora, “but obviously [will be] smaller,” Ullman told WWD earlier this week. Sephora will be the exclusive online beauty products seller on Penney’s Web site.
Penney’s has adopted a growth strategy of off-mall locations that will give Sephora the opportunity to grow outside its traditional shopping center locales. “I think this is just the beginning. It is a great buildout and I wouldn’t be surprised to see others do this,” said Allan Mottus, an industry consultant. He said he could even see Lauder taking the same tactic in Kohl’s or at other retailers. Kohl’s, of course, currently has Lauder’s BeautyBank brands in its stores. The difference with Penney’s strategy is that Sephora is a known name to shoppers; Kohl’s and BeautyBank had to build four beauty brands from the ground up.
In addition to Ullman, Penney now has Marti Richner, who previously worked at Mercantile and Ulta. According to Mottus, she understands what needs to be done to build a credible beauty business.
Still, consumers briefed on the deal were baffled. “Sephora prices better come down if they are going to be in Penney’s,” said Heather Sanchez, a Branchburg, N.J., resident. And then there’s the question of whether teaming with Penney’s knocks Sephora down a notch.
However, Penney’s has been working on upgrading the overall store with improved apparel, including new programs such as Nicole by Nicole Miller, and labels such as St. John’s Bay, Sag Harbor and Worthington. Penney’s has also been airing captivating commercials for apparel, currently spotlighting dresses.
Also, consumers are getting used to store-within-store concepts. The fast-food chain McDonald’s has been in discount stores for years and Target is adding Starbucks. Stop & Shop Supermarkets has Barnes & Noble bookstores. And, upgrading beauty continues in chains such as Target, with its European bath department, and in drugstores, with premium skin care sections.
What raises questions, however, is Penney’s track record with beauty — and the experiences of other retailers, such as Sears, which exited its lavish Circle of Beauty program. When Avon’s BeComing didn’t hit the mark, Avon’s chairman and ceo, Andrea Jung, said Penney’s was “probably the wrong partner.”
Ullman thinks the Penney’s customer still wants beauty. “We learned that beauty wasn’t successful for us last time — but we also learned that our customer had not given up on the beauty category, and she wanted us to be carrying it,” he said.
The partnership with Sephora is expected to bring younger shoppers into Penney’s. When told about the deal, 16-year-old Kate Klinck gave the response Ullman hopes to hear: “Wow. I have to get to Bridgewater to go to Sephora, but there is a Penney’s at QuakerBridge [a 15 minute drive]. And it will make my mom happy because she always wants me to buy clothes at Penney’s rather than Abercrombie … It is cheaper. I’ll have more reason to do that and maybe she’ll buy me more makeup.”
Sephora has plans to open another store in midtown Manhattan. The beauty retailer has signed a 10-year lease for an 11,000-square-foot space located at 711 Lexington Avenue, taking over a lease from apparel retailer Strawberry. Sephora plans to occupy each of the store’s three floors, according to Newmark Knight Frank Retail, which represented Strawberry in the deal. The space, situated between 57th and 58th Street, is several blocks south from Bloomingdale’s and adjacent to a Vornado development project.
“Our core strategy is to continue to aggressively open more Sephora stores,” Sephora USA’s president and chief executive officer, David Suliteanu, said earlier this week. “That core strategy has not changed a bit. We will continue to open 30 or more stores a year, and the Penney’s deal is completely incremental to that strategy.”