Nail care polishes up; the eyes still have it
Tracking all of the latest trends within beauty can be about as simple as herding cats, but there undoubtedly are some niches within beauty that are making waves at food, drug and mass.
It is no secret that nail color is hot — red hot. Yet, nestled within the nail color segment is another rising star for the mass market. Enter at-home gel polish. Gel manicures are one of the more popular salon services in the professional market, and now beauty mavens can create the look at home — for a fraction of the price.
According to data provided by Pacific World, gel polish sales are expected to hit $27 million in 2012 in the mass market and, by 2016, are projected to exceed $300 million.
Looking to leverage the popularity of salon gel manicures, Pacific World and several other manufacturers have launched at-home solutions for the mass market. Pacific World recently launched, under the Nailene brand, its new SensatioNail Invincible Gel Polish, which works with an LED light. It is a collection of at-home gel polish products that provide users with up to two weeks of damage-proof wear.
“The introduction is definitely surpassing our expectations out of the gate, so we will be expanding distribution throughout the world,” said Mike Matulis, SVP sales and category management at Pacific World.
Red Carpet Manicure recently launched its at-home LED gel polish manicure and pedicure system. In addition, CCA Industries has its Nutra Nail Gel Perfect UV-free gel color.
Another innovative product making major waves in nail color is Sally Hansen’s Salon Effects from Coty Inc. The brand recently teamed up with pop star Avril Lavigne to launch a limited-edition collection of edgy Salon Effects real nail polish strips designs.
However, the eyes still have it, especially when it comes to lush lashes. Thanks in large part to celebrities, who have popularized false eyelashes and lash extensions, faux lashes are no longer a faux pas.
“The retailers are realizing that over in the [United Kingdom] and other global markets; those retailers have lash bars and have education. They go from your traditional standard lashes to the glitz and flair,” Matulis said.
According to data provided by Pacific World, sales of false lashes and adhesives are up 26.5% to $68.8 million for the past 52 weeks at food, drug and mass (including Walmart panel data and the dollar store channel). Pacific World, which currently markets Revlon-branded false lashes, is looking to bring its Eyelene lash brand to the U.S. market in 2013. Eyelene currently is sold in the United Kingdom and Canada.
Meanwhile, the U.K. brand Eylure recently teamed up with popstar Katy Perry to launch in the United States a line of false lashes, available at Ulta.
On a separate note, Bio-Oil, a cult skin care product hailing from South Africa, is driving incremental sales at retail by being merchandised within various departments in the store — skin care, first aid, and hand and body — and by offering various product sizes, including a new 6.7-oz. bottle. Year-to-date, Bio-Oil point-of-sale is up 19% compared with 2011, and is registering sales of $4.5 million.
Getting niche brands on the shelf
For niche brands, getting a foot in the door of mass market retail is no easy feat, and the stakes remain high as retailers have, in recent years, trimmed SKU counts and grown increasingly risk-adverse. Yet, at the same time, retailers remain on the hunt for a point of differentiation among a sea of “sameness.” Such industry trends have elevated the role that business development organizations, master brokers, regional brokers and sales and marketing consultants play in helping to bring niche brands to market, stay on shelf and garner the greatest ROI from their marketing spend. To gain greater insight into how these industry professionals are helping niche brands find success at retail, Drug Store News hosted a virtual roundtable discussion with some of today’s leading players.
DSN: What is the biggest challenge for brands in getting on the shelf these days? How can your company help?
Ron Otto, National Sales Solutions: Convincing a category manager to take the time to review a new product is a challenge. A category manager wears a lot of hats, and there is not much time left over during the week for new vendor/new item meetings. This especially is true for companies just getting started. We educate our clients about the retailers and their expectations. Only after we are convinced they have a product with unique attributes and are willing to support it with both in-store promotions and consumer advertising will we ask a retailer for an appointment. This saves time for everyone and increases the chances for success. Working with a strong local broker makes it easier for a retailer to take a chance on a new company.
Chip Carter, Morgan & Sampson: Many retailers wait until someone else has gone first. In many cases, without IRI, they won’t even consider it for review. We suggest [direct response], infomercials and, of course, social media to create product awareness.
