L’Oréal's digital transformation provides a makeover for the social beauty age

When global beauty firm L’Oréal provided a corporate update last week, much attention was paid to the poor performance of The Body Shop part of the business and the decision to explore ‘strategic options’ for the division. The prospect of a sell-off there inevitably caught the eye of market watchers, but away from that headline there’s a compelling story of digital transformation in action and delivering benefits.

L’Oréal announced a commitment to beefing up its digital activities this time last year and it’s been putting its money where it’s mouth is. For example, e-commerce now accounts for 10% of total revenues and enjoys a growth rate of 34% year-on-year. (Ironically spending on upgrading e-commerce capabilities is one the reasons given for The Body Shop’s poor performance!)

One year on from that public endorsement of digital, L’Oréal CEO Jean-Paul Agon remains convinced that the firm’s thinking is sound and forward-looking:

This new era where digital is omnipresent, ever-present and essential to the lives of our consumers should be a new golden era for appearance, self-expression and self-esteem, a new golden era for beauty.

As we enter into the era of social networks, we also enter into the era of, what we call, social beauty, where the way you look the quality of your hair, of your skin would be more important than ever in the way you feel for your image of yourself and for your positive interactions with others.

These should infuse progressively all categories of beauty, make-up today, hair color very soon but also styling hair care, skincare. Beauty will be increasingly important for consumers and they will want more of it. They will be ready to devote a larger share of their income to beauty and personal care.

In other words, if you’re out there on social media, you’re going to want to look your best. Agon also couches this ‘social beauty’ trend in more fiscal terms:

In this era of digital, where [consumers] have access anytime and anywhere to every possible information, they want more innovations truly new different and better products. They will be always looking for something extra in terms of performance and results. They will not compromise on quality, efficacy, security and sincerity. And they will drive the premiumization of the market. They will be keener than ever to trade up in terms of quality for better products.

Consumers will not only be ready to buy more beauty products. They will also be ready to pay more for it because they are worth it. They also have new expectations. They will expect a more personal relationship with brands, an ongoing one-to-one dialogue. They will expect customer’s advice and new services that help them choose and use their products and they expect the best immersive shopping experience, connecting directly with their brands, for example, through e-commerce or in-boutique on top of traditional distribution channels.

With that in mind, Agon pitches L’Oréal as the beauty company that is uniquely positioned and equipped to drive and capture a golden era of beauty. This is, he argues, in large part due to what he says is “an edge in quality efficacy and safety, which are in the world of total transparency, more important than ever”. In this respect, he points to investment in digital tech within L’Oréal laboratories:

Design-thinking, open labs and fast-prototyping enable us to accelerate innovation. In parallel, the regionalization of our R&D hubs and our unique strategy of universalization fits particularly well with the multi-polarizing world. Innovation isn't just about products anymore. It is also about services. Our Digital Incubator based in San Francisco is spearheading game-changing innovations such as Makeup Genius, Virtual Makeup Coach [which has been] downloaded over 20 million times, the La Roche-Posay UV Patch that helps educate consumers about sun protection or recently the Kérastase Connected Brush that will help people better care for their hair and this is just the beginning.

Changed relationship

Digital channels are also changing the nature of the relationship between consumer and company, he adds:

Because L’Oréal is at the cutting edge of direct consumer relationships, we have developed new ways of connecting with our consumers. We have seized the opportunities that digital offers to interact and converse with them on a personal level. With over one billion viewers on our brand website and social media pages, L’Oréal is clearly the champion of connected beauty. Once again, our digital acumen has been acknowledged by L2, which has ranked two L’Oréal brands in each Digital IQ top five in the US, in China, in Germany and in France.

As we have anticipated and adjusted our distribution footprint to where our consumers wanted to shop, we are exploring now all the new opportunities of the direct to consumer channels. L’Oréal is leading beauty in e-commerce, expanding fast across all divisions and some of our brands are also opening branded boutique in order to respond to consumer demand for immersive brand experience and services and to create for them a new multi-channel shopping opportunity.

This more personal relationship with the consumer can be seen in the way L’Oréal business units  have adapted their marketing strategies. Digital is a key driver of the brand success, says Nicolas Hieronimus, President, Selective Divisions at L’Oréal:

We adapt to the new customer expectations in terms of shopping experience through D2C or direct-to-consumer first. We opened several boutique on Urban Decay, rolled down new design of Kiehl's stores, innovated with pop-up stores on Giorgio Armani in Paris, or YSL in Los Angeles and supported our direct e-commerce with new tools in order to provide full brand immersion.

CRM and the 60 million qualified contacts of our L’Oréal Luxe database allows us to meet the growing demand for personalization. We develop customized solutions like a new personalized skincare in-store with Kiehl's apothecary preparations or proposed Yves Saint Laurent engraved lipstick online with stunning sales.

Meanwhile in the Consumer Products Division, President Alexis Perakis-Valat make the boast that:

Social listening is a way of life for us. It helps us to understand what the latest trends are and jump on them as they start. This is how Colorista was created. Digital also allows us to master precision advertising. This is how we launched Ultra Doux Oat Delicacy in Western Europe with tailored contents based on different consumer insights. But beyond advertising, we are also creating relevant editorial content for our brands. This is for the deeper more emotional bond with our consumers. We've done this successfully with Maybelline, creating tutorials, how-to videos or even YouTube series such as Glossy Talk with over 35 million views in 2016.

All of this has taken investment and time, as well as a need to source the best in talent. Agon explains:

The success of our digital transformation stems from the combination of the very clear strategic direction we set and are very decentralized agile approach in execution. With significant investment in talent, we now have close to 1,600 digital experts on board and our internal upscaling program has already benefited almost 10x that number. With all these wins, we are considered now by the digital professionals as the undisputed digital leader of the beauty industry.

There have also been behind-the-scenes upgrades and reinvention based on digital strategies, most notably throughout the manufacturing and supply chain. Agon explains:

We accelerated packaging design with rapid prototyping techniques like 3D printing that allow us to further reduce time-to-market. In production, there is a true revolution with our new industrial platforms, which are evolving to an ultra-connected augmented reality and robotized industry 4.0. In the big factories, modernization is increasing our productivity and speed of execution, especially thanks to high-speed lines and operations excellence programs. In the smaller factories, new robots, cobots, allow us to be even more agile and to make personalization possible and affordable.

Finally, our supply chain has become even more reactive to respond to the major challenges linked to e-commerce. Our Industry 4.0 program integrates all the new opportunities that digitalization offers throughout the entire value chain. At the same time, we have continued our profound transformations in term of sustainable development. Our comprehensive approach of our companywide efforts framed by our Sharing Beauty With All program are clearly paying off.

My take

An impressive example of an organisation setting out its digital ambitions and then executing on them. It’s still early days, but the indicators are that L’Oréal is set to benefit greatly from its investment.