The Grayson Report

Costco and Cosmetics: A Marriage in Mass?

July 7, 2006

Suzanne and Bob Grayson
Grayson Associates

Suzanne and Bob Grayson are respected, professional marketers, having spent their careers with the leading companies in the beauty industry before staring their successful consulting business in the early 1970s.

Their consulting clients have included Avon, Bristol-Myers, Estée Lauder, Procter & Gamble, Revlon and Cover Girl, among others. They reside in San Juan Capistrano, CA and maintain an office in New York City. For more information, they can be reached at or
Do not pass go—go directly to Costco—collect $$$$. That’s the strategy of Princess Marcella Borghese, also known as “Kirkland Signature by Borghese Cosmetics.” If you are a Borghese department store customer you’ll just have to change your shopping habits. Luckily, while you used to pay, say $20 for a lipstick, now you can get two for $14.99.

Costco has had cosmetics in the past, but they were primarily kits and sold at gift-giving time. This appears to be a full-scale assault on drug stores and the other mass outlets (Kmart, Wal-Mart, Target) which have gone the private label route. If this works, expect to see Costco move into cosmetics in a big way. In theory, at least, a proprietary private label line is designed to help make the store a destination rather than a store of convenience only. Costco, on the other hand, is already a destination...all by itself! It’s the weekly or bi-weekly starting place for most shoppers, even without cosmetics. So, Borghese becomes a pickup/impulse item that just adds to the shopper’s bill.

Going mass for upscale brands can take two routes—QVC/HSN or mass retailers. Given the choice, QVC/HSN adds advertising and maintains an aura of class. Costco et al makes no pretense about this. Just quality products at a value price.

Prescriptives has shown that it can do QVC and still remain and grow in department stores. Borghese is cooked. But, there is glory in massive sales and prompt payment.

For our readers who are relatively new to the cosmetics industry, the Borghese line was probably the first “celebrity” name to be used in connection with a brand. Charles Revson lured the very real Italian Principessa Marcella Borghese to be the fountainhead of a new line to compete against Juliette Marglen in department stores. Juliette who? Juliette Marglen was a new cosmetic line from Fabergé.

Borghese developed into a fairly strong line, its main competition being Elizabeth Arden, Helena Rubinstein and Geminesse, aka Max Factor. This was pre-Ultima II when Revlon was looking to have a more upscale line for department stores—basic Revlon was still in department stores. Ultima II started out as a skin care product which morphed into a full cosmetic line when Mr. Charles needed a line to compete with Estée Lauder in specialty stores. But, Borghese was no match for Estée Lauder or Clinique. After Mr. Charles died in 1975, the money-driven Michael Bergerac pulled basic Revlon from department stores, recognizing that the costs were too high, the profits too low and the payments too slow. The move left Borghese to struggle without much clout. Revlon quickly became the No. 1 line, by far, in mass which consisted of independent drug stores (80%) and chain drug stores (20%). Earlier this year, Revlon announced plans to re-enter department stores with fragrance. But the introduction of the scent, Flair, has been postponed in the wake of more bad financial news from Revlon. We’ll save that story for another column.

Back to Borghese’s Future

Borghese’s life-saving strategy raises questions about the viability of small lines in department stores. The channel needs small, edgy brands to attract younger consumers to its edgy soft goods, all of which is good for image. But as Leonard Lauder noted in his HBA keynote a few years back, the small brands fight to stay in department stores in the hope that a large company will buy them. Recalling Estée Lauder’s own early years of passion and struggle, he chastised those in the audience for being in the business for potential sale, and not for the love of creation and building.

This Samy hair care advertisement offers a lot of solutions but with no “star” product, there’s no reason to purchase the line.
A few years ago, these small entrepreneurial lines had no place to go as they lurched out of the department stores’ revolving door. Now, they don’t even go to department stores—there’s Sephora and Ulta and Bath and Body Works, all of which also pay their bills. When department stores want the lines that make it to “hot” status, they’ll have to make it very attractive—just like in the old days when Estée Lauder could demand almost anything from a retailer and get it. EL started out with an advantage that left others far behind to this day.

Where to Look First?