Hank Gehrisch, Pankow Associates: There are many challenges to getting new or growing brands on the retailers’ shelves today. Two of the biggest are cost of entry and developing an affordable marketing plan that will move products off the shelf. “Pay on scan” or having the retailers “hold back” the cost of the original order could prohibit many small or new manufacturers from being able to afford the cost of entry with major retailers. The strength of a consumer marketing program will determine how we can forecast expected sales of a new item in units or dollars. The potential of a new SKU must be greater than an item currently on the retailer’s shelf. We can benefit a new manufacturer by detailing the probable cost of entry with our largest retailers, and advise what the retailer’s expectations or thresholds may be for any given category. We also provide assistance in suggesting how best to spend co-op advertising funds or perhaps using their monies to run national advertising (e.g., advertorials or ROP ads) to maximize the effect of available budget dollars.
DSN: Once a small or medium-sized brand breaks through, how does it stay relevant and top of mind with the retailer and make sure it is not churned out in the next category review?
Dan Mack, Swanson Group: Once a brand hits the shelf, there are three things it must do to stay relevant: It has to create custom experiences through custom promotional events, support its brands with social media efforts that create loyalty, or offer exclusive products that move the needle while providing competitive differentiation to the retailer. Once a brand finally gets to the shelf, the work really begins. The best [brands] create experiences that are unique to the retailer, creating stronger vendor, consumer and retailer alignment.
Frank Parise, Performance Sales and Marketing: By offering an 18-month promotional plan. This will keep category managers aware and looking down the road.
Bruce Funk, Elias Shaker & Co.: It’s a matter of making sure — up front — that solid marketing programs are in effect, not only to consumers but also with the retailer. The bottom line is making sure the product sells as well as you say it will sell and is contributing to the bottom line. Staying on top of retailer data — orders, POS, etc. — and having regular communications with the category manager and support staff also is key in staying relevant.
David Biernbaum, David Biernbaum & Associates: Effective communications with the retailer are essential. At David Biernbaum & Associates, I am a control freak when it comes to managing the communications between my client companies, [their] brands and the retail category managers. I want retailers to know what the brands are doing — at least on a monthly basis — in terms of marketing, advertising, social media development and consumer sales trends that go well beyond POS and short-term IRI data. However, retailers do not have time for reading too many emails or, heaven forbid, receiving too many phone calls or voice messages. So, I have thoughts about the types of communications and summaries that work best. I like the practice of email summations, say about once each month or so — kind of an executive summary for category managers and retail executives, and certainly my brokers, that include easy access online with links to interesting developments for the brands. Links work much better than file attachments.
DSN: What do you think has been the best new niche product to emerge in the last year or two and why? Why do you think it was able to break through, and what can other CPG companies take away from that?
Michael Quinn, Pankow Associates: Most recently it was the re-introduction of the St. Joseph Aspirin brand. They participated in as many account-specific promotions as possible to let consumers know that “St. Joseph was back.” They played on the brand’s 100-plus-year-old heritage and made it appealing to today’s customers. They shared their long-term plans with retailers and followed through on their commitments. As a result, they accounted for 63% of the growth in the low-dose segment of the aspirin category.
Mack: Three brands that have broken through, even though they have been out for a bit longer than two years, are Muscle Milk; Evolution of Smooth lip care, lotions and shaving creams; and Think Thin protein bars. Each of these brands has created a compelling brand image, [filled] unmet needs and elegantly communicated differentiation to the consumer. Also, each of these brands has done a very nice job creating a strong attachment to [its] user base. They may not be the largest, but they have a group of zealots that love them — and love sharing the message. Each of these firms also has done an impressive job with very crisp and clear packaging and imagery. That is mission accomplished from a marketer’s perspective.
Otto: Electronic cigarettes have gained some traction during the past year. Traditional cigarettes are actually a niche product — they appeal to less than 20% of consumers. It is estimated that e-cigs appeal to 10% of smokers. E-cigs are super-niche, but they easily could represent [more than] $1 billion in retail sales within five years. We represent the GreenSmoke brand of electronic cigarettes. We feel they are the highest quality and have the best marketing support.
DSN: What advice do you have for retailers to bring more excitement to the shopping experience? How do you think suppliers can help?
