Repackaging Retail

Is it all gloom and doom in department stores? Is anything going well? How will the sector find the ‘way forward?’

By Stephan P. Kanlian

Much has been said and written about the demise of the department store as a venue for cosmetic, fragrance and personal care products in the U.S. market. Still, there is no other paradigm set to take the place of traditional department store retailing that would replace the volume enjoyed by many prestige beauty brands.

A survey of industry experts, including department and specialty store executives, industry consultants, market research analysts and professors of retail management and marketing, examined beauty retail to determine what strategies might work best in finding the “way forward” for the traditional department store beauty department.

There is no question that the department store sector is not achieving the growth it once did. However, much of the trouble lies in one category. “Everyone is looking at the drop in fragrance sales, when at the same time treatment and color are doing well,” said Dorothy Foster, president of DCF International and a professor of retail management in the Fashion Institute of Technology’s (FIT’s) Master’s degree program for beauty industry professionals. The competition has increased in scope and become better at marketing beauty. Department stores now compete against cross channel shopping at mass, specialty retail and new entrants such as Ulta, Sephora and the Internet.

There are positive examples that provide the kind of entertainment, convenience and shopping experience that today’s consumer demands. Some of these examples come from other industries, some from the specialty retail sector, some from the mass market and some from department stores themselves.

Create an Experience

Ed Burstell, vice president and general manager of Henri Bendel, points to successful department store retailers of the past as example that the task can be done. “The experiential factor was not always lacking at department store retail,” he pointed out, “think of Bloomingdales under Marvin Traub. The customer responded on an emotional level to merchandising and pure theatre.”

Even Henri Bendel itself is an interesting case study, a magnet for chic shoppers for decades that fell upon its own hard times until returning to the unique experience at retail that was always associated with the store. “The consumer still wanted the experience,” stressed Burstell.

There are many examples of department stores now taking the challenge of creating a more pleasant retail experience. Candace Corlett, partner in WSL Strategic Retail, pointed to the addition of a Starbucks on the 4th floor of Macy’s Herald Square store. “You get off the elevator and all you smell is coffee,” says Corlett. “It refreshes the customer and keeps them shopping. There is no intimidating signage about beverages not being allowed on the retail floor—a subtle message to encourage the customer to enjoy and indulge.”

Another traditional department store trying to break new ground is Lord & Taylor, which partnered with Parfums Givenchy for the relaunch in September 2002 of L’Interdit, the signature scent of Audrey Hepburn. For the first time, fragrance was included as part of a window promotion that utilized Hepburn visuals and “little black dresses” on sales associates. “This launch was unusual because we were able to combine several key elements in a way that benefited each aspect,” said Lavelle Olexa, the store’s chief of fashion merchandising. Women’s Wear Daily reported that the merchandising campaign led to L’Interdit ranking No. 7 overall among women’s fragrances and No. 3 among new launches at Lord & Taylor.

Better Merchandising

With efficient sourcing, product mix is no longer the point of difference in most retail stores, making presentation and editing the keys to differentiation. “If I were personally in charge of reinventing the department store sector, I would create more private spaces, beautifully lit and comfortable,” explained Robin Coe-Hutshing, owner of Fred Segal Essentials. “I would create a mindset and pockets of interest —they (department stores) do it in the juniors and teen departments, but that kind of focused concept has to be applied to beauty.”

Mary Manning, partner in the brand and marketing consultancy Manning Abelow, and a graduate professor in FIT’s Master’s program in Cosmetics & Fragrance Marketing and Mangement, said, “Ulta has done a beautiful job of merchandising brands, both mass and prestige, and since consumers now shop across channels, Ulta presents product in that way.”

Ed Burstell had words of praise for traditional retailers tackling the merchandising issue that is so critical to the success of specialty retailers such as Henri Bendel. He points to Jane Elfers, president and chief executive officer at Lord & Taylor, as a merchant who has made progress in remerchandising a large, traditional retailer.

