L’Oréal CEO - size matters in pursuit of 'beauty tech' leadership

Size does matter. Or as L’Oréal CEO Jean-Paul Agon puts it:

In the world of the algorithm, bigger is truly better.

L’Oreal’s bid to become the leader in what it terms the “beauty tech world” is a topic we’ve covered before, but according to Agon it’s one that’s stepped up a notch in 2018, reflecting another of his mantras:

Strong brands get even stronger.

And it’s investment in digital transformation that has built up that strength, he argues:

The market is accelerating, thanks to digitalization as beauty and digital are really a perfect match. Beauty is a very visual and socially shareable category, which thrives on digital platforms. It is one of the most engaging categories online. Digital has opened the door to boundless and mesmerising world of inspiration. It’s the combination of beauty and digital that has led to the explosion of sharing and self-expression we see today on social media. It has never been easier to discover beauty, share it and shop it. Digital is and will remain a terrific booster for beauty.

Our market is also fuelled by increased penetration of beauty all over the world, which will secure the growth of the market for many years. Because of e-commerce, which is extending our reach far beyond the limits of traditional distribution in emerging economies where access to beauty product has been limited, digital has the power to connect consumers with beauty products in even the remotest corners of the world.

He adds:

Digital is also strengthening our power to connect with consumers. Today, we have more than 1 billion consumers, visitors on our websites. We generate one-third of the global beauty traffic on YouTube and one-fourth of the beauty engagement on Facebook. In the L2 rankings of Digital IQ, four of our brands ranked in the top 10 and 6 in the top 20.

Exemplars

All of which justifies the pursuit of the status of being a beauty tech firm, rather than just a cosmetics firm. It also requires organizational re-thinking:

Digital is now totally embedded in our teams, in every brand, every division, every function, every country, infusing every area of the business, with digital excellence. Digital has been and will continue to be a powerful accelerator for growth. And beyond digital, new technologies around data and Artificial Intelligence are opening new horizons. Beauty is becoming more and more tech, and we are absolutely determined to be the pioneers, the champions and the leaders of this new beauty tech world.

A good example of L’Oreal’s bet on digital tech can be seen in L’OréalAccess, an e-learning cross-brand platform which should be available in 42,000 salons in 46 countries, offering 24/7 support and real-time training.

A more ‘bleeding edge’ example stems from the acquisition of Augmented Reality firm Modiface. The Canadian firm had already worked with L’Oreal, producing a ‘Style My Hair’ app allowing users to ‘try out’ different colors before committing to a choice. Following the acquisition, ModiFace is now part of L’Oréal’s Digital Services Factory, a dedicated network to design and develop new digital services for the group’s brands. Agon explains:

The acquisition of ModiFace has been instrumental in enriching the services we offer our consumers. Digital now amounts to 43% of our media investment, of which 3/4 are spent on precision advertising, which we can optimize in real time with our proprietary digital cockpit, strongly enhancing ROI. We have more now than 2,000 digital experts in-house, including data scientists, social media strategists, digital media specialists. And to date, we have up-skilled more than 22,000 employees.

That has led to a new look for L’Oréal itself, adds Deputy CEO Nicholas Hieronimus:

[Our] big brands benefit from a long established trust among consumers, from power products boosted by e-commerce, algorithms and global consumer recognition such as La Vie est Belle from Lancôme or Revitalift from L’Oréal Paris, but also from their unique adaptation capabilities. Our big brands have learned to combine the recipes of the New World, levering social and digital for instance with their scale and their media muscle

In all divisions, O+O, online plus offline, is now the new norm. More than ever, our digital activations drive to physical stores but also to e-commerce with links to our e-retailers or our own sites.

Amazon, of course

Third party tie-ins with e-retailers include T-Mall in China, where L’Oreal’s two biggest brands, Lancôme and L’Oréa lParis, are ranked in the top three offerings on the network. There’s also an expedient alliance with Amazon, says Alexis Perakis-Valat, Head of L’Oreal’s Consumer Products Division:

In the US, Amazon is our number one e-commerce pure player partner. We’re growing very strongly there. We’re benchmarking our growth with the growth of the category in Amazon. From the information we have, we grow faster than the category on Amazon. It’s important also to note that different categories have different weight on Amazon. Amazon is better at selling some categories versus others.

So, we’re really concentrating on where Amazon can bring growth and complementary growth. [It’s] the same thing in Europe, because Amazon is mostly a US play and Europe play. In Europe also, from the indication we have, we’re growing faster than them, faster than the category at Amazon. So we’re really the method of growth of the category with Amazon, who is a very important partner for us today and in the future.

For all the talk of a ‘new world’ in which L’Oréal is operating, Agon concludes with the observation that digital has become an enabler for change, but that some things remain constant:

Our strategy, it’s about innovation, quality, great brands, hero products and people, of course, incredible quality of our people. And the great thing also, which is an important message, is that we thought a few years ago that maybe digital would change that. In fact, it’s the contrary. Digital, in fact, boosting the importance of brands, the importance of hero products, the importance of quality, the importance of consumer satisfaction, of course. So, in fact, all the key principles that made L’Oréal win during all these years are even more relevant to win in this new world where digital plays an important role.

My take

An ongoing impressive story of digital transformation empowering the growth of an established business sector - and without the disruptive chaos seen in so many others.