William Don Cormell, Beech Haven Sales and Marketing: The wellness programs offered by several drug chains have been successful for small companies. They tie the consumer and chain together, and enhance the shopping experience. … Suppliers and retailers can improve the shopping experience by tying the manufacturers’ national promotional plans into their in-store events. I have seen a major effort in the [past] two years to improve the preparation for meetings on both sides of the desk.
Anthony Raissen, InterQuantum: It would be great to see retailers carve out a section of the store for innovative products, even if it were to be done on a regional basis. I know this seems simple, but with the shelf space at a premium, it always comes down to ROI. Not just the ROI on shelf space, but the costs associated with inventory and logistics as well. Some progress definitely has been made in this area with “As Seen on TV” sections in some stores, but this is limited. Suppliers would need to limit the downside for retailers by promoting their products to consumers, as well as by providing an easy way for retailers to handle returns.
Parise: Create a new item endcap to test out niche [and] new items. Set criteria then use that to determine if the item goes into [the planogram].
DSN: What do you think will be the biggest opportunity in the front end of the store over the next 12 to 18 months?
John Malmborg, KKM: The biggest opportunity in the front end over the next 18 months will be to appeal to shoppers in a relevant way. This means having the right offers for the shoppers that the retailer wants to attract and have in their stores. Not all customers are equal. The retailers that are able to identify the shoppers that they want and provide them with the right incentives are the ones that are going to have the most business and the most profitable business. The advent of mobile marketing and digital marketing will play a big role in this area as retailers use their data to understand the shopper and give them reasons to buy more and more in their stores.
Mack: I feel like most retailers are smothered in a world of “sameness.” So, I still believe the challenge for most retailers is to uncover, unlock, license or create brands that are truly unique and only offered within their four walls. That has been the magic of Target’s private-brand offering, Costco’s treasure hunt, the prestige lines at Ulta and Sephora, and the Look Boutique experience with Duane Reade and Walgreens. Distinctiveness is attractive and brand ubiquity is boring from a consumer’s perspective.
DSN: In terms of reaching the consumer and driving trial and awareness for the brand, where do you think small and mid-sized companies are getting the most ROI from their marketing spend these days? Where would you tell a niche company to allocate those dollars?
Raissen: We have been very successful using a direct-response approach to create awareness and drive trial. The model works well because it provides for affordable advertising that generates some immediate sales and helps companies with their cash flow requirements. Most products do not make money in direct response these days; however, a solid campaign can create large-scale awareness that, in turn, drives consumers to look for the product. With most direct response campaigns, even with the proliferation of Internet shopping, only about 8% to 12% of the sales come directly to the company; the remaining +/- 90% is done at retail. If a company can sustain the investment spending at the beginning of a campaign, then once they get to retail they will be able to capitalize on the 90% of consumers who are retail shoppers.
Funk: That’s kind of a complex question, depending on the type of product, the category and the competition. I think it’s important that the vendor invest with the retailer in [its] account-specific programs, as they typically can drive good business. Beyond that, I feel there is a big upside to social media marketing, as well as specifically targeted traditional marketing (e.g., TV, print and radio). For example, we recently were at a seminar where the U.S. Postal Service made a presentation for [its] “Every Door Direct Mail” offering. A program like that, I think, would especially be good for items that have limited or regional distribution in a chain.
Biernbaum: Unfortunately, chain drug stores and supermarkets still are putting pressure on small and medium-sized brands to spend most of their money on retail promotions right off the menu driven by in-store discounts. What works better is for retailers to resist the usual mode of draining the small brand’s funding on programs that don’t particularly work well for specialty and niche brands but, instead, to allow the brand to invest more in non-DVR-oriented cable TV, viral social media, targeted Internet advertising, consumer sampling, pharmacy and doctor sampling, and effective publicity and public relations. Depending on the product, the category and the brand, a certain mix of the dynamics of these approaches will drive more sales and profits to retail than many of the usual “spends” inside the drug store itself. What I do push for is retail tagging and creative driving programs that send consumers direct to any given retail chain.
For the complete "Behind the Brands: 2012 Annual Report," click here.
10,000 & counting: Dollar General goes national
At first blush, there appears to be nothing special about Dollar General’s first Southern California store in the suburb of Montclair. It occupies about 7,500 sq. ft. of space in an aging strip center, and a small banner hung on the exterior beckons to passing motorists and pedestrians, “Now Open.” Inside, more signs explain the bare-bones merchandising of familiar brands to shoppers unfamiliar with the Dollar General value proposition. “No frills, just real savings” and “Simple prices you can add up in your head” make clear that Dollar General’s goal is to provide great prices on household essentials.