Create Your Own Magic

Many retail experts recommended going against tradition by moving beauty “downstairs” and off the main floor. “Barneys and Bergdorf Goodman’s basement beauty departments have accomplished a sense of privacy and made it “my special place” for consumers,” said WSL’s Corlett. “You go down there because you want to tinker. You will always have to pass through the portal of the main store, which is why the basement idea is key.” Coe-Hutshing of Fred Segal Essentials agreed, saying, “Bergdorf Goodman is honoring product and, as a consumer, I get a better sense of what I’m looking at.” Corlett also pointed to specialty stores such as Bath and Body Works and Old Navy that have learned to create magic in-store. Today Henri Bendel sets the industry mark in terms of events and creating theatre in-store. Their innovative “girls club” environment sets them apart as a specialty retailer. There is an opportunity for other department stores to do exactly the same thing, according to Bendel’s director of marketing, Teril Turner. “We don’t have the budget of a large chain department store,” Turner noted, adding, “We make our events real shopping celebrations with themes, food, coffee and wine bars, gimmicks, drama and special guests.” The team at Bendel’s prides itself on having no preconceived ideas.“We never say we can’t do something,” points out Turner. “We figure out a way to do it. We think what we do is unique, but it could be done in any store.”

Look Outside the Industry

Target was consistently identified as creating a point of difference at retail by our industry experts. “With a focus on top designers, they are the geniuses of the moment,” said Robin Coe-Hutshing. She added, “There is a sense of discovery in which the consumer can find great products at great value.”

Corlett observed, “It (Target) is upgrading its presentation and making it feel like a beauty department with a point of difference from other mass cosmetics departments.” Dorothy Foster agreed, saying, “Target’s cosmetics area was poorly merchandised in the past. The newer stores have beauty departments that are attractive, well-merchandised and easy to shop, bringing them up to the level of other departments at Target.”

As the former head of a major beauty manufacturer, an industry consultant and a professor of marketing in FIT’s Master’s degree program in Cosmetics and Fragrance Marketing and Management, Shei­la Cutner identified other good examples outside of the beauty industry. “Airports today are what malls used to be. They have the traffic, the consumer has disposable time and the concepts are very strong,” Cutner said.

“In the grocery store sector, D’Agostino’s provides child care and Stew Leonards creates pure theatre for a unique shopping experience that is coupled with outstanding customer service. Entertainment and service is what department stores should offer.” Cutner also cites Home Depot’s unique approach to reaching out to communities, providing workshops and keeping children busy making crafts while their parents shop for home improvement products.

Focus on the Consumer

Henri Bendel’s Burstell believes it is all about the consumer, advising, “Find out what makes the customer tick and build around that. Reach out to good matches for co-branding and incorporating the store into the customer’s lifestyle.”

“The customer perspective is show me something new and make it too hard to resist,” stated Corlett. “Consumers are most excited about the Spa experience in beauty—a license to indulge. The challenge for department stores is execution—the trend must be converted to an experience.”

Cutner sees an opportunity for department stores to make a connection with the consumer. “It is about emotional branding,” she stressed, adding, “department stores must make the emotional connection with consumers. They have the space and the brand awareness, but they must value the customer and what they want.” Cutner also recommended more liberal return policies, convenience and better customer service as opportunities to make the emotional branding connection with the consumer.

Everyone is a Specialty Retailer

Just as all politics is local and all marketing is niche, stores today are all specialty retailers in one way or another. Traditional department stores are speaking well to certain consumer targets and providing the specialty retail experience in some departments, like teens and juniors. “Everyone has jumped on the teen market,” observed Foster, “but an opportunity still exists with post-baby boomers. However, there is a fear of speaking to the mature customer.”

There are many lessons to be drawn from the specialty environment. Perhaps no one does it better in beauty than specialty retailer Fred Segal Essentials. Coe-Hutshing’s methods could as easily be applied to a department store chain. She emphasized, “I have never depended on the industry to provide me with excitement. I have taken what I find exciting and made it equally exciting for the consumer.”
Coe-Hutshing uses merchandising, usage and training as ways to energize product in the mind of her consumer. She refocuses consumers on existing product in a new way, part of a return to a focus on classics that she lovingly referred to as “digging through diamonds for gold.”

