Forecast to Thrive

Top beauty retailers offer expert advice on succeeding in a new economic climate.
by Leah Genuario

Amidst news of volatile stock markets, and job and real estate reports arose positive statistics for U.S. retailers in 2011. U.S. retail and food services sales were up 8% July 2011 through September 2011, as compared with the same period the prior year, according to the U.S. Census Bureau. Health and personal-care store sales in particular rose 4.5% in the same time range.

While retailers—and the rest of the country—hope the worst is behind us, a new economic landscape with new rules of engagement is emerging. Specifically in the beauty industry, retailers must navigate a world with increased competition, more discriminatory customers and thinner wallets. It is a challenge, but successful beauty retailers say it is not an impossible mission.

“The beauty retail game has changed greatly,” comments Michael Batt, president of Beans Beauty, a retailer with four brick-and-mortar locations in Pennsylvania as well as a strong Internet presence. “The smaller beauty retailer is working much harder to vie for business.” He says business traditionally clinched by small beauty supplies has been lost to drugstores and supermarkets carrying diverted brands, as well as to bargain hunters on the Internet.

“Everyone has gotten into beauty,” agrees Dominick Costello, president of Ricky’s NYC, a regional beauty-store chain with locations primarily in New York City. Costello has seen increased competition from online sources, as well as the eagerness of largely apparel retailers, such as JCPenney, to jump into the beauty arena. “There’s a lot of fanfare about the beauty industry and how it’s growing. It will grow, but it is highly saturated,” adds Costello.

Despite increased competition, savvy beauty retailers still have a chance to survive—and even thrive—in today’s environment. San Francisco Bay Area beauty-retail chain Peninsula Beauty, for example, has remained profitable throughout the challenging economic environment, and has even seen sales grow 6% in 2011 as compared to the prior year, says Jerret Schaar, chief operating officer.

Peninsula Beauty’s growth hasn’t happened by chance, but is the result of a multifaceted strategy well executed by its leadership. “Beauty consumers have more choices than ever. We have to deliver more value in our offers, more smiles from our sales staff and more solutions to our customers’ beauty problems. Even though we sell tangible products on the retail floor, we have to think about selling our service and product knowledge just as much as the physical products,” Schaar says.

Successful beauty entrepreneurs offer proof that the future can still look bright for today’s small beauty retailers. We’ve asked several experts to provide advice on how to effectively manage a beauty store in a difficult economic marketplace. Here is what they have to say.

[Image: Collection]

Forecast to Thrive, p. 2

No. 1

Act Fast

News of a big-box store opening in a small store’s sales territory can make even the most courageous small retailer cringe. Yet there are specific advantages a small beauty retailer provides that will never be duplicated by a retail giant.

“The biggest advantage is that we can navigate quickly on things. If there is a new product, idea or initiative, we can make it happen quickly. We don’t have a political chain of commands to go through,” says Costello.

Ricky’s NYC has a reputation for providing hip, sometimes hard-to-find items, says Costello. When a hot new product becomes available, “We can bring it in [within] a matter of weeks or even days. If there is suddenly a big demand for a product, it doesn’t have to go through eight levels of management before it gets into the stores.”

Schaar calls this phenomena “retail rhythms,” and his chain of stores has mastered the art of reacting quickly and implementing a strategy to sell to the latest fads. Retail rhythms can be something as simple as strategically placing designer umbrellas on a rainy day, and as sophisticated as bringing in products based on new celebrity trends or providing do-it-yourself kits in response to the rough economy. “We can launch online keyword ads or in-store merchandising end caps to harness sales trends faster than the big-box stores. Less meetings and approval requirements equal faster retail responses,” comments Schaar.

Forecast to Thrive, p. 3

No. 2

Keep Well Staffed

Another important advantage of smaller retailers, say experts, is its staff. A good sales staff provides an invaluable resource to consumers that will drive traffic to your door—and away from the big boxes.

“Box stores lack soul. They are cookie-cutter operations planned like a science. The staff often reflects the same lack of depth and caring,” says Batt. “We stock our stores to reflect what we believe our audience wants to see. Our staff is devoted to our culture—a culture that is passed down from the owners and that is obtainable and on the job on a daily basis. There is a genuine sense of pride and community in a smaller operation, and the customer feels that.”

Staff is an integral part of a well-working store, and “extremely important during economic downturn,” adds Costello.

“Our employees are our No. 1 asset,” agrees Batt. “We’ve come to realize that no matter how well we set the table our employees are responsible for bringing the customers back.”

