Beauty is beautiful for business

More pharmacy retailers boost beauty sections to draw customers

Rite Aid is testing a revamped beauty section in at least one of its Genuine Well Being stores, in New York's West Village. Dubbed Beauty Vision, the section features a wider assortment of brands, a spruced-up look and a Beauty Vision adviser who can help customers learn about various brands and products. The chain is promoting the new concept with a special event on Tuesday featuring Eddie Funkhouser, creator of the eponymous cosmetic brand.

Assuming president Obama's healthcare reform initiative works out - notwithstanding the rough start it's had so far - and tens of millions of uninsured Americans get healthcare coverage, it's going to mean a lot of potential new customers for pharmacy retailers. But while that will drive script count and get people through the door, it will also drive pharmacy margins down. This means retailers will need to do more to make themselves stand out in the front end, and one of the best ways to do that is with beauty.

With its still-experimental concept - which adds to its efforts to improve the beauty section as part of its shift since 2011 to the Wellness store format that is currently in place at more than 1,000 of its stores - Rite Aid is the latest to join the growing trend of retailers offering the kinds of beauty products and services one would expect to find in a store like Sephora or a high-end department store. Duane Reade and Walgreens have done this with the Look Boutique concept, while Target recently announced that it would expand its Beauty Concierge program to 95 more stores, bringing the total that have the program to 300.

In an audio interview for the August issue of DSN, beauty futurist Jeanine Recckio pointed out the importance of beauty as a key part of what she called "retailtainment." That means that beauty should be, above all, fun because that's what will make customers shop the store.

It's a good move for Rite Aid, which has relied heavily on the pharmacy and wellness to drive sales and customer traffic, particularly with the pharmacy focus of its Wellness+ loyalty card program and the Wellness store format. It's also a good way to bring to the beauty section the kinds of one-on-one services the chain already offers with the Wellness Ambassadors, who have helped to drive sales at Wellness stores.

Lately, Rite Aid's gains in sales have largely come from the pharmacy. In October, the chain's same-store sales increased by 2.1%, including a 3.4% increase in pharmacy same-store sales, but a 0.6% decrease in front-end same-store sales. By comparison, Walgreens' 5.8% increase in same-store sales included a 7.8% increase in the pharmacy and a 3.5% increase in the front end, as well as a 0.6% increase in same-store foot traffic and a 1.7% increase in basket sizes at comparable stores. Meanwhile, according to third quarter 2013 results announced earlier this month, CVS had a 3.6% increase in same-store sales, including a 5.7% increase in the pharmacy and a 1% decrease on the front end.

This isn't to sell short Rite Aid's phenomenal recovery, which has driven huge gains in its stock price and earned accolades from Jim Cramer, host of CNBC's "Mad Money." But it does show that while the pharmacy is and always will be an important part of any pharmacy retailer's business, the front end will become more important in the years to come as well. The front end is, after all, the first thing people see when they go into the store, and the new beauty concept in the West Village, as well as the store's open food and beverage cooler right by the door, shows that Rite Aid is well aware of this.

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