Out-of-stocks, shipping problems add to C&F dilemma

Out-of-stocks, shipping problems add to C&F dilemma – cosmetic and fragrance

After a rough start in 1993, chain drug buyers say they are adopting a number of strategies to turn that situation around.

Part of the problem has been out-of-stocks. Chains have lost sales because two of the industry’s biggest manufacturers, Revlon and P&G, have been having problems shipping product.

At Louisiana’s K&B, cosmetic buyer Donna McManus says shipping problems have caused phenomenal amounts of business lost.

In New York, Genovese’s cosmetic buyer Stephanie Hayter says her sales growth “would certainly would have been better if some of the vendors had shipped on time. In one case, my stores got their Mother’s Day fragrances from one vendor the Friday before Mother’s Day.”

At Snyder During in Minneapolis, vp–marketing Phil Perkins said his cosmetic sales to date are down about 10 percent and at least part of the decline is directly related to lost selling opportunities.

Some of the softness in chain drug cosmetic sales is attributed to the economy. The continuing recession is causing a lot of shoppers to buy cosmetics in mass merchandise stores where prices are lower.

“The competition is getting intense,” says Hayter. “We have stores opening right across the street from us. And people are going where they think they’ll get the best price.”

Part of the problem is operational. Some chain drug retailers say the industry has made a mistake by turning cosmetics into a self-service department. They are trying to establish a point of difference by putting service back into cosmetics and by upgrading their mix and their decor.

“There are a lot of people buying cosmetics in department stores, and that’s an opportunity for us,” says David Morocco, vice president of purchasing at HSI operator of Brooks, Hooks and SupeRx drug stores.

He added, “People are looking for glamour and pizazz in cosmetics. They want help when they’re looking for something. They want shopping to be fun and easy. It will take time, but we’re developing programs that will give shoppers a reason to buy cosmetics in our stores.”

“Having service gives you an important point of difference,” says Harco’s cosmetic buyer Penny Wade. “We’re launching a new program through our human resources department to develop more incentives for our cosmeticians. We want to be able to reward those cosmeticians who make it a habit to contact customers when something interesting comes along and who do suggest certain products to customers.”

Some chain drug cosmetic buyers say their sales this year have been unintentionally hurt by their own internal efforts to reduce inventories and enhance turns.

In some cases, buyers say their own inventory management strategies have caused out-of-stocks and consequently lost selling opportunities.

Some chains are trying to double turns by lowering their store level inventory reordering points. One buyer reports that the strategy will probably trim inventories by 30 to 40 percent, but the down side is the strategy will dramatically increase out-of-stocks.

“We know customers shop us because of our presentation and because we have what they want,” said this buyer. “If we only reorder when we’re down to one piece on the shelf, we will certainly have many out-of-stocks and I don’t think our customers will tolerate that.”

Other chain buyers agree. “Technology is a wonderful thing,” said a another chain’s buyer. “Now that we have computers I can’t imagine running the department without them. But you can’t manage a cosmetics department based on numbers alone. You have to think of the customers. And if they come in looking for black mascara and you don’t have black mascara because your ordering point was too low, well they’re not going to care about your inventory problems. They’re going to go to your competition and get what they want when they want it.”

Harco Drug has converted from six-inch to four-inch pegs, a strategy that cosmetic buyer Wade says has been very successful in maintaining stock-service levels while reducing excess inventories at the store level.

Wade says the program gives the stores more control over the inventories. She says the chain has minimized excess inventories by refusing to buy any pre-packs that contain stock-on-stock.

“A stock-on-stock promotion just duplicates the inventories we already have on the wall. We won’t do them any more,” she says. “A promotion has to have something new to offer consumers.”

Wade is also paring back on fragrances as the category continues to soften. “We question whether we should carry a broad assortment of basic SKUs or skew down the basics and carry more promotional fragrances. I think promotions are the way we’ll go in the future,” she said.

COPYRIGHT 1993 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group