Mass Market Cosmetics Makeover

To the casual observer, it might appear that the mass market cosmetics industry hasn't changed much in the past year. Merchandising trends that started a few years ago, such as the prevalence of modular wall systems, continue to focus on efficient design over new materials and the ongoing need for collaboration at all stages of the process.First of two articlesBut if one scratches the surface, it's apparent that the industry is on the brink of some far-reaching changes, particularly in the use of sampling and the push into previously untapped markets. Of greatest interest are changes now occurring in the area of interactive communication. These have the potential to catapult cosmetics companies to the merchandising forefront.Interactive: Past Efforts Brought ProblemsMost cosmetics manufacturers have considered interactive technology at one time or another, hoping it would resolve the age-old problem of actively involving customers with products at the point-of-purchase. Many invested significantly in research and development of prototypes, only to abandon their efforts when faced with the high costs and challenges of implementation.Interactive options range from the simple and manual (such as mirrors on displays and skin-type diagnostic charts) to the highly complex and electronic (such as push-button audio systems, computer programs and continuous-loop videos). So far, manual approaches such as Clinique's seminal slide system have outperformed and outlasted flashier electronic programs like the Clarion computer.In many cases, the novelty of an electronic display causes an initial spurt of customer interest, but it is ignored when the newness wears off. With video programs, customers eventually tune them out, and beleaguered clerks, tired of repetition, simply shut them off As for computers, Gerry Yablans, president of Long Island City, N.Y.-based P.O.P. Inc., a display designer and manufacturer, cites the example of Clarion, whose computer "was a great way to get response. But the real question is whether it sold more product. Since the product was taken off the market, the computer obviously didn't do enough in terms of sales."According to Rick Goldberg, director of marketing for Maybelline Co., Memphis, Tenn., "The computer let you enter all this information, but it intimidated people and took too much time." He adds that Maybelline has turned to a manual option this year. "For our classic line, we're installing a mirror and a ring of color chips for our foundations to help customers choose shades."John Lombardi, executive vice president of creative services at Revlon Inc., New York, agrees that manual approaches are more effective. Costs eventually ended Revlon's investment in electronics because they were "out of line" given interactive's potential return. "Maybe I could afford to put a hologram in 500 or 1,000 doors, but you need 10,000 to be cost effective," Lombardi says. "I'd rather put the money into R&D and advertising."Beyond cost, perhaps the greatest problem presented by electronic interactive systems has been how to apply it effectively to the mass cosmetics industry. "I was in interactive big time about four years ago," says Bob Barlow, director of package development at Neutrogena Corp., Los Angeles. "But I just couldn't figure it out. It doesn't fit our category, and we never could see that it was the best use of our dollars."Interactive's Future Holds PotentialDespite drawbacks, manufacturers and display firms continue to monitor interactive developments. Some still fund research, and a few have implemented new programs. Gary Rein, senior vice president of Advertising Display Co., Englewood Cliffs, N.J., believes that while interactive is still in its infancy, it will "allow marketers to establish an even more finite database specific to individual customers." The P-O-P firm is working on a proprietary system that will "circumvent traditional retail trade networks and allow marketers to create an interactive dialogue with their customers." As reported in P-O-P Times last November, Chesebrough-Pond's brought interactive into the mass market in the fall of 1994 with a new display for its Age Defying line of skin care products. By pushing a button on the display, customers can activate lighting on a series of backlit transparencies while a talking computer chip educates them about the products.The display was created by Mechtronics Corp., a Stamford, Conn.-based P-O-P company. President Richard Fellinger says it's a good alternative to continuous videos. "This is a less expensive way to address the mass market. It's all self-contained, it puts the product right in front of the customer, and there's no expensive video equipment."The interactive application attracting the most industry attention, however, is part of a campaign developed by Sassaby Cosmetics for jane by Sassaby, a new cosmetics line aimed at teens and young adults. According to Anne Gattoni, marketing manager at Trans World Marketing, East Rutherford, N.J., "jane was launched in July of 1994 and already is, if not the top seller, one of the best selling lines out there."Gattoni believes its success is due to the product, its hip name and packaging, and the P-O-P materials developed for it by Trans World. "It's an upscale product that appeals to a modern, hip teenager because of very competitive price points, a black color scheme and minimal secondary packaging. We created a distinctive merchandising environment of end gondolas with geometric shapes and unique colors as well as bins and gravity feeds. It's very interactive because all the merchandise is displayed in a really shoppable way that makes it so much more fun to shop."In addition to manual interaction, Sassaby offers its customers electronic interaction through jane's brain, a 24-hour computer link on the Prodigy network. "The major cosmetics firms are definitely aware of this and are watching it with great interest," Gattoni says. "Sassaby is presenting the product on Prodigy as an actual entity. When you participate, you're talking to a real person named Jane."While customers accessing jane's brain talk to each other and to "jane" about makeup and other traditional teen concerns, she also encourages participants to get involved in social issues. "When jane asked consumers about the causes they care about most, the majority cited family-related causes," Gattoni says, "In response, all of our spring displays will feature an 800 number for the National Runaway Switchboard to raise awareness and help runaways."Importance of SamplingAnother area in which Sassaby is leading the industry is in sampling. Every item in the jane line, whether it's an applicator or product, is priced at just $2.99. Gerry Molitor, Trans World's vice president of sales and marketing, says this strategy "means their products are priced like every other line's samples. It creates a 'try me' environment that fosters multiple purchases."According to Revlon's Lombardi, sampling is becoming more important than ever in the mass market, particularly for fragrances. "We put a lot of energy into our fragrances, and we put testers out because consumers must be able to try a fragrance before they buy. We'll be doing even more of that this year, and we'll also move beyond the traditional Christmas testing period by making testers available year-round."Revlon has also stepped up sampling of its other products, particularly through coupons and packets in magazines. "We've been extremely successful and have launched quite a few new and revolutionary products with excellent results. Our Colorstay lip color was a blockbuster with outstanding results -- once women tried it, that was it. And our Age Defying makeup is equally successful."Despite such success stories, sampling still presents its share of challenges, including high cost for delayed results, health concerns and a hodgepodge of local laws and retailer policies discouraging it. Consumers also add problems by removing testers and spoiling products and packaging in an effort to try different colors.Maybelline is tackling product spoilage with a new inner plastic cap for its lipsticks. "We just started shipping it in October on our Revitalizing line," says Goldberg. "Customers can take off the lid to see the color but won't mess up the product. It's working so well that we're using the inner cap with all our lip products."Beauty Salons: An Untapped MarketMass market leaders such as Kmart and Target are giving department store cosmetics counters a run for their money with increasingly upscale displays and more high-end products. In the future, however, both mass and upscale retailers may be doing battle with a new challenger: beauty salons."The salon business is dramatically underestimated," says Bill Lush, an account executive at Mechtronics Corp. "Statistics show more people trust their beautician than their doctor. If beauty operators were ever convinced of their power, and if this market were truly developed, it would be a real race with drug and department stores."Janet Paris, senior vice president of Henschel-Steinau Inc., an Englewood, N.J.-based P-O-P company, agrees. "In a salon, you've got an audience with time on their hands because they're sitting and waiting for appointments," she says. "Also, unlike the retail side, interactive is highly developed and very well used in the salon environment because people have time to stop and look at a video."Salons remain the sleeping giant of the cosmetics industry for several reasons. Many shops are mom-and-pop concerns lacking sophisticated skills in marketing and product merchandising. Counter clerks generally don't receive commissions and thus have no incentive to push products. And while beauticians rise and fall as much on customer service as on cutting skills, they usually tend to lack sales savvy when it comes to merchandise.Lush predicts this scenario will change within 10 years. "With the decline of department stores, this market is really poised. It's on the brink, because it falls nicely between the mass and upscale markets."Other Incremental ChangesWhile interactive, sampling and salons signal important shifts in the cosmetics industry, other areas are experiencing changes that are worth noting.General business trends such as cost cutting and vendor consolidation are having a ripple effect. Layoffs at product-manufacturer companies are now affecting P-O-P in the form of tighter budgets and less display activity. The exceptions are new product launches, where increased investment can be justified."It used to be that design drove a project, but now budget drives it," says Henschel-Steinau's Paris. "Everything is geared to the bottom line because companies have to be more profitable."Another trend that is changing relations between cosmetics companies and their P-O-P firms is the use of fewer vendors. "This certainly mirrors larger trends across other industries," says Mechtronics' Lush. "Manufacturers want to limit the number of display vendors to a core group, which is great as long as you're in that group."In exchange for making it into the core group, vendors are asked to do more with less. Despite flat budgets, they must maintain the upscale look favored by most mass cosmetics retailers. "The idea of bringing class to the masses is still the dominant theme among major companies like L'Oreal, Procter & Gamble and Chesebrough-Pond's," says Doug Leeds, president of Thomson-Leeds Co., a New York P-O-P company. "Mass stores are really upgrading to compete with department stores. They want to make the cosmetics section a destination, and we've helped several clients customize standard gondolas to provide a more upscale, surrounding environment."In general, display companies are meeting budget challenges by emphasizing efficient design over new materials. As Neutrogena's Barlow explains, "There really aren't a lot of new materials, and besides, ensuring that you have the most efficient display design is more important." Revlon's Lombardi echoes comments made by several industry insiders when he says, "We're always interested in new, more cost-effective materials, but in the mass market the focus is still mostly on plastic."Another way P-O-P companies are helping cosmetics manufacturers hold the line on costs is by streamlining internal processes with the aid of computers. "Most major display companies have some type of in-house system or access to outsourcing with automatic 3-D computer graphic-rendering capabilities," says Trans World's Gattoni. "It cuts costs by eliminating multiple prototypes. In the future, these systems will be used in conjunction with clients' planogram computer systems to maximize the profitability of every square foot."Collaboration ContinuesThe emphasis on display profitability is perhaps the most important weapon in the war on costs. In a continuation of the collaboration that has spread throughout the industry, cosmetics manufacturers, retailers and display makers are being brought together earlier in the marketing process to devise sales-boosting merchandising strategies.Most strategies are built around today's display of choice, the nearly ubiquitous permanent modular wall system. Says Maybelline's Goldberg, "Permanent merchandising systems on the wall at retail are key. For our Revitalizing line, we introduced 19,000 doors nationwide that are modular and allow tailoring for a particular retailer. We spent a lot of money on it and a lot of time talking to customers and cosmeticians in the stores before we even designed it. We definitely think it's worth it because it makes shopping much easier for customers, and we've gotten very, very good comments from retailers."Revlon's Lombardi adds that display productivity even outstrips space and location in importance. "Space and location will always be factors, but there's more and more focus now on the product mix and productivity at the wall. We now know that space that's not used well isn't just unproductive; it actually loses money for the retailer."The modular approach to most mass displays enables cosmetics firms to mix and match products on an almost custom basis for retailers. Maybelline, for example, can provide any one of several hundred product combinations, and Revlon designs its prepacks in several versions to meet accounts' varying needs.By focusing on tailored product mixes, both manufacturers and P-O-P firms can avoid the high cost of fully-custom display manufacturing while delivering what retailers need. Henschel-Steinau's Paris believes this solution is the most practical. "Something has to give when budgets shrink. You can't build displays for half of what you used to spend and still get the same results."P.O.P. Inc.'s Yablans takes this theme further. "In the mass market, we need to meet retailers' needs and the nuances of certain chains. But it's not in the best interest of our customers to be completely custom. To stay cost competitive, you've got to design something that works pretty much across the board."In the future, Yablans says cosmetics marketers who do "all the prethinking" will be the ones who succeed. "That means thinking through the buying process so carefully and thoroughly that the consumer doesn't have to do it. This area is very, very important because it's the only way to get that $10 out of the customer's pocket or purse and make them happy while doing it."

Mass Market Cosmetics Makeover

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