The nation’s drugstores are in the midst of a major repositioning that could have a long-term impact on the beauty department.
Chain after chain is adding in-store mini medical clinics offering quick tests such as strep throat cultures or cholesterol screenings. By doing so, drugstores are returning to their roots as centers of not only prescriptions, but distributors of health information. This positioning strengthens their role in the retail business and helps distinguish one chain drugstore from another down the block.
The most vivid example is CVS, which acquired MinuteClinics this summer. That purchase is expected to accelerate CVS’s expansion of in-store clinics. But not only are drug chains adding the clinics, supermarkets such as Kroger and discount chains including Wal-Mart and Target are doing the same.
With the need for space for the clinics — which can range anywhere from 75 square feet to more than 1,000 square feet — comes slicing of other categories. Since beauty is not one of the most productive departments in the store — inventory turns only about three times per year — some experts think footage could be siphoned off for the clinics. Others disagree and say that beauty goes hand in hand with the wellness positioning.
Exacerbating the situation is that there are more competitors than ever for beauty sales and the mass market category is in desperate need of some blockbuster launches to get shoppers coming to the store for cosmetics and other health and beauty items.
“Chain drugstores have been under pressure in makeup and fragrances because they sell the same products as mass merchandisers but at higher prices,” explained industry consultant Allan Mottus. “This has caused slower turnover rate in an intensive stockkeeping unit category.
“As such, chain drug managements are looking for categories where there is a higher return on investment and less competition with Wal-Mart, Target, Kmart and dollar stores. Mini-clinics and more health-related categories fit drug chains’ profiles and should be expanded.”
Add to that, he said, Walgreens’ flirtation with apparel, as reported this week in WWD, and there is even greater pressure on beauty. Walgreens is offering apparel and jewelry to differentiate it from competitors.
Candace Corlett, principal with WSL Strategic Retail, agrees that chains are measuring right down to the inch when it comes to space allocations. “But I think whether beauty is reduced depends upon the chain itself and the strategy of that chain. Some are focused on health and wellness and consider beauty part of that and might cut down on seasonal. Others might sacrifice beauty for seasonal merchandise,” she explained.
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Some retailers, Kerr Drug for example, have never put a big focus on cosmetics, choosing to be more of a health care destination. Walgreens, on the other hand, is a major beauty force and has relied on the expertise of its beauty advisers since the chain was born.
There are signs cosmetics, in particular, are getting the edit. Wal-Mart has slowly decreased its selection, according to store observers. Other chains such as Walgreens have added more nontraditional beauty products such as teeth whiteners into the beauty assortment. One buyer who asked not to be named because of the sensitivity of the subject said he’s already been forced to yield some color cosmetics footage to skin care and hair appliances.
Beauty manufacturers, not surprisingly, are fighting any urge to chop beauty. “Yes, all departments are vulnerable,” admitted Harvey Alstodt, president of Del Cosmetics. “But what chains should be doing now is making a bigger statement than ever about cosmetics.”
That sentiment was echoed by Lisa Yarnell, president of Jane & Co. “Last time I looked, total cosmetics in the drugstore channel was up 4.9 percent year to date, doing $1 billion in sales on 230 million units sold,” she said. “I don’t know what the rest of the areas in drug are doing, but 5 percent ‘ain’t too shabby’ in today’s marketplace. Why oh why would they want to cut into $1 billion in sales that has an average gross margin of 4 percent or better?”
Yet not all operators see the natural link between beauty and health care. As retailers look for ways to extend mini clinics, the industry watches and hopes beauty real estate doesn’t suffer.