She judged, “Department stores are bypassing good product looking for newness instead of creating committed presentations. We all have to specialize.”

“Specialty stores do it well,” stated Corlett. “They spend energy on merchandising, edit, break rules, show creativity and execute better.”

Lessons from Abroad

Many retailers overseas have also tried new concepts, some similar to the basement beauty environment that has been created at Bergdorf Goodman and Barney’s New York. There have been high profile beauty department renovations at many London and Paris department stores, some of which offer potential for the U.S. market. “The fragrance department at Printemps in Paris has created a wall of fragrance for trial (similar to Sephora),” said Manning Abelow’s Manning. “The fragrance department is easy to shop—there is no intimidation and assisted service is standing by. It was always that way in the mass market until loss required locking up testers. It begs the questions: why do we still have a fragrance bar in the U.S.?” In the U.S. market, in addition to Sephora, Ulta has also adopted this concept for fragrance marketing.

Coe-Hutshing cited the Amazon.com example of “if you like this book, you may like to try one of these similar products.” She said Selfridges in London is a store with this kind of approach inherent in its design and layout. Teril Turner said Liberty in London is another that helps its customer navigate well through the space, despite an inherent challenge of being in non-contiguous space.

Tell a Story; Make a Connection

Storytelling, a part of store design, layout and merchandising, is also part of building the emotional connection with the consumer. Even at Fred Segal, with a reputation for newness, Coe-Hutshing feels a responsibility to present productin a way that tells a story. “It is not about hype,” she emphasized. “The consumer is over-hyped. They want gut reaction. The key is communication with customers—telling them a story and intriguing them into staying,” she continued. “It’s why Stila is so successful, because its graphics tell a story to a woman. It is accessible, inclusive and welcoming.” The Canadian retailer Holt Renfrew’s “Lab” department focuses on emerging brands across categories successfully. Coe-Hushing, said, “It (the Lab) creates drama and tells a story to the consumer.”

Strive for Convenience

“Department stores and malls test your endurance” observed Corlett. “Retailers focus on using technology to service their own ROI, not the customer’s.” She suggested using technology in-store to place food orders ahead of time, so your food is waiting for you when you arrive in the mall’s food court. Corlett also suggested locating more ATM machines with better placement throughout the mall and adding the convenience of valet parking for customers.

“You have the building that you have when you are a department store,” says Teril Turner, “but you can help the consumer navigate. The department store consumer is time crunched, so help them.”

FIT’s Cutner asked, “If product is not the point of difference, what can you offer?” She answered the question herself, stressing, “Service and value. Time is the new value commodity.”

Partnership between Retailers and Brands

Rather than focus on what is going wrong, it would be more productive for marketers and retailers both to remember that theirs is a shared destiny. The key for both sides is to work together in testing new concepts, finding what is working and beginning to roll it out to more stores. “The key is finding a way to build excitement both for brands and department stores,” advised Coe-Hutshing. “Both have everything to gain by making it work and everything to lose if they don’t.”

The Way Forward

Publicly held companies with quarterly reporting pressure from Wall Street, increased competition at retail and a more sophisticated consumer, have shifted the focus of traditional department stores and major beauty brands from building long term relationships with consumers to short-term gains in market share.

Coe-Hutshing believes that the way forward lies in those initiatives that focus on consumers. “Listen to the consumer —the answers are all there. Try to exceed the consumer’s expectations.” The West Coast specialty retailer has a tough lesson to teach to both brands and store executives in the department store sector.

“The moment you detach from the consumer and focus on balance sheets, you aren’t in the best position to make marketing decisions. It’s not about capturing a demographic for a brief moment. You must go about what you do with heart and true passion for the merchandise. Perhaps the way forward is to simply look back over our shoulder and recapture the passion that our industry was once known for.”