Courting beauty’s prestige players—without ever getting them to walk down the masstige aisle—appears to be the main reason behind the recent announcement by CVS that the chain is pulling the plug on its upscale format, Beauty 360. All 25 units from coast to coast will close May 19, as will its e-commerce site.
“They believed, and were very public about the belief, that they were going to get the [Estée] Lauder and L’Oréal prestige brands simply because they said they would do so. It was as if they had discovered the secret to cracking the age-old code for how these companies view distribution,” said one manufacturer, who at one time had considered selling in Beauty 360.
Instead, Beauty 360 stocked a few hot Indie brands, but mostly secondary and tertiary ones, without the fan base to drive turns. Although very credible properties such as Laura Gellar, Paula Dorf and Pop Beauty were stocked, they just didn’t bring in the foot traffic needed.
Wendy Liebmann, Chief Executive Officer at WSL Strategic Retail, said that while CVS’ strategy was a bold attempt to move into new beauty territory, the competitive environment was changing—and fast.
“Ulta, Sephora, Bluemercury, and others had upped their beauty proposition. Duane Reade boldly and very quickly reinvented its beauty departments in New York. Even Macy’s created its assisted self-service Impulse Beauty departments. So much changed so quickly and CVS wasn’t able to respond quickly enough to compete,” she said. “In the end, it was a bold idea that didn’t go far enough or adapt and innovate quickly enough.”
When CVS opened the first Beauty 360 in Washington, D.C.’s DuPont Circle in 2008, it was heralded as an example of “if you build it they will come.” Specifically: open an upscale environment and more brands will move over to mass. But Vincent Longo, who has sold his eponymous makeup line in Beauty 360 since 2009, said the retailer should have continued on its path of shining the spotlight on Indie brands, but more prestige ones, rather than trying to get the prestige nationals.
“[This strategy] would have separated the store from the fray, similar to what Sephora did when they started. The Indie brands are what made Sephora. There’s always a place for that in a mature market. Retailers always go back to the Indies. It’s their ‘square one.’”
He added that the closing of the stores does not surprise him.
“We saw marketing come to a standstill last year. We had noticed it for a while but were waiting to see what the corporate side was going to do because they weren’t sharing any [information] with us.”
Another nail in Beauty 360’s coffin was the economy, said insiders, which took a turn for the worse shortly after the stores started opening. “They were beautiful stores, but timing is everything,” said one former drugstore executive.
Management changes at CVS also moved Beauty 360 to the back burner. Former Chief Executive Officer, Tom Ryan, was a champion of the project, and when he retired last year, his successor, Larry Merlo, directed more muscle to pharmacy. Another main architect of Beauty 360, Mike Bloom, left CVS last year for the top spot at Family Dollar Stores.
Other changing dynamics lessened the importance of Beauty 360. CVS developed its own upscale brand to counteract the fact it wasn’t getting a direct pipeline from prestige brands. The most notable is Salma Hayek’s Nuance. In fact, in a statement issued by CVS, the chain said it is not backing off of beauty. CVS pointed to the success of its Beauty Club, which has 10 million members, as well as Nuance, which is “exceeding sales expectations.”
In a press release, CVS called Beauty 360 “a great opportunity to learn about beauty shoppers that can be used as it enhances the beauty departments in its thousands of CVS drugstores.” Each store will be examined on a case-by-case situation to determine what will go into the space.
With Beauty 360’s exit, eyes are on what’s in store for Walgreens’ Look Boutique, now in both Duane Reade and Walgreens’ doors. Executives were quick to point out how different Look Boutique is from Beauty 360.
“They’ve taken a very different strategy, building their own brand story and identity—services, creative layouts, interesting brands, and leveraging the overall face-lift of the Walgreens/Duane Reade facilities,” said an insider.
There are those, however, who are whispering that Look Boutique’s numbers are not up to plan, but that the department enhances the overall image of the store. Manhattan-based Look Boutiques, for example, benefit from the sheer volume of shoppers passing through them, making it a must-watch format for bustling urban markets.