Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Saturday, February 14, 2009

Shoppers/Murale's Venture Into Cosmetics

Throughout its existence, Shoppers Drug Mart has achieved remarkable success and has revolutionized the pharmacy concept in Canada. In the 1950s, Murray Koffler, Shoppers founder, sought to legitimize his pharmacies by making the atmosphere more professional (ex. Requiring pharmacists to wear white overcoats) and focusing on his core business, the sale of prescription drugs, over other products such as soda fountains which were removed.[1] Shoppers Drug Mart, established in 1962, began with a very simplistic concept that focused on products with essentially inelastic demand, prescription and over the counter drugs and subsequently cigarettes. Through its 47 year history, Shoppers has continuously added and revamped its product offering in order to cater to customer desires and become more of a neighborhood one-stop-shop rather than just a pharmacy. However, never in Shoppers history have they made such a departure from their successful store format strategy and their RVP as they are with their expansion into high end cosmetics.

Since 2001, Shoppers Drug Mart has aggressively entered the high-end cosmetics business and has achieved success. There were several strong reasons for this venture, including the lack of a dominant high-end cosmetics competitor in Canada as well as Shoppers already established and steady clientele it currently attracts. Stores have been renovated and have become much more upscale with the cosmetics department becoming a focal point of the store (many stores are designed so upon entering the store you must walk through the beauty boutique). Shoppers has increased their product assortment to carry not only premium brands but have developed their own high-end cosmetic private label called Quo. Nevertheless, arguably the most important strategic move they undertook was the appointment of Jurgen Schreiber in 2007 to become the new CEO of Shoppers Drug Mart Corporation. Schreiber was poached from Watson and Co. Ltd., a European retail giant, where he transformed their cosmetics department. Schreiber was strategically selected to become CEO of Shoppers due to his experience in retail and cosmetics, but also the extensive contacts he has established within the global cosmetics industry. Upon arriving at Shoppers, he used his connections to acquire new high-end product lines and forge new industry relationships, such as Shoppers recent contract to stock the Clinique cosmetic line (Shoppers became the first North America drugstore chain to carry the brand) and Gosh and Boots No 7. While the expansion into high-end cosmetics was occurring before Schreiber’s arrival, it is clear that he was strategically selected to take the initiative to a level that requires significant industry intelligence and connections.

As a result of the current economic conditions, one would surmise that Shoppers decision to carry discretionary products, such as iPods or high-end cosmetics, would be an extremely risky as consumers seek to minimize purchases; however, as other blogs have alluded to, certain premium products can still flourish in recessionary conditions. Cosmetics are a necessary female item that women will not do without and are essentially an ‘affordable luxury’. Despite current decreased spending by consumers, Shoppers has been able to steal market share and should be well-positioned in this industry once the economy fully recovers. Shoppers currently accounts for 20% of the $1.3 billion dollar Canadian market, increasing its market share threefold since 2003.

Despite this rosy picture for Shoppers retail stores, some industry experts are more pessimistic about their new stand-alone store called Murale. Focusing on selection and experience, Murale offers high-end cosmetic products and has well trained skin care professionals assisting in personalized service and care. Further, following their own structure in Shoppers Beauty Boutiques, Murale hires their own staff (unlike department stores who have staff hired by the brands they represent) to provide professional and unbiased opinions. Schreiber and the Shoppers brain trust felt there was a gap in the cosmetic market, as consumers were demanding greater access to premium products and were demanding greater service capabilities. With no dominant player established and with their increasing capabilities in their own Shoppers location, it was time to allow these acquired strengths in cosmetics to flourish on their own. Despite all this, some industry experts remain pessimistic about the launch citing economic factors and Canadian consumers purchasing behavior in regard to cosmetics. In general, Canadian’s don’t spend as much on cosmetics as either Americans or other global consumers. Further, both Shoppers and Murale will be competing to acquire market share in the cosmetics industry and will be stocked with many of the same product; a situation that could lead to sales cannibalization. While Shoppers benefits from their already established customer base and store traffic, Murale will need to develop this independently. Nevertheless, regardless of whether Murale becomes a successful retail outlet, it is clear that Shoppers will continue to expand its cosmetics business and will be well-positioned to become the dominant player in the high-end cosmetics industry upon economic recovery.

[1] http://en.wikipedia.org/wiki/Shoppers_Drug_Mart

Main Articles:

- http://www.theglobeandmail.com/servlet/story/LAC.20081129.RCOVER29/TPStory/?query=Shoppers+Drug+Mart

- http://investdb3.theglobeandmail.com/servlet/ArticleNews/story/GAM/20081129/RCOVERMURALE29

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