Note the Samy ad below. There are 25 products but no focus. Where is the driver? If the intention was to tell the consumer, “We do it all,” it may have succeeded. But the consumer only needs one or two products so the other 23 or 24 merely get in the way of her making a selection. Maybe a better way of thinking abut this is to view the two approaches to creating advertising. The first is that the graphic should attract the reader’s attention and then be dragged into the copy. The other is that the ad should be written so that it reaches out to the reader and grabs her by the throat. Success comes by tapping into her running tape of life experiences to provide information that will solve some real or imagined problem, not by offering 25 solutions to heaven-knows-what problem. A corollary for those of you who remember a famous commercial some years back, “Where’s the beef?” can substitute, “Where’s the star?”

Since being acquired by Markwins a few years ago, Wet n Wild has worked hard on improving its image and this ad works.

Wish I had done that.

This Wet n Wild ad (left) is so at odds with its long history of being a low-image price brand that its look could have been for any up-market brand. Try covering the name and substitute any other and you’ll see what we mean. Advertising like this will move the brand from the low price leader to a sophisticated value brand that provides some psychic income. Think of it this way: If she is spending $20 more at the pump, she may like the idea of spending $5 less for a lipstick, and feel smart about it, at that. Watch this company (Markwins). It’s making marvelous numbers.

Glad I didn’t do this.

The ad on p. 42 is for Suave’s Sleek Conditioner but you’d never know it. The copy talks about “frazzled feeling” and “frizzled feeling” but never ties it to the product—which is so small that you can barely see the brand name. And, without a magnifying glass you can’t read the label. What was the strategy? Maybe it was there but just got lost in the execution. Too bad. There must be a more compelling way to communicate “why pay more?”

Now that StriVectin-SD is past its prime and heading toward oblivion; huh? You mean it didn’t work?, out comes Sovage (same company), based on a magic ingredient, Ibedenol. Wait a minute—isn’t that the professional ingredient from Allergan that, in a 5% cream, is being marketed by Elizabeth Arden. “No,” you say, “that ingredient is Ibedenone.”

Seems a little sleazy to us.

Frizzle Doesn’t Sizzle
This ad for Suave conditioner promises to eliminate frizzled hair misses the mark for a number of reasons. The copy is too small, the message unclear and the brand itself is hard to find in the advertisement.
Still, the copy is wonderful, long and engaging. Here’s just one paragraph:

“...Dr. Bishop cautions, “Although the data from preliminary research and, concededly, the remarkable anecdotal reports from people who have used Idebenol suggests that the compound is highly effective, many more clinical trials must be conducted before a concensus regarding this novel skin cream emerges in the established medical community... Nevertheless, if you’re like most of us, and don’t give a flying fig about a ‘medical consensus’...”

One very interesting footnote. “Certified 100% idebenenone-free” (in mice type) but who will see it? Obviously, not so “free” that they don’t want to trade on Allergan’s good will. Sort of like, “Better than Botox.” Wait a minute! If the product doesn’t contain idebenone, why did they name their ingredient Idebenol? That strategy confuses us—maybe it’s supposed to. Looks like a lawsuit to us.

Caution: If you read all the copy you’ll buy it. Better wait for the clinicals!

L’Oréal’s Natural Match line is a winner because, among other things, it puts the consumer benefit right in the brand name!

Kudos to L’Oréal

L’Oréal recently ran a four-page ad (left) depicting, in many different ways, the gradations available with this Natural Match Hair Color, and then backed it up with a smashing (and huge) in-store display which has actual “fan-type” samples of the “hair.” Looks like you are in a salon. If the woman’s concern was about matching her natural color (product-class benefit)—now it’s gone.

How do you like that? The consumer benefit right in the name, what a concept! Not to be outdone by its sister company, Lancôme is running an ad that speaks to every woman’s concern: “Are you using the right moisturizer? Visit the Lanôme counter now for a complimentary skin care analysis consultation, and leave with a sample of your ideal moisturizer.”

This ad from Lancôme is sure to attract women to the department store counter.
How’s that for clearing the confusion? Here again, “tapping in” to a consumer’s basic concern—is she using the best product for her skin? No model, no clinicals or graphs, just—we have the right one for you. Hopefully, the on-counter displays will remind folks of the ad, and stop passers-by as well.

So here we have L’Oréal, taking consumer education to an impactful and involving level in all of its divisions. To those of you who say “consumers don’t read,” we’ll say that they do when the material is presented with theatre, as in the case of L’Oréal and Maybelline.

We’ll have to wait and see what department stores allow Lancôme to do to set it apart from other lines, as L’Oréal’s mass lines have been very successful in that channel.