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Why Sears' Tiptoe Back Into the Beauty Business Is Still Risky

Color me surprised. After nearly a decade hiatus and a quiet 13-store test two years ago, Sears (SHLD) is breaking out beauty departments in 100 of its busier namesake stores. Hoping to convert more browsers to buyers with cosmetics is a big gamble that just shows Sears execs can't get away from spaghetti-on-the-wall management strategies.

The announcement follows a raft of news about Sears' celebrity collaborations (Kardashian Klothing!), its Amazon-like online marketplace and management musical chairs.

Once upon a time
Sears created New York-based Circle of Beauty in 1995 and launched the first cosmetics brand ever to be totally developed for one particular retailer and customer. But even appointing a president who came from Avon couldn't save the brand which Sears discontinued in 2001.

Speaking of Avon, Sears also was one of several department stores slated to receive the direct selling cosmetic queen's retail line BeComing. Avon ditched that effort in 2003.

Mix 'n match
There's no telling how many devotees of Circle of Beauty remain after a decade, but if Sears message boards are any indication, loyalists would love to get their fingers back into those pots of color and cream.

That's why it's a mystery that Sears is stocking its glass fixtures with loads of mascara and blusher found at any Walgreen (WAG) store. Sears "strategy" for its makeup mix is to offer an assortment of mass market and prestige brands (the latter usually only found in department stores). So far though, Sears is touting L'Oreal, Maybelline, Revlon and CoverGirl, nail care from Sally Hansen, Essie and Nicole by OPI, and other skin care products.

Sure, Walgreen and its ilk decamped from tiny mall shops years ago. And perhaps women really want to pick up a tube of Great Lash on their way to the food court. But until Sears makes way for shampoo, body wash, and paper towels, it's unlikely that these brands will turn the department store chain into a one-stop shop like its management wants.

Stiff competition
Sears is probably gambling that the price of gas will stay high and serve to push shoppers into making fewer store runs. However, March retail numbers indicate that consumers had a heavy foot on the e-commerce gas pedal. Online sales were up over 16 percent, the fifth consecutive month of gains.

That's why Walgreen (not Sears) should be seeing brisk traffic of both brick and click variety. Walgreen just acquired websites such as Beauty.com and SkinStore.com, adding 60,000 products to its already massive offerings.

Back in the mall, rival JCPenney (JCP) has already cornered the market on prestige brands in its deal with Sephora. In a true high-low mix of retailers, the make-up maven's store of choice for hard-to-get brands such as Korres, Bliss, and Murad set up shop within JCPenney stores.

The good news is that Sears appears to be hedging its beauty bet, rolling out v-e-r-y slowly and only to the most productive stores. Management better hope their customers like that pasta al dente because this scheme still seems undercooked.

Image via Sears
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