Kissing Off The Cosmetics Counter

Robin Burns's risky plan: To break the stranglehold the department stores have on high-end makeup

When Robin Burns goes to a shopping mall, she's all business. The CEO of Intimate Brands Inc.'s (IBI) beauty division is there to size up the competition, the cosmetics counters that crowd the first floor of every department store worth the name. Burns is immaculately groomed, sleek in an all-black outfit, and unsparing in her criticism. The sales assistants in a Robinson-May store in Denver aren't attentive enough. The promotion signs aren't clear enough. The lighting is fluorescent. Enough said.

In the cosmetics business, where image is everything, the 47-year-old Burns is known for her keen eye. "Robin is attuned to the tiniest nuance in marketing cosmetics," says Paulanne Mancuso, a former colleague who now runs Unilever Cosmetics International.

There's a reason why Burns is paying so much attention to department stores these days. A cosmetics industry veteran who got her start at Bloomingdale's, she has a new mission: to break the stranglehold department stores have had for years on high-end, high-margin fragrances, lotions, and makeup. Leslie Wexner, chairman and chief executive of The Limited Inc. and its Intimate Brands unit, wooed her away from Estee Lauder (EL) in 1998 to develop as many as three cosmetics chains that will each sell only its own brand. Burns inherited the first chain, Victoria's Secret Beauty, a spinoff from Victoria's Secret lingerie; she plans to create two other "prestige" brands from scratch.

The idea behind the boutique strategy is simple enough: control. Burns and Wexner don't want their new brands to compete with others for prime real estate in department stores. They don't want to pay for sales staff they can't fire, or negotiate marketing budgets and coordinate launch schedules with store executives. "Department stores are dying over the fact that we're doing this," Burns says.

All of this comes at a time when the U.S. cosmetics industry is in turmoil. It used to be that women bought almost all their makeup in department stores only. But now cosmetics are going the way of housewares and furniture, which were once sold largely through department stores, too. Drugstores and discounters are claiming a bigger piece of the cosmetics business by selling more high-end products. Meanwhile, the French cosmetics emporium Sephora is establishing itself in the U.S., and a number of specialty retailers that have added cosmetics lines, such as Gap (GPS) and Ann Taylor (ANN), are also encroaching. The result: Cosmetics sales at department stores rose by just 2.7% a year during the second half of the 1990s, down from about 8% in the late 1980s, according to Kline & Co., a consulting firm in Little Falls, N.J. Over the same period, cosmetics sales at specialty stores surged 22.5% annually. "The department store's final and most profitable bastion is starting to crack," says Todd D. Slater, a retail analyst at Lazard Freres & Co.

PERENNIAL PROBLEM. Burns, of course, wants to hasten the demise of the cosmetics counter. She started with a big advantage: Victoria's Secret Beauty had a powerful lingerie brand behind it. It will be much more difficult, and expensive, to conceive and market two totally new brands. She will also have to contend with the perennial problem of all single-brand stores: keeping shoppers interested. Gap, Pottery Barn, The Body Shop--they're all trying to stay fresh. And, like Mickey Drexler, CEO of Gap, Burns will have to one day manage three "prestige" brands that could easily cannibalize one another.

But there's the chance, too, that she could end up with a company to rival the likes of Estee Lauder and L'Oreal Group. "Robin has the opportunity to build a cosmetics empire," says Muriel Gonzales, a senior vice-president for cosmetics at Bergdorf Goodman. Not since the 1980s, when Bernard Arnault acquired Christian Dior, Guerlain, and Givenchy, has anyone sought to create a cosmetics powerhouse.

