Omni-channel delivers $1 billion makeover for Estée Lauder

Profile picture for user slauchlan By Stuart Lauchlan August 25, 2016
Summary:
Estée Lauder has applied the online foundation and is now getting a digital makeover that's topped the $1 billion milestone.

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Estée Lauder herself

Did you know that the average millennial woman uses more make-up on more occasions during the week than their mothers? No, nor did I.

Not, I have to say, that I particularly care either, but it’s the kind of information point that means a lot to Fabrizio Freda, CEO of global cosmetics retailer  Estée Lauder.

For Freda, that statistic means a growth opportunity for his firm and its many brands, including MAC, Clinique and Jo Malone. He says:

The more the millennial generation grows in percentage of the total population, the more makeup usage will continue to accelerate.

Having that kind of data to hand has helped to shape Estée Lauder’s strategy in what Freda says is a market that is:

marked by rapid changes in global prestige beauty. Thanks to our 10-year compass, we had anticipated many of the trends and we're well positioned to meet consumer change in desires and shopping habits.

One of the most visible manifestations of that lies in the firm’s long-standing investment in omni-channel, e-commerce and digital capabilities. While the make-up counter at Bloomingdales, Harvey Nichols and Macy's remains an unchanging aspect of the offline retail experience, Estée Lauder is getting a fiscal makeover from its online business.

Total e-commerce sales, including m-commerce, have now topped the $1 billion a year mark, a major milestone for any firm, and are set to rise further, says Freda, noting that online is now Estée Lauder’s fastest-growing channel :

We expect our strong online growth to continue. Our channel strengths reflected industry trends and we invested in areas with the best traffic in growth. Sales in our online business rose 27% reflecting solid gains in brands and retailer sites. We opened more sites for our brands and with retailers globally to widen our product availability. Orders and conversion grew more than 20%.

With that solid foundation applied, there are now two main priorities for the coming year. The first is to increase the reach of target customers across all geographies. Clearly the universal reach of online channels will play a major enabling role here. Freda explains:

Our brands have numerous opportunities to attract new consumers in every region. MAC is one of our largest brand, but isn’t as widely distributed as other brands. It has approximately one-tenth the doors of Estée Lauder and Clinique and about half the distribution of several direct global competitors. So there are millions of untapped new consumers, the brand can potentially reach.

Many of our small and medium sized brands are now poised for global expansion. For example, in travel retail, Jo Malone today is available is less than half of Tier 1 airports. So there is a lot of runway left to reach additional travelling consumers. Online, Jo Malone has e-commerce website in just eight countries, compared to 26 for Clinique. In fact Jo Malone expects to launch e- and m-commerce in approximately ten new markets this year.

The second priority centers on ehancing the consumer engagement experience, which Freda says means:

new experiences and innovative high quality products and services, which will encompass digital marketing, disruptive in-store merchandising, compelling creativity and omni-channel offerings.

As our brands broaden their reach, they will emphasize fast growing image building channels. In the online world, our focus is on mobile and omni-channel. Consumer expect a seamless integrated experience across channels, platforms and social media.

We are implementing new technology and digital experiences including online booking for each store appointments, omni-channel loyalty programs and high touch mobile services.

A big shift here has been a move towards more and more digital spend on marketing and advertising, says Freda:

Our brands are increasing their media spending and devoting more resources to digital, which allows them to target their communications to potential new consumers with relevant messages, thanks to better data and new technologies.

Approximately 30% of our total advertising spending is now digital, up 15% from last year. Our brands are doing interesting activities in the digital space. Estée Lauder launched the interactive global content network based in New York. It was like a news room and Bobbi Brown held its first live video on Facebook, celebrating its 25th anniversary and a new campaign, which attracts nearly one million viewers.

There are also plans afoot to share social media influence with key fashion and beauty icons, such as Victoria Beckham, adds Freda:

To engage consumers, our brands plan to utilize more global and local influences, beauty consultants and makeup artists to amplify their messages, Estée Lauder is collaborating on a make-up collection with fashion designer and influencer Victoria Beckham and she is promoting it to her 12 million Instagram followers.

None of this means that the make-up counter is going to disappear from the offline stores any time soon, although with announcements from the likes of Macy’s about their plans to close 100 branches, it’s possible that the entire store might! Freda says such offline cutbacks in real estate presence pose certain challenges:

Our brands very rarely are exclusive to a retailer. They are targeting certain group of consumer, that’s clear. Macy’s, as you know, has announced to close 100 doors. We will collaborate with Macy’s to protect the consumption of our brands in these doors transferring to other Macy’s doors consumers.

We will do our best to support Macy’s in this plan, which we believe they’re doing the right thing. We will focus a lot to support Macy’s in selling more in the remaining doors that they will focus on as well as we’ll continue to support Macy’s in building, the best we can, their online business that we have together. So [if] our retailers decide to close doors to other things, we collaborate with them in keeping the sales, continue increasing the sales.

It’s not about one or the other when it comes to online or offline, Freda concludes:

If we focus on the client, on the final customer, we get always the right decision made and there are normally win-win for the brands, for our retail partners and for the consumers. That’s what we are looking. That’s our principle.

My take

An omni-channel investment that’s paid off - and looks set to go on paying off. While trying out and choosing new types of make-up is surely one of the most enduring offline shopping experiences you can imagine, once selections are made and favorites selected, the online channels are perfect for topping up the dressing table. Estée Lauder has played a savvy game here and is deservedly reaping the rewards.