Such an approach to merchandising doesn’t qualify as “special” in the same visually appealing way it does at a Nordstrom, Target or Bass Pro Shops. Then again, special can take many forms, and in Dollar General’s case, its dowdy little store east of Los Angeles looks good because it is the model of consistency that just last month enabled Dollar General to open its 10,000th store. The company already had the largest network of retail stores in the United States after opening 625 new stores last year, and with that many planned for this year, as well, it quickly hit the 10,000-store milestone.
According to chairman and CEO Rick Dreiling, Dollar General has been able to achieve such considerable growth by focusing on the four priorities of driving productive sales growth, increasing gross margins, leveraging process improvements in information technology to reduce costs, and strengthening and expanding Dollar General’s culture of serving others.
“We believe that adherence to these priorities and our focus on multiple leverage to drive sustainability of results will continue to separate Dollar General from the competition and allow us to provide our customers with the consistent low prices that they trust,” Dreiling said during the company’s recent conference call to discuss record fourth-quarter results.
“The returns on our new stores remain some of the best in retail, thanks to the disciplines we have developed in our real estate model,” he said.
Discipline is a good thing for a company to have, especially one that is expanding its store base at an unprecedented rate. For example, when results for the fourth quarter ended Feb. 3 were reported on March 22, the company indicated there were 9,937 stores in operation. An annual report filed the same day with the Securities and Exchange Commission showed the store-count figure as of March 2 had increased to 9,961. Then on March 30, the company reported the opening of its 10,000th store in Merced, Calif.
The company added 63 units in the space of roughly two months, which sounds like a lot, but is actually a little off the pace the company needs to achieve the 625 new stores slated to open this year. Going forward, the company needs to average 1.8 new stores per day to hit its new-store expansion target of 625 units and 7% square footage growth by the end of its fiscal year in early 2013. And then the company needs to maintain or possibly even accelerate that pace over the coming 15 years, as Dollar General claims the U.S. market is capable of supporting upward of 20,000 of its stores.
The company’s steady success, as exemplified by 22 consecutive years of same-store sales growth and a strong rate of return, has led to plenty of fans on Wall Street, where there appear to be few doubters when it comes to Dollar General’s growth prospects. A key reason is the fact that the company only recently began expanding into Northeastern markets, and this year entered California and opened a new distribution center in Bakersfield, Calif. In fact, last year was the first time since 2006 that Dollar General entered a new market, which it did with new stores in Connecticut, New Hampshire and Nevada.
Typically, new market entries are fraught with risks, and those risks are multiplied in California, which can be like entering a foreign country, especially for a retailer whose roots are in the rural Southeast. Normally that would be the case, except Dollar General has a senior management team with deep roots in the western United States. The company recently hired Safeway veteran Greg Sparks as EVP of operations, which provides the company with valuable supply chain and operational expertise in western markets just as new distribution capacity comes online in Bakersfield to facilitate growth in California and neighboring states. Sparks spent 34 years with Safeway.
Meanwhile, Dreiling also has considerable exposure to California and Western markets. He joined Dollar General in 2008, but from 2003 to 2007, he was with California-based Longs Drug Stores as EVP and COO. Prior to that, he served as EVP of marketing, manufacturing and distribution at Safeway from 2000 to 2003 and was president of Safeway’s Vons division from 1998 to 2000.
Dreiling’s decision to hire Sparks as head of operations is not the first time he has turned to his former Longs and Safeway colleagues to build the next-generation Dollar General. In 2008, he hired John Flanigan as SVP of global supply chain after Flanigan served as group VP of logistics and distribution for Longs and, prior to that, as VP of logistics for Safeway. Flanigan was promoted to EVP at Dollar General two years ago.
Dollar General has come a long way since opening its first store in 1955 and completing a public stock offering in 1968. Taken private in July 2007 by Kohlberg Kravis & Roberts, Dollar General became a public company again in November 2009 with a new management team at the helm and ambitious growth plans in place, which have been successfully executed over the past few years and have the company positioned to eventually double in size.
For the PDF of the full report from Retailing Today, click here.