In light of the recent story and RetailWire discussion on Costco's use of diverting, it was interesting to come across a piece on the Women's Wear Daily (WWD) website describing how Target has brought in upscale beauty brands into a store in New Jersey that are typically found only in department stores and high-end beauty boutiques.
According to a piece by Molly Prior and Faye Brookman, Target's store in South Plainfield included Bare Escentuals, Bumble and bumble, Clarins, Keihl's, Origins and StriVectin.
Manufacturers of the brands, interviewed by WWD, all maintained that the companies had no direct relationship with Target.
Bumble and bumble president Peter Lichtenthal said the retailer is not authorized to sell its products.
"We became aware of this matter only when the products appeared on shelf," he told WWD. "Bumble and bumble is committed to prestige hair salons as our primary and overwhelming channel of distribution...Through Bumble and bumble's advanced coding system, along with dedicated surveillance on ordering patterns, we have been able to intensify our 'zero' tolerance policy against any Bumble and bumble partner that diverts our merchandise to an unauthorized retailer. If someone diverts, we will shut them down."
StriVectin marketing director Gina Daines, said, "Unfortunately, diversion of luxury goods has become a serious problem worldwide and one that StriVectin takes seriously. As a high-end brand, we have invested an incalculable amount of research and resources into finding the best ingredients and formulas to make our products safe and effective. As a result, we believe that our products should be sold at the finest retailers."
William Chappell, an analyst with SunTrust Robinson Humphrey, said, "It's ironic that a good Midwestern retailer is using backdoor tactics to get ahead. Target has decided it's going to go upscale whether [prestige beauty firms] like it or not."
Target does seem intent on upscaling its beauty image with a four-foot planogram signed as "professional skin care" in a number of stores. The set included the Lumene brand along with the aforementioned prestige brands.
WWD reported that it found similar sets in three of 11 Target stores visited in a number of states. The retailer declined to comment on the "professional skin care" site but an unidentified vendor said Target is testing the concept in 300 to 500 stores across the country.
Discussion Questions: Has diverting activity increased? Are the objections raised by brands in the media an accurate reflection of the c-suite reality outside of the public eye? Does diverting during an economic slowdown represent a bigger threat to a luxury brand's equity than when it is done during a more robust time?