With an average annual growth exceeding 5% in recent years, the luxury market is one of the most vibrant in the beauty sector. Recently appointed Deputy Chief Executive Officer of L’Oréal with responsibility for Divisions, Nicolas Hieronimus, who has 30 years of experience with the Group, explains the strategy that L’Oréal is following to reinvent itself and consolidate its leadership position on the market.
A luxury market on steroids
While the luxury cosmetics market is growing fast, it is also undergoing deep-seated changes. “Boosted by digital, the arrival of new generations of customers and Chinese consumption, the luxury market is growing faster than ever. At the same time, it is forcing brands to reinvent themselves constantly”, says Nicolas.
He argues that two new luxury markets are in the process of emerging. First, a market for affordable, accessible luxury whose swift growth is being driven by Gen Yers and Gen Zers around the world. “Millennials have a real appetite for luxury products and consume them earlier than their predecessors did. In China, when young women get their first paycheque, one of their number-one goals is to go out and buy a designer lipstick and avoid the mass market altogether. This trend is being supported by digital and by the fact that some beauty brands are pricing more affordably, such as Sephora, particularly in the USA.” The second market offers a high-premium, more experiential form of luxury reserved for connoisseurs. “Increasingly, consumers want a unique experience, something new. In Asia and the United States, we are seeing growing appetite for ultra-premium skincare products and niche fragrances.“ As a result, says Nicolas, “luxury has never reached so many countries, so many generations and so many distribution channels.”
Digitalisation and diversification: the demands of modern luxury
In this setting, L’Oréal Luxury has two priorities: “We’ve got to digitalise and diversify to meet consumers’ new expectations.”
Digital offers L’Oréal Luxury a great way to get to know and connect with consumers, as well as being a fast-growing distribution channel: “By harnessing data, social media, CRM and precision marketing, we can reach out to consumers in a pretty targeted way.” Through these precision marketing efforts, the Luxury Division gathers key data on consumers, which it uses to identify specific expectations: “Depending on their interests and profile, we can craft individual messages and suggest products that are likely to please them – YSL’s Black Opium would appeal to a glam-rock city girl, while Mon Paris might resonate with a more romantically-minded woman in the 25-35 bracket.” This information can also be used to set up a long-term virtuous circle. “The data give us a better understanding of consumer expectations and help us to anticipate them, enabling us to create innovative, high-value added products that will be in demand in the future.” E-commerce, meanwhile, is now a major growth driver for the Group as a whole and for the Luxury Division specifically.
Diversification-wise, L’Oréal Luxury is broadening and strengthening its brand portfolio to meet the many and varied needs of new consumer populations. “Our portfolio today includes perennials such as Lancôme, which already know how to reinvent themselves, designer brands such as YSL and Giorgio Armani, and alternative brands like Kiehl’s and Atelier Cologne, a niche fragrance brand that is all about personalisation and naturalness, which are two hugely important contemporary trends.” The makeup portfolio, meanwhile, has been expanded to include Urban Decay and It Cosmetics. “Urban Decay caters to makeup junkies, while It Cosmetics products give women a confidence-boosting lift by minimising the appearance of skin imperfections. Each of these acquisitions will make a big contribution to the Division’s growth.”
“Prolong the magic, offer an unforgettable experience”
As Nicolas sees it, the critical challenge for high-end brands is to offer consumers unforgettable experiences. “Luxury has always been about providing people with something unique and exclusive, something that belongs to them alone.”
The Division is counting on personalisation to offer this type of exclusiveness. A growing number of L’Oréal Luxury brands are now offering bespoke products, such as Yves Saint Laurent, which lets clients customise their lipstick by picking a colour, cap or by having a message engraved, to make it a unique object that can be offered as a gift or kept. Lancôme, meanwhile, recently began offering Le Teint Particulier, a new custom-made foundation that can be tailored to any skin type. “In store, a beauty advisor scans and analyses the customer’s skin. The customer can then watch as a unique formula is prepared specifically for her.” This kind of incredible technological innovation will forge strong ties to the brand. Experience tells us that quality of service and the human factor play a big role in in-store luxury. No one knows this better than Kiehl’s, whose advisors are on hand to offer personalised consultations. “After an in-depth discussion to pinpoint the customer’s needs, beauty routine and goals, Kiehl’s beauty advisors prepare a customised treatment right there using the Apothecary Preparations product line.” Customers leave not only with a product but also with a powerful memory and the feeling that they have lived a special moment. “Luxury’s primary mission is to make people dream and experience wonder. In every time, country or product, our goal is to prolong the magic of our brands”, says Nicolas.
Making an impression to raise our online and in-store presence
L’Oréal has carved out a big place in the global luxury landscape. In 2016, L’Oréal Luxury reported growth of 7% – two percentage points better than the global market – and notched up a number of international successes, including for Lancôme, which became the first selective market brand in China, and Yves Saint Laurent, which ended 2016 on growth of 29%.
When asked about upcoming challenges for the Group, Nicolas immediately mentions the need to continue growing experiential luxury. “Last year, we opened Armani Box pop-up stores. Visitors to the box, which is entirely kitted out in red, are greeted by a giant red gorilla, which is a reproduction of the one in Mr Armani’s office. Guests can get their makeup done by a face designer, and the entire session is filmed using a tablet so that they can reproduce each stage of the beauty routine when they get back home. It’s a great way to make an impression and encourage customers to share their experiences on social media.” He ends with these words: “In the luxury market, it is crucial to give customers experiences. That is how we will continue to grow our online and in-store presence.”