The importance of a good team, especially in difficult economic times, makes the hiring function extra important for retailers. Peninsula Beauty follows a tried-and-true hiring philosophy, says Schaar. “Hire the smile, train the skill.” The company focuses its resources on teaching product knowledge to naturally service-oriented employees and “quickly removes” those who are not service oriented, says Schaar. It has also invested in hiring a part-time sales and service coach for its staff of more than 50 people.

Training and enthusiasm are the keys to a successful employee, says Costello. The company looks for employees with great morale and willingness to work. Skills are honed with a variety of training opportunities, which include ongoing product training, and sales and management seminars for staff members who show growth potential. “We try to nurture people and give them opportunity to learn, grow and be confident on the sales floor. Good employees are such an important thing,” says Costello.
In addition to offering training, it is also important to recognize employees for a job well done. Schaar, for example, has employed a variety of staff bonuses and incentive programs to energize employees.

[Photo caption: Peninsula Beauty uses a part-time sales and service coach to keep its employees primed for great customer service and sales.]
[Image: Courtesy of Peninsula Beauty]

Forecast to Thrive, p. 4

No. 3

Find Your Niche

Dig into the history of Ricky’s NYC and you’ll find a chapter in its 20-plus-years history that includes kids beauty supplies. While dedicated children’s sections were in its stores at one point, they are no longer there today.

“We tried to do a kids thing, and it was a drain on us. It was a great idea. The store did pretty well with it, but because it was so specialized it needed special attention. It was distracting us from our bread and butter,” explains Costello. “We’ve made mistakes, and we’ve tried different variations of our business; but we’ve found that when you aren’t focused, it takes away from what you’re doing every day.”

Costello’s takeaway advice for other beauty retailers? “Stick to what you do and do it well.” Ricky’s NYC has found an identity in its urban vibe and is known for supplying the best brands and always being in stock, says Costello. “At Ricky’s, we worry about us much more than anyone else. We forge forward with our philosophy. We have become a New York institution.”

Finding a niche is also an opportunity to grow business because you are offering your customer something special that can’t be found anywhere else. “Find your niche and what makes your store unique—capitalize on that. Be different. Be special. Be a destination,” says Batt. When competing against big-box stores, “We can purely capitalize on not being the same and offering a better shopping experience.”

Forecast to Thrive, p. 5

No. 4

Cut Costs

Equally important in a rough economic environment is that retailers should also be savvy cost cutters.

Batt advises being a student of sales reports. Know what is moving and let go of slow inventory through markdowns. Quickly letting go of slow inventory is one effective way of staying profitable.

A critical analysis of retail space can lead to tremendous cost advantages. If you can execute your business model using less floor space, work with your landlord to concentrate square footage, recommends Batt.

Schaar reminds retailers to remember “ROI over ego.” He suggests that all marketing and advertising efforts remain measurable so that advertising dollars are used as efficiently as possible. In an effort to keep costs low, he also advises retailers to re-shop vendors for the most competitive offers as well as identify opportunities to increase energy efficiency, thereby lowering bills.

“Ask your local utility [agency] to perform energy audits on your business to identify opportunities for more efficient lighting and HVAC usage,” says Schaar. “Rebates are frequently available for work and equipment. We changed our MR16 light bulbs from 50W to 35W and saved big last year.”

Finally, retailers also urge that businesses examine their number of employees and whether every position is necessary. “Everyone in the company needs to be busy. If you have people who aren’t busy, then you have too much staff. No one likes to be overworked. But stimulation is good, and people like to be engaged so that their days go by quickly,” says Costello. He also advises that managers stick to their best sellers. “You have to work with what you can control. You can control your payroll and what you’re buying week to week.”

Rather than sitting on your loins and reminiscing about the good old days, focus on the “positive side of these tough times,” says Batt. “This difficult economy promotes a spirit [of trying] harder. It’s like any team sport: Don’t lose sight of the goal. And the fight to get there is so gratifying when you realize that the struggle makes the team a unified force. I can’t express how much I count on our people. Customers are gained one at a time. Dazzle them with service. Let them tell someone else how special their experience was at your store.”

Leah Genuario is a Hawthorne, NJ-based freelance writer. She is the former editor of Beauty Packaging.

[Photo caption: Ricky’s NYC has a reputation for providing hip, sometimes hard-to-find items.]
[Image: Courtesy of Ricky’s NYC]