Estée Lauder's digital make-over

Stuart Lauchlan Profile picture for user slauchlan August 15, 2013
Estée Lauder is building a multi-channel route to market as digital investment complements traditional retail space, an approach that's helped it crack open markets such as China. Now it turns its sights on Brazil.

Estée Lauder is one of the best known names in the cosmetics industry, with 30 brands in its portfolio, including prestige beauty brands such as Jo Malone, Tom Ford and Crème de la Mer.

This past week it delighted Wall Street with a a profit surge of 84% for its most recent quarter, fuelled in part by expansion into new markets supported by new forms of digital outreach.

CEO Fabrizio Freda sees investment in digital as a key plank of the beauty group's strategy going forward:

"Our digital budget in advertising is increasing significantly. It's tripled in the last year. So we are spending much more in digital, and we will continue to increase our digital spending."

It's a case of working out where to focus that digital investment, he adds, with certain brands better suited to more traditional outreach methods while others - such as M-A-C - ideally suited to leverage online reach:

"There are some of our brands, which use digital online communication, digital advertising and all the e-commerce activities as their main communication activity. For example, this is very important area for M-A-C, while there are other brands, which are using more TV or more print.

"It's by brand, our decision making, and our return on investment is calculated by brand. So -- but on average, we are definitely increasing our investment in digital in a very significant way."

Fabrizio Freda

That said, the digital direction is clearly set:

"We continue to improve our social media skills and find exciting ways to engage consumers. A dramatic example of this was in May, when M-A-C created an online-only event to sell a coveted Rihanna lipstick.

"The brand sold out the collection online in North America in less than 3 hours, and the only way a consumer heard about the sale was through e-mail, social media and M-A-C commerce and m-commerce sites. Not a penny was spent on traditional advertising."

Combining new digital tactics with traditional retail outlets is a powerful combination, he argues:

"We are trying to create a more cohesive experience for consumer with engaging merchandising across retail and wholesales locations. Our brands are approaching freestanding stores in various ways.

"M-A-C, for instance, has created several different store formats that vary by size, location and target consumers that allow it to maximize its penetration. For example, Aveda will expand its presence in Japan and Korea with its own stores."

But digital investment is a useful mechanism to expand into new markets and new regions around the globe. There have been notable successes to date, says Freda:

"We are the leader in prestige beauty and e- and mobile commerce, with sites across 20 countries. In fiscal '13, we had triple-digit growth in mobile sales and site visits. This year, we will launch e-commerce and m-commerce operation in new markets, including Poland, Israel, Malaysia and Taiwan, and several brands will expand their digital sales to much more countries."

China in their hand

A prime example of this is Estée Lauder's progress in China where digital investment has cracked open an untapped market.

Some interesting stats from the New York-based L2 Think Tank make the case for the Chinese beauty market:

  • China is the largest online beauty market in the world, nine times that of the U.S.
  • Sales on 2011 topped $8 billion.
  • Year on year growth between 2006 and 2012 is around 200%.
  • Online beauty sales are projected to top $20 billion by 2016.
  • In 2012, approximately 17% of luxury cosmetics in China were purchased online.

L2's own Digital IQ Index: China ranks the digital competence of 100 prestige brands in China.

Rankings are determined 20% on mobile, 30% on site, 30% on social media and 20% on digital marketing. Marketers are given rankings of Genius, Gifted, Average, Challenged or Feeble accordingly.

According to 2012 index, Estée Lauder scored 800 data points in four categories against 99 other brands. It was ranked as ‘Genius’ when it came to being digitally savvy across four main areas including site, digital marketing, social media, and mobile.

It's a major achievement for the beauty brand as Emma Li, research lead at L2 Think Tank in New York, has noted:

“Digital campaigns in China are very different. Social media marketing is less about fan growth, and more about increasing interactivity and driving user-generated content.

“Genius-ranked brands share the ability to simultaneously launch multichannel, multi-platform digital campaigns, maintain a strong social presence and foster a natural symbiosis between online and offline activities."

Where the nuts come from

A fresh challenge for Estée Lauder now is Brazil. Daniel Rachmanis, the firm's Senior Vice President for Latin America, explains:

"While we expect to continue winning with our traditional department store partners, we also plan to lead in fast-growing emerging channels, namely e-commerce and specialty-multi.

"We launched our first brand e-commerce site 2 years ago for Clinique in Brazil, and sales have steadily grown. Later this year, we plan to unveil our second e-commerce site in the country, this time for M-A-C.

"Looking further out, we expect to launch e-commerce in Mexico and Chile in fiscal '15. We also have 10 marketing sites for our brands throughout the region, and we have a local presence on Facebook, Instagram and Twitter in many markets."

A multi-channel approach is key, argues Rachmanis:

"Although we've had strong growth, distribution in Brazil remains challenging. Department stores are nonexistent, perfumeries are fragmented and losing share, and the new prestige distribution is still emerging.

"Going forward, our distribution strategy in Brazil will focus on freestanding stores, specialty-multi and our e-commerce business.

"The specialty-multi channel is changing the retail environment and creating new distribution opportunities for our brands. For example, Sephora is rolling out in more stores in Mexico and Brazil, and Smashbox, Clinique, Bobbi Brown, Estée Lauder and our fragrance brands are leveraging this new distribution."

None of this means the end for the traditional retail outlet however, he concludes:

"We currently operate 37 of our own stores, and another 43 are run by our partners. In the next 3 years, we expect to double the total number, including stores for new brands such as Aveda and Jo Malone."


A fantastic success story and text-book example of how to combine ecommerce, digital marketing and traditional retail constructs.


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