Burns has already helped reshape the industry once. Remember Obsession? As president of Calvin Klein Cosmetics Co. in the 1980s, she risked an unheard of $17 million on a racy advertising campaign for the fragrance--triple the company's existing revenues. Obsession sold like mad, and the budget behind it "set the standard for launching a major fragrance," says Barry Schwartz, chief executive and chairman of Calvin Klein Inc., which licenses the designer's name to the cosmetics company. Then, as head of Estee Lauder's North American operations in the 1990s, Burns updated its image by bringing in English actress Elizabeth Hurley as the face of Estee Lauder. Burns has earned a reputation as a keen strategist and marketer in an industry known for its shortage of both. Even competitors such as Phillip Miller, chairman of Saks Fifth Avenue (SKS), call her a "visionary."

It's easy to see where Burns' devotion to detail comes from. She grew up in a small Colorado mining town under the watchful eye of her mother. No task went unremarked upon--from school assignments to setting the dinner table. In 1970, Burns headed to New York's Syracuse University. After graduating with a degree in education and retailing, she joined Bloomingdale's executive training program. By the time she left nine years later, she was head merchant of the chain's cosmetics business. Burberry Ltd.'s chief executive, Rose Marie Bravo, then a cross-town competitor at Macy's (FD), describes Burns as "tough as nails."

She was also an artful communicator. Robert Taylor, the former owner of Calvin Klein Cosmetics, recalls a meeting in which Bloomingdale's was vying with Saks Fifth Avenue for the designer's first men's fragrance, Calvin. Burns, then the least senior of the Bloomingdale's group, took over in the nicest possible way. "She has the ability to be authoritative without being autocratic," Taylor says. Bloomingdale's beat Saks for the launch. In 1983, Taylor hired Burns--she was 30 by then--as the president of his troubled Calvin Klein Cosmetics business.

Taylor needed Burns's finesse. He and Klein were involved in a business dispute so serious that they weren't even speaking. Burns began courting one of Klein's staff who persudaed Klein to meet with Burns. The two clicked. At the time, Calvin Klein Cosmetics had just $6 million in sales and was losing money. Burns convinced Klein that the company should focus on perfumes instead of color cosmetics, telling him that his name would resonate more with a fragrance. Together they brought out Obsession and Eternity, the two best-selling launches of the 1980s. By the time Burns left in 1990 for Estee Lauder, sales had increased eightyfold, to $500 million.

When Wexner approached Burns in 1998, she was more than tired of working with the department stores. "You spend all of your time fighting for which of your products will be up front," she says. And Wexner was looking for a powerhouse to build an independent cosmetic company. Burns wasted no time giving the Victoria's Secret Beauty stores a makeover. She is trying to create what she calls a "sophisticated, ultra-feminine image." Low-price, fruity-smelling bath gels with names like "Enchanted Apple" are on their way out. More upscale skin and hair-care products with names like "Body by Victoria" are coming in. And just like in department stores, Burns plans to offer free makeovers and samples of lotions and perfumes. "This is a high-touch business," she says.

JOINT VENTURE. So far, the Burns touch is working. Last year, she introduced the Dream Angels fragrance line in her beauty stores; sales are $150 million annually, making it the top-selling prestige fragrance and the first such launch ever outside a department store. She also added 30 Victoria's Secret Beauty outlets, bringing the total to 465. They should ring up sales of $560 million this year. Within five-to-ten years, Burns hopes to operate 800 stores and bring in $2 billion, counting catalog and Internet sales.

That's the first cosmetics brand in her empire. To create new brand No. 2, Burns turned to Shiseido Co., Japan's largest cosmetics maker. In September, the two companies formed a joint venture to develop a line of makeup and open several stores in the U.S. Burns refuses to disclose any details, but the venture brings together Shiseido's expertise in product development and sleek packaging, and Intimate Brands' retail experience. "The combination has the potential to turn the cosmetics business upside down," says Allan Mottus, editor of the Informationist, a cosmetics trade publication.

As for brand No. 3, that's still about five years away. For now, Burns says only that it will target a different high-end niche. And if she succeeds in selling these brands in her own stores, she might never have to face the buyers at Bloomingdale's again.

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