DIpil Das
The coronavirus crisis has impacted retailers and brands in the beauty industry worldwide, forcing many to temporarily shutter stores and furlough employees. French cosmetics company L’Oréal has said that throughout the coronavirus pandemic, its focus is on relief, safety and security for its 11,000 employees. The company made a pledge to protect the jobs and wages of full- and part-time employees through June 2020. L’Oréal USA’s CEO Stéphane Rinderknech discussed this commitment and outlined other ways in which the company is surviving the coronavirus crisis in WWD’s Beauty Inc digital webinar, which was held on April 27, 2020. In this report, we highlight a few of Rinderknech’s insights.
L'Oréal’s Strength Is Its Balance between Categories and Channels
L'Oréal, a 110-year-old global cosmetics company, operates across four business segments and in every major sales channel. As shown in Figure 1, the company’s Consumer Products Division is the largest, having brought in €12.7 million ($13.8 million) in revenue in fiscal year 2019—comprising 43% of L'Oréal’s total revenue—followed by L’Oréal Luxe at 37%, totaling €11 million (roughly $12 million).
[caption id="attachment_108541" align="aligncenter" width="700"]
Source: Company reports [/caption]
Rinderknech highlighted that L’Oréal’s strength is in its balance between categories and channels; it sells both mass and prestige beauty cosmetics online and in different types of brick-and-mortar stores. During the coronavirus pandemic, this has enabled the company to adapt, because it is not 100% exposed to one channel or category. For instance, although L’Oréal has been impacted by the closure of department stores and hair salons, the company has continued to sell through mass merchandisers and through e-commerce. In fact, the company’s digital transformation has accelerated as a result of the physical lockdown measures. In its sales report for the first quarter of 2020, released on April 16, 2020, L’Oréal estimated that online sales of its products (including estimated sales through the websites of retailers it sells to) accelerated by 52.6% in total. By division, e-commerce grew an estimated 62% for Active Cosmetics, 57% for Luxe, 45% for Consumer Products and 44% for Professional Products.
L'Oréal Is Reinventing Brand Content To Promote Digital Consumer Engagement
As consumers are no longer able to visit hair salons, they are discovering color products for use at home. L’Oréal’s Consumer Products Division is reinventing brand content to teach consumers how to color their hair at home, by releasing online beauty-at-home tutorials. The company is turning its efforts to digital engagement, consumer education and maximizing brand content. Rinderknech said that each of L’Oréal’s businesses is producing content to entertain, teach, livestream to or otherwise engage with consumers—with teams and brands reinventing themselves to stay relevant to consumers during the coronavirus crisis. For example, L’Oréal Luxe is leveraging its field team associates to help livestream content. Through its beauty-at-home tutorials and the consumer hair-color boom, the Consumer Products Division is leading in the hair-color category, with over 50% market share.
Coronavirus Crisis Will Not End Physical Retail but Will Elevate the Shopping Experience
L’Oréal leadership believes that the future of brick-and-mortar stores is still viable, which Rinderknech described as a “convergence of two worlds” rather than “an omnichannel confrontation.” He does not believe that there is one consumer that shops only online or offline, so the beauty sector should use this opportunity to figure out how to best connect to consumers and determine consumer centricity, thus creating an elevated store experience. Rinderknech added that “speed” and “digital” will represent the new normal in the post-coronavirus retail landscape.
Rinderknech highlighted that L’Oréal’s primary learning from China during the coronavirus crisis is the obsession with “consumer satisfaction” through consumer-centricity. He emphasized that while some beauty categories are much stronger in the US—such as makeup and hair color—the principle of customer satisfaction and understanding how to bring the best services to the consumer is a global concept: Digital and e-commerce are ways to serve the consumer; understanding the consumer comes first.
L’Oréal Is Working with Hair Salons To Prepare for Reopening in a New Reality
There will be a new reality in retail as the world recovers from the coronavirus crisis, which will impact hair salons for the next six months to a year, according to Rinderknech. L’Oréal is working with salons to determine sanitation protocols, social-distancing rules (and the impacts of using only one chair out of every two) and mask requirements. L’Oréal is supporting small businesses by providing offering