MAKING UP SALES

The color cosmetics field is wide open for supermarkets when it comes to market penetration.According to statistics from ACNielsen, Schaumburg, Ill., for the 52 weeks ended Dec. 28, 1996, supermarkets barely held on to a 13% share of the $2.2 billion cosmetics mass market. That share has been steadily declining since 1994, if only by a percentage point or two.Of the eight segments in cosmetics ACNielsen

The color cosmetics field is wide open for supermarkets when it comes to market penetration.

According to statistics from ACNielsen, Schaumburg, Ill., for the 52 weeks ended Dec. 28, 1996, supermarkets barely held on to a 13% share of the $2.2 billion cosmetics mass market. That share has been steadily declining since 1994, if only by a percentage point or two.

Of the eight segments in cosmetics ACNielsen tracks -- lipstick, mascara, eyebrow and eye liner, eye shadow, face powder, foundation liquid, foundation cream and blushers -- supermarkets lost unit sales in all but two for the 52 weeks ended March 8, 1997. Unit sales of eyebrow and eye liners rose 3.2% and foundation cream climbed 2.1% at supermarkets.

Supermarkets can make up cosmetics sales lost to the drug and mass channels if they market the category, increase product selection and allocate more space, industry executives told SN.

A spokesman for Kroger Co., Cincinnati, which has led the way with its combination food-and-drug stores, said the key for supermarkets to capture market share and sales from other channels is to raise awareness.

"We [as an industry] need to, most of all, create better awareness so that consumers know we have a broad selection of cosmetics in the store and the capability to respond to their needs in a grocery store environment," said Paul Bernish, Kroger corporate director of public affairs.

"A lot of it has to do with creating a friendly environment for customers to evaluate cosmetics -- what they want to purchase. Studies have shown that people looking at the cosmetics will spend several minutes trying to decide what color. We have to figure out a way that allows them that time without having them be distracted," Bernish added.

The general feeling among those polled by SN is that consumers and retailers alike aren't taking advantage of the one-stop shopping supermarkets afford their customers.

"As the customers become more comfortable in sourcing a quality product in their supermarket environment, they will find the convenience of doing that in their supermarket," said Bernie Rogan, spokesman at Shaw's Supermarkets, East Bridgewater, Mass.

Shaw's has been increasing its number of cosmetics stockkeeping units in remodels and new stores, and "paying a lot of attention to that particular department," he added.

Gary Evey, spokesman at Grand Rapids, Mich.-based Spartan Stores, said combination stores like Meijer are successful because "they're allocating plenty of space, offering a wide variety and making use of in-store displays and promotions."

In the past, supermarket retailers have complained of frequent color and product changes and the difficulties of maintaining stock that flows with current trends and styles.

"Staying with the trends is obviously one of the things that has to be constantly watched -- not just the seasonality. I mean, whoever thought that purple nail polish would be popular?" noted Shaw's Rogan.

While smaller chains and independents struggle with how to manage cosmetics better, some larger grocery operators already have cleared the hurdle.

"Chains like Kroger, Albertson's, QFC and Hannaford Bros., for instance, have done an excellent job of running combination food and drug stores where the health and beauty care section, including cosmetics, is well merchandised all year long. That implies that they've learned to deal with the seasonal aspects of that category," noted Chuck Cerankosky, an analyst with Tucker Anthony, Cleveland.

Bringing in additional stockkeeping units requires more space. Drug and mass formats have traditionally dedicated more space to makeup. Indeed, cosmetics is often one of the first stops in a drug store's shopping pattern, where a shopper has a full aisle of products from which to choose.

Spartan's Evey said the biggest obstacle supermarkets must overcome is limited space. One observer noted that standard supermarket stores have been allocating as little as 8 feet to the category.

One industry observer commented that a basic supermarket set should include 8 feet of Revlon products, 8 feet for L'Oreal, 8 for Cover Girl and then another 8 for Maybelline.

A&P, Montvale, N.J., is testing a 40-foot cosmetics section in one of its Food Emporium locations. Company spokesman Michael Rourke said, "In this specific store in this area, it might be a good way to test an additional department like this."

The dollar rings and profit margins of the category would seem to warrant such a set.

SN's informal survey revealed that supermarkets can make anywhere from 18% to 40% on cosmetics because the products are not as price sensitive as others in the store.

Currently, margin erosion is a hot topic among industry experts. Makeup products have such a high markup that a little erosion does not take away all the retailer's profits, thereby making it a category worthy of some additional attention.

Don Stuart, a partner with Cannondale Associates, Wilton, Conn., describes supermarkets as being caught between "the price and selection prongs that mass and drug offer."

The most important thing for supermarket retailers to do in order to overcome the middle mediocrity is to focus, consultant Stuart said.

"The focus they're starting to get over in food, they need to have also on their cosmetics business -- more user-friendly dynamics, broader selection, more competitive pricing, ways to take advantage of the convenience, capitalize on the margins and then get the consumer and close the sale."