A 20 year online foundation adds to Estée Lauder’s digital make-up
- Summary:
- Estée Lauder got started on its digital make-up over 20 years ago. The results today are impressive.
While it’s tempting to assume that that a focus on online and all things digital is a relatively recent retail phenomenon, there are offline consumer brands that are now in their third decade of omni-channel action.
One such firm is Estée Lauder, which set up a dedicated online division 20 years ago. Today that arm of the business consists of a global team of around 700 people, developing and managing hundreds of sites across 39 countries. For the past 17 years, this activity has been led by Dennis McEniry, President of Estée Lauder Companies online, who explains:
We are responsible for building and operating our direct-to-consumer A&M commerce sites partnering with retailers to fuel their growing online businesses as well as spearheading digital technology, innovation and omni-channel initiatives.
Twenty years on and the online arm can boast average annual sales growth of around 25%, although in fiscal 2017 that rose to 33%, accounting for $1.3 billion in revenue. Globally online represents 11% of total company sales, while in the top four national markets, that rises to 20%. McEniry says:
We continue to outperform total online retail growth in the US and in the UK, our two largest online markets. In China, our third largest market, we nearly doubled online sales and we’re again the top prestige beauty company on Tmall for Singles’ Day. We are also nearly doubled our online sales in other emerging markets such as Russia, Turkey, South Africa and we launched in the UAE, Saudi Arabia and India.
To maintain this level of growth, the firm needs to keep a close eye on sourcing, retaining and developing the best digital talent, he adds, as well as mkaing sure that the online team has the best demographic make-up :
We have trained over 2,500 people in digital this past year across the company, and the digital and online area has the fastest growth in terms of people head count. Our online team, which is tightly integrated with our brands through close collaborations, consists of 80% women, 60% millennials and 39% Gen X. It is our priority to foster a team culture that promotes diversity, learning and strong collaboration in order to drive success in a fast-paced environment.
When determining the priorities for Estée Lauder’s digital roadmap, there’s a lot of consultation to be done with the 200 or so retailers with which the firm works around the globe. That means a lot of one-to-one engagement for McEniry:
I personally spend a lot of time with department store CEOs, with the heads of e-commerce businesses in different markets around the world.Frankly the number one consideration in which ones that we focus our effort on are two things. [Firstly] where is the consumer going? And secondly, what is their ability to help build our brands and to build our brand equity?
This leads to some strong partnerships with third party retailers, he explains, citing Sephora, Selfridges and Macy’s as examples:
Our model gives us a solid platform to deploy more brands in more countries with more products and categories in the future, which will enable us to garner new consumers around the world. We are strategically focused on expanding our brand-building distribution online across both direct-to-consumer and retailer sites.
Opportunities exist in capitalizing on industry growth as more consumers shift online, adding new brands in our existing markets, expanding our online platform to the countries we are not currently in. For example, we plan to expand our online presence in India, Middle East and Southeast Asia this year. A number of our brands, including Jo Malone and La Mer, have many untapped markets to enter. We also have attractive online expansion opportunities from recent acquisitions, including GLAMGLOW, Too Faced, Le Labo and BECCA.
(Notably absent here is Amazon, not currently a distribution partner for Estée Lauder and not one that features in any near term strategic thinking for the firm.)
Not just tech
Success online is not all about the tech, argues McEniry:
We focus a lot on building the beauty expertise of what consumers expect in historically in the real world or in the brick-and-mortar world and we bring that expertise online by marrying both real people with real expertise and technology to help them provide really, really outstanding makeup, skin care, fragrance advice online.
We do not believe that it is all about putting up a website and letting people order and then processing packages. The expertise and the people part of it is as important to our brands and to our prestige positioning as anything else that we do on the technology side.
Our signature High-Touch services that are available online set us apart from our competitors. We combine real-life beauty experts who have extensive knowledge about our products with technology to deliver the best beauty advice online.
That said, getting the right technology in place to underpin this strategy is critical, he adds:
Our growth opportunities will also be fueled by technology improvements, innovation and advanced data analytics. We are investing capital and resources in key areas including mobile, omni-channel, digital innovation and marketing technology.
McEniry cites some specific examples to illustrate the point:
We work with Artificial Intelligence and other technologies in order to deliver a more unique, interactive, personalized tool, such as virtual try-on of make-up technology, using augmented reality and facial recognition technology, as well as a bots-powered Foundation Finder tool.
Mobile commerce continues to drive our results, as it provides consumers with always-connected and always-on commerce. Mobile accounts for two-thirds of our traffic and nearly half of our online sales. We anticipate this trend to accelerate, so we are expanding our mobile team and increasing investments in mobile innovation to provide the best beauty experience.
We are working to tie our social media efforts to m-commerce sales with the best High-Touch beauty experts in the industry. This branded beauty experience brings our brands to life in a way that is personalized, locally relevant and fun, all delivered to her mobile device 24/7.
It all combines to provide an online foundation on which to build future growth, says CEO Fabrizio Freda, and is indicative of “a digital first mind-set throughout the company”. That’s not to say that there isn’t still a focus on the traditional offline store beauty department:
Globally, department stores are an important brand-building channel that provide high-touch service, and we are investing by modernizing our counters in our service model in the best performing doors. Many international department store continue to generate very healthy growth especially those in high traffic touristic destinations, like Harrods or Selfridges in London, where our business is robust. In several other markets such as China or Italy, department stores are delivering strong gains.
Our biggest challenge has been in some US brick-and-mortar department stores, which are struggling from falling foot traffic especially in smaller malls and touristic driven doors. US department store represents approximately 17% of our global sales last year and we are encouraged by new signs of strength in some retailers’ top doors.
Nonetheless, the priority is to increase the online capabilties and tap into the additional revenue opportunities. Freda explains:
E-commerce is increasing the frequency of purchase of our consumers because their re-purchase is readily available Sometimes in the past, people would have waited to re-purchase their regular preferred product to the next visit. Now they don’t need to wait. So basically all the gaps of people in usage or repeated usage of product are being filled by the user online.
My take
An impressive example of a retailer that put down the foundations of digital success very early on and is now looking good as a result.