Lean, Mean And Booming -- Garden Botanika Relies On Database, Service, Low Prices

Far from the fashion and fragrance centers of New York, London and Paris, squeezed into a spartan space in a Redmond office park, is the world headquarters of Garden Botanika.

For an industry riveted on luxury and glamour, Garden Botanika seems as much of a departure from traditional attitudes as its chunky, polo-shirted president, Mike Luce, does from, say, Estee Lauder.

Inside a small, bare office embellished only with a couple of posters on the wall, the genial Luce, a former Eddie Bauer president, explains the natural cosmetics and skin care company's corporate priorities.

"You're sitting on a folding chair," Luce notes, unnecessarily, to a visitor. "But we have a state-of-the-art merchandising information system."

Clearly, Garden Botanika is a retailer for the lean-and-mean '90s. Its stores emphasize customer service and value-conscious prices. Advertising is minimal. Its customer database reportedly is among the most extensive in the cosmetics industry, allowing Garden Botanika to track every purchase and send out eight to 12 targeted mailings a year.

Apparently, its approach is paying off. Garden Botanika is expanding nationwide at a clip that will boost total stores from 41 to more than 90 by December. Sales of the privately held company are expected to more than double to about $30 million.

If customers keep sweeping Garden Botanika's products off those glass shelves, the company could add as many as 50 to 75 stores each year for the next five years, and possibly go public with a stock offering.

The company has impressive backing. Among its major investors: Costco founder Jeff Brotman and France's Carrefour, the world's ninth-largest retailer.

The potential market is huge. The $25 billion cosmetics industry has been racing to add natural ingredients to its products, but one estimate puts the naturally oriented cosmetics companies' share of total sales at only about $500 million. Luce started casting around for a new retailing idea to develop back in 1989, when he was at Eddie Bauer, the company was up for sale and Luce decided it was time to leave. At one point, Luce approached Brotman to see if his Jeffrey Michael stores might be for sale. (He envisioned a clothing chain along the lines of Logan Drive, the casual clothing retailer that opened in the former Jeffrey Michael stores a few weeks ago.)

Brotman wasn't interested in selling. But he was interested in starting a mall-based, natural cosmetics chain along the lines of The Body Shop, and, several months later, Brotman and Luce teamed up to start Garden Botanika.

Its target customers are working women in their 30s and 40s who bought cosmetics in department stores but are seeking less-expensive alternatives. This customer, their surveys showed, wants a nicer atmosphere and more service than drugstores or discounters provided.

The first stores opened in late 1990, in Westlake Center, Bellevue Square and in Portland.

Thirty eight were added in the next three years, giving it a presence on both coasts. Now Garden Botanika is closing in on the Midwest, opening stores in Ohio, Illinois and Minnesota.

"It's crazy from here through October," says Luce, noting that the company is gearing up for more than 30 new store openings in the next two months, in time for the critical holiday season.

Recently, a new flagship store opened in Bellevue Square - a 1,200-square-foot showcase for Garden Botanika's latest store design. Bright and airy, the design features lots of glass, white shelving filled with richly colored cosmetics and customer-friendly touches, such as a small sink where shoppers can test and remove cosmetics.

Another new development: Garden Botanika's first mail-order catalog, set to go out after Labor Day to almost a half-million potential shoppers.

Garden Botanika must move rapidly just to maintain market share. Arlee Jensen, the company's vice president for merchandising and product development, estimates Garden Botanika faces more than two dozen competitors in the bath-and-body-shop industry niche, one experts say is headed for a shakeout. Among the competitors, besides The Body Shop: The Limited's Bath and Body Works, H2O Plus, Bare Escentuals and Nature's Elements.

Mass merchandisers such as Wal-Mart and Kmart sell private-label cosmetics while some department stores and natural-food chains are developing private-label lines of body and bath products.

Three companies will likely emerge as industry leaders, says Allan Mottus, publisher of the Informationist, a New York-based health care and beauty newsletter.

Just staying in the running long enough to have a shot at the top will require lots of capital, Mottus says.

"Right now, The Limited is the best capitalized, and The Body Shop is way up there. The question is, who's going to be No. 3?"

Garden Botanika is striving to be there, though it's not well-known yet, even in the fashion and cosmetics industry. That could be partly because it doesn't advertise in magazines and its relatively small amount of newspaper advertising is mainly tied to mall promotions.

It prefers to use its customer database. The wealth of information about its customers is one advantage it may have over the comeptition, which Mottus says has made little use of such technology yet.

Increasingly, Garden Botanika is distinguishing itself in other ways, for example, referring to its products as "botanically based," a more precise description than the nebulous "natural" tag.

It is also using pricing as a competitive tool. On the back of the catalog, for example, is an offer for spa products. Judging by the packaging and design, these products would look at home in a fine department store.

The six spa products - mud mask, pumice body polisher, moisturizer, cleanser, mineral bath and sea kelp soap, a $33 value, are on sale for $15.

And that, says cosmetics expert Mottus, sounding impressed, "is very inexpensive."