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Department stores gear up fight for beauty market

Beauty adviser Jennifer McKnight, right, helps a customer at one of the open cosmetics displays at Sears in Mississauga, Ont.

Peter Power/Peter Power/THE GLOBE AND MAIL

When it comes to beauty, the department store is beginning to take on the hue of a chain drugstore.

Once dominant in beauty products with their prominent cosmetics sections, department stores are locked in a battle with rival retailers over lipsticks, lotions and eyeliners. Now they're testing more customer-friendly methods that appeal to a younger woman, echoing the formats of Shoppers Drug Mart and others.

The Bay and Sears are introducing hands-on beauty bars and open-shelf displays, rather than tucking the products away behind a counter. They're starting to train their staff to bone up on all labels, instead of just a line or two. Next to its prestige lines, Sears is stocking low-priced "masstige" brands previously only carried in drug stores, grocers and discounters.

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There's an urgency to the makeover. The Bay and Sears, the two remaining traditional department stores, have watched other retailers, including Paris-based cosmetics specialist Sephora, move aggressively into the department stores' upmarket beauty turf.

It's such lucrative territory that even in the downturn it continued to enjoy sales gains in Canada.

"There's a place for an environment where customers can come in and just help themselves," says Brenda Yeomans, a general merchandise manager at the Bay, which is owned by Hudson's Bay Co. "The younger customer wants to be more in control of her buying decision and she wants to feel she can just come in and browse."

Profit margins of cosmetics are appealing - often more than double those of other consumer products. Last year, overall sales in the $7.5-billion Canadian cosmetics and toiletries industry rose 3.5 per cent from 2007, but only 1.9 per cent at department stores, according to market researcher Euromonitor International.

The bulk of the gains flowed to drugstore chains (up 4.7 per cent), discounters Wal-Mart and Zellers (5.3 per cent) and grocers (4 per cent.) Even more dramatic, those sales at Sephora jumped 78.2 per cent, the data show.

Department store cosmetics counters are typically closed-format, and the staff deal with specific brands. The major pharmacy chains feature mostly open displays and staff sell all lines.

In a bid to lure back customers, Sears Canada Inc. Tuesday will unveil a pilot at two Ontario stores in Mississauga and Burlington that refashions their cosmetics departments. Dubbed Oasis, it does away completely with the closed counters, and moves staff into the aisles amid a luxe setting of glass shelves and mahogany partitions.

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In another nod to a younger consumer, it stocks the masstige brands, such as Cover Girl and Revlon, and popular hair- and nail-care products. It motivates staff to sell more than just specific labels by ensuring they're rewarded with commissions on sales of all brands, insiders say.

The Bay, for its part, launched open-concept displays at its store in Waterloo, Ont., last fall and beauty bars at three other outlets. They feature a mix of up-and-coming labels in easy-to-reach displays and sales staff advising on all brands.

The pilots are aimed at persuading women like Jocelyne Moyer to come back.

Ms. Moyer, 24, checks out eye shadows at Sephora and recently shelled out $150 at Shoppers Drug Mart for eyeliner, foundation and other makeup. But she never shops for beauty items at department stores. She doesn't like that their products are behind counters and that staff tout a single brand while ignoring all others.

"When I go to the Bay or Sears, I just walk by those cosmetic counters," says Ms. Moyer, a production supervisor at a food company in Guelph, Ont. "They've always seemed really inaccessible to me. I don't know if it's because of the salespeople, who are on commission - but I feel pressured. Or it's because of the way the displays are set up."

The tide for department stores was already turning when Sephora, owned by European fashion powerhouse LVMH, opened its first stores here in 2004, with 20 across the country currently and plans to more than double that within four years.

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Shoppers Drug Mart and other pharmacy chains had built on Sephora's pioneering self-serve approach with a growing array of premium brands and staff trained to cross-market all of them. It lets shoppers touch, feel and smell the products without having to ask for assistance.

"That makes for a more fun, approachable shopping experience than you get at most department stores," says U.S. beauty expert and blogger ( Elizabeth Dehn in Minneapolis, Minn.

Sephora bolsters its profile among younger consumers by creating an online community, she says. "People love being able to read product reviews and chat with other beauty junkies."

A year ago, Shoppers upped the ante by moving further into the department stores' terrain with the launch of its upscale Murale cosmetics chain. Shoppers CEO Jurgen Schreiber vows that the retailer will one day be the leading purveyor of prestige lines.

For the department stores, the allure of wooing a younger cosmetics customer goes beyond the beauty aisles. With their beauty counters on the main floor, the chains want to draw shoppers with lipsticks and then entice them to other departments. "Beauty is a catalyst to fashion and handbags and apparel," Ms. Yeomans says.

The Sears pilot gives younger consumers the chance to mix-and-match masstige and prestige brands, as the budget-conscious Ms. Moyer does at Shoppers. At the pilot, she can pick from an $8.50 Rimmel mascara or one for $30 by Lancôme.

"It's not the place your mother used to go to," says Sarena Campbell, a vice-president at Sears.

The Bay thinks it can perk up a younger customer with "beauty studios" that carry a variety of emerging brands such as Make Up For Ever, which has a following among influential makeup artists. These beauty bars help create a more contemporary, inviting atmosphere, Ms. Yeomans says. "It has a nice buzz to it."

Taking a cue from Sephora, the department stores are increasingly treating their cosmetics like fashion, racing to introduce new products and brands. Sears is launching 30 new labels at its test stores, including the eco-friendly David Babaii hair care line, tested on film star Kate Hudson.

But experimenting with unfamiliar brands comes with risks. While the Bay has been pleased with its sales of Make Up For Ever, it didn't fare well with another line the Napoleon Perdis line from Australia and dropped it recently, Ms. Yeomans says.

The stores are more vulnerable to issues of product tampering or theft by leaving merchandise out on open shelves. "Our biggest concern is cleanliness and hygiene," she says. "Young people think, as I did when I was that age, that nothing is ever going to hurt me."

Department stores still have to find ways to get young consumers through their doors. Sears plans to market its cosmetics online, and add most of the new products to its e-commerce site. The Bay is doubling its direct mail spending this year from 2008, sending promotions to existing customers. And it's focusing more on trumpeting brands in its ads, rather than simply price markdowns, Ms. Yeomans says.

"We're absolutely not where we want to be and where we believe we can get to," she adds.

Ms. Moyer hasn't noticed the changes yet. A recent university graduate, she watches her spending carefully and often heads to discounter Wal-Mart for cosmetics. She splurges at Shoppers by buying a $50 Smashbox foundation makeup. But she's keen to try out some of the test concepts at the department stores. "It really just opens the door for me to go there to take a look."

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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