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August 22, 2008 5:18 PM

Beauty, Business

CVS Beauty Revolution

A rendering of CVS Pharmacy's upcoming luxury beauty stores. Change can be difficult, except when it suits a consumer's abiding need for convenience. CVS Pharmacy -- the 6,800-door, $85 billion drugstore chain that built its business on making things...


A rendering of CVS Pharmacy's upcoming luxury beauty stores.
Change can be difficult, except when it suits a consumer's abiding need for convenience.

CVS Pharmacy -- the 6,800-door, $85 billion drugstore chain that built its business on making things easy for shoppers -- now aims to save consumers a trip to the local department store by putting luxury beauty brands right under their noses.

The retailer's eyebrow-raising proclamation that it plans to open upscale beauty emporiums -- visualize a Sephora store plunked down alongside a CVS -- underscores the topsy-turvy state of retail distribution.

The first two stores are slated to open by year's end, and from the renderings it seems CVS is sparing no expense in a bid to legitimize the move upmarket.

It's no longer enough for this drugstore to aspire toward luxury with diverted fragrances and homegrown proprietary brands. CVS wants a piece of the real action, and its ambitions couldn't have come at a better time.

CVS executives would not divulge the brand names in its Beauty 360 portfolio, but did acknowledge there are 32 lines, excluding fragrance, across skin care and makeup. They described the lot as "department store and specialty brands."

No longer can department stores, which are preoccupied by waning foot traffic and store closures, count on keeping their core beauty brands corralled behind their glass counters. Department stores may still scowl at, or even threaten to drop, beauty firms that flirt with alternative channels, but some suppliers are asking, what real power do they have to prevent brands from migrating to more alluring outposts? After all, as department stores were busy maintaining a costly point of entry for beauty upstarts, Sephora established itself as a democratic beauty mecca that has international distribution to boot. And Ulta, after years of lobbying upscale brands to give its salon-mass-prestige concept a try, has gained traction with a slew of new partnerships. Even more startling is that TV retailers have wooed the Estée Lauder Cos. of the world by tallying up thousands of sales in minutes on air.

Even still, beauty is a world filled by traditionalists. And tradition dictates that less distribution is more. A brand sold in thousands of doors may be in danger of losing its mystique or preciousness.

Very true, but Sephora has proven that shoppers go gaga over stumbling upon hard-to-find brands, and enjoy browsing established lines without the help of a brand-biased sales associate in their face.

CVS' prestige ambition, as revolutionary as it is to the U.S., has a precedent, which some suppliers have said gives them more confidence to participate. Canadian drugstore chain Shoppers Drug Mart began opening Beauty Boutiques -- pristine, assisted-sell beauty shops with a host of prestige brands like Clarins, Clinique, Christian Dior -- eight years ago, and now has more than 140. Those who do business with CVS say the two retailers openly exchange ideas on how to improve their businesses, and suggest Beauty 360 is an outgrowth of that dialogue.

With CVS' might, the concept will likely work, which may cause some nail-biting by Ulta and Macy's Inc. executives, in particular.

The challenge will be to convince prestige beauty firms -- many of which took a wait-and-see attitude to Sephora -- to plunge into CVS' deep dive into luxury beauty. CVS and Beauty 360 may have separate entrances, but their walls touch, and that's just enough to unnerve beauty's upper class. But if CVS gets the key brands and executes the merchandising just right, it could leave the retail competition in the dust, while touching off a consumer stampede.
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