L'Oreal Permanent Merchandising Gets a Makeover

"A whole new merchandising direction...the boldest step this company has ever taken with regards to merchandising..."These are strong words. But to Paul J. Kolenik, assistant vice president of merchandising for L'Oreal, the new permanent wall display system for L'Oreal cosmetics is a strong statement. And it represents a more cohesive and efficient approach to cosmetics merchandising than the company has had in the past.Kolenik oversees the Cosmair division's permanent merchandising efforts for all L'Oreal cosmetic, fragrance and skin care products. He is currently directing the rollout of System 2000, the permanent wall display system that is being installed in L'Oreal's mass market and drug store accounts.Also under Kolenik's permanent display jurisdiction, but not included in System 2000, are two fragrances, Chaps and Vanderbilt, and L'Oreal's 3-year-old skin care line, Plenitude. Merchandising for L'Oreal hair care products is handled by a separate division.Promotional displays for cosmetics, fragrance and skin care are developed by a separate department, headed by Laurie Houlihan, director of promotional purchasing and production.Importance of "The Wall"Kolenik says today there is a great emphasis on "the wall" and the role it plays in permanent merchandising of L'Oreal cosmetics in mass merchandisers and drug stores. (L'Oreal cosmetics are not distributed through department stores.)"The basis of our business is the wall," Kolenik says. "The consumer must be attracted to it. It has to be clean, well-organized, easily accessible and easily recognizable. Many cosmetic purchases are impulse, and hopefully, once she is at the wall, a customer will make additional purchases."Many of our accounts are self-service, so image, quality and information must all be conveyed to the consumer via the wall," he states.System 2000 presents the entire L'Oreal cosmetics line, which is divided into four categories: lip, nail, face and eye products. Each category includes several different products, adding up to 22 different "brands" available on the wall.This isn't the first time the entire cosmetics line has been displayed together on a wall. L'Oreal has always had a presence there, but System 2000 replaces what Kolenik affectionately calls the "schizophrenic wall.""The schizophrenic wall reflected our evolution in merchandising," he explains. It came about because, as new products were launched, displays for them were created on an individual basis, and were designed to fit as many SKUs as needed. As a result, L'Oreal's wall became a hodgepodge of displays of different colors and sizes. "You could look at the wall and see where we were in 1985, see where the company direction went in 1986, 1987 and so on, based on the displays," he says.On the schizophrenic wall, display colors ran a spectrum that included dark purple, gray, beige and clear. Displays measured anywhere from up to 18 inches wide to only 6 inches wide. As a result, there were visible gaps on the wall. It also became increasingly difficult to fit in a new display when a new product was launched, because L'Oreal adheres to a "family presentation" on the wall -- positioning all lip products together, all nail products together, and so on. Fitting in a new display on the wall meant complicated and time-consuming planogram rearrangements.System 2000 eliminates those problems. It is comprised of a series of inter-locking boxes that form the entire wall. Each box measures 12 inches wide and high and 10 inches deep, and is molded of high-impact plastic. This basic box eliminates all the extra frames and adaptors that were required with the original displays. In its various configurations, the display has illumination, graphic panels and/or vertical rows of clear acrylic cubes that highlight certain products.Each foot-wide display module has an inner tracking system of six rails, and each product is designed to fit, on a sliding product tray, into one of those rails. The box also holds graphic panels for some products. It can even accommodate carded products. A vertical panel with pegs to hold the cards was developed, and that panel, too, fits into one of the six rails in the box. For Hydra Perfecte foundation, the box is modified to hold testers."The best thing about the system, to us, and the reason why it took so long to develop, is that every component is inter-changeable within the boxes," Kolenik says. "Products can be moved easily from one box to another, and the only thing that changes is the components inside the boxes, which just snap out."The most challenging part of designing System 2000 was taking every single one of our [cosmetic] products and finding a way to fit it into the box, on a product tray or using other components," without modifying the package, Kolenik adds. "There are engineering phenomena in this display."As a result of the simplified design, where it used to take an average of four hours to originally "set" the wall in a store, it now takes about an hour and a half.In the future all new products will be adapted to fit in a box on the display wall. There are some blank boxes near the bottom of the display, covered with solid plastic front panels for now.Kolenik sees future cost savings. "Replacement costs will be cut down," he explains. "If a display breaks, instead of sending an entire unit, we'll just send a new tray, or a new component." He estimates replacement costs to eventually be less than 25 percent of what they were before System 2000. "When you think about the number of stores we're in, replacing displays was a very costly part of our business."L'Oreal's product line is arranged in the same order on System 2000 as it is on the current wall. Moving from left to right across the wall are nail, lip, face and eye products, all clustered in "families."The display is available in several different configurations, or classes, which were designed to fit the needs of different retail accounts based on their size and volume. The design is consistent, built around the boxes, but there are aesthetic (such as illuminated or non-illuminated headers and light boxes) and size differences."Some accounts like [System 2000] but don't want to devote 12 inches of selling space to the light poles," Kolenik says. "Or there are some accounts that, for whatever reason, cannot bring electricity to the wall. So we have a number of different configurations." The Class A version of System 2000, the "top of the line," starts at a minimum width of 10 feet.Development of System 2000 took more than two years, and included testing prototypes of the display in stores all over the country. Modifications and improvements were made, based on feedback from the field. According to Kolenik, nationwide installations of System 2000 began in January. "We are planning to put the display in approximately 40 percent of our total stores in the first quarter of 1992," he says. "It is my hope that by the end of 1994, we will have done every store that L'Oreal serves, with this system or a variation of it."Independent third parties will help install System 2000."Because of the massiveness of this rollout, we cannot afford to take the sales force out of the field and lose the selling time to put the displays up," Kolenik says."Also, we want to do certain chains within specific time frames, say, four or five weeks, and we don't have the physical manpower to do that," he continues. "But the sales forces in very remote areas of the country, where third parties cannot cover, will be responsible for some set-ups. And some of the territory and district managers will hire temporary people for set-ups. We kept all of that in mind when we were designing the system, that we had to make it as simple as possible to install and maintain."Vendor InvolvementMaking something simple out of a complicated concept required a close partnership with a display producer, Kolenik says. That partner was P.O.P. Inc., Long Island City, N.Y."We required a number of different things from our vendor when we decided to do System 2000," Kolenik describes. "We needed a company that had a facility outside of the U.S., because originally we hoped to develop it somewhere where the details wouldn't be disclosed to our competition."P.O.P. Inc. has a manufacturing facility in the United Kingdom, but L'Oreal ultimately decided against using it, because "it just wasn't feasible for us to go back and forth all the time."We were also looking for a primary vendor that had all manufacturing capabilities in-house. We wanted to purchase very few components on the outside, except some of the electrical things."Kolenik says L'Oreal commandeered a 3,000-square foot room at the P.O.P. Inc. plant, "where we do all of our planograms and have all of the various accounts' fixtures. That's where we determined 'Does it work or not?' during the main development of System 2000."That dedication and attention to detail are required of all suppliers L'Oreal decides to work with. "A lot goes into the selection of vendors," Kolenik says. Factors he cites are vendors' capabilities, cost structures, ability to deliver, and quality.Sell-Through, Not Sell-InHigh-quality, attractive displays are essential in helping L'Oreal maintain its position as "class for the mass," Kolenik believes. While it finishes behind the three top leaders in the $3.5 billion mass cosmetics market (Cover Girl, Maybelline, Revlon, in order of market share), Kolenik maintains that L'Oreal intentionally keeps a tight rein on its distribution."We could be in double the [number of stores] that we are in now, but we're not," he says. "It's part of our philosophy of business management. It's all well and good for an account to say they'll give us 14 feet of wall space, but we won't necessarily take it unless we think there are strong opportunities to sell-through that much of our product in an acceptable time frame."We want to maximize the space that we have," he continues. "The key to a successful business is not sell-in, it's sell-through." Kolenik explains by raising the scenario of a retailer that dedicates 14 feet of wall space to the product line, only to decide six months later that it only needs 7 feet. "You can't just inundate an account with products, because it doesn't do us or the retailer any good to go back in later and take 7 feet of returns. Yes, the retailer buys the product, but your success with that retailer depends on whether the consumer buys the product."That business strategy also means that there are only a certain amount of SKUs of each L'Oreal product at any one time. For example, unlike some of its competitors, L'Oreal has just 66 shades of nail enamel."That's it. At L'Oreal, if you want to introduce five new shades of nail enamel, discontinue five," says Kolenik.That quantity control enables L'Oreal to manage each SKU and brand more closely, a capability Kolenik says is crucial in today's competitive retail milieu."It's all about maximum space utilization," a term Kolenik says accurately describes System 2000. "Retailers want to give maximum space to the best lines, and you've got to prove yourself daily."A Presence in the FieldFor L'Oreal, part of proving itself means maintaining close contact with the field."Direct involvement with the retailers is the key to successful merchandising," Kolenik states. "Merchandising is not something you can create inside an office."Therefore, field merchandising manager Dave Vilmur, based in Tampa, Fla., Lori Mariano, New York City-based manager of merchandising, and Kolenik himself are in the field on a frequent basis. Their trips include working with sales-people and account personnel both in stores and at accounts' headquarters. They address all aspects of merchandising, including creating planograms. Mariano also helps design and oversee the delivery of displays, and purchases components. With Kolenik and Vilmur, she presents merchandising seminars to L'Oreal's sales force at national sales meetings, attends trade shows, and helps develop merchandising training programs and videos for the field force.Before national roll-out of System 2000 has even neared completion, one opportunity has resulted from it and presented a challenge to the merchandising staff at L'Oreal. Several major retail chains that have tested the system have asked the group to redesign their stores' entire cosmetics departments. Kolenik says they are clearly taking advantage of what they recognize as L'Oreal's merchandising expertise, as evidenced by System 2000."Working with vendors, we've been stripping these departments down and starting over again," he explains. "We're giving them different options to improve their stores' layouts, and have taken it all the way to detailing how the fixtures should be built. We're designing gondolas, signage, everything. We're incorporating all the different companies' product lines, laying them out according to how much space the retailer wants to give them." Of course, these new cosmetics departments include System 2000.Kolenik says the new responsibilities, while they make his job more complicated, are an excellent opportunity for L'Oreal."The key to our business is providing different services to the retailer," he explains. "We establish credibility with them, and they look to us for our expertise. You could argue that we're doing their work for them. But, on the other hand, until now there was only one cosmetics company that was asked to do this, and that was Revlon. So now System 2000 has made it so there are a couple of players in that area."The relationship also gives L'Oreal a tremendous amount of input, if not control, over how its products are displayed. "We're now involved in every aspect of merchandising, from deciding how we want a display to look to deciding how a whole chain could look."Its position as an up-and-comer, not the market leader, is what keeps L'Oreal striving to become, as Kolenik says, "the number one cosmetics company in the U.S.""You've always got to push forward, keep an eye on your competition, and never really be comfortable and rest on your laurels," he says. "As soon as you say, 'Fine, we've achieved everything we want to achieve in the marketplace,' you're history."That thinking, not Kolenik's alone but a company-wide philosophy, is what makes L'Oreal innovative and open to creative thinking. "We're always looking for new ideas and are not afraid to implement them. Some companies 'walk' very slowly, and miss opportunities," he says."I'm not saying we run to where we want to go. We walk very sure-footed. We know where we want to go, but we're not unreceptive to looking at new ways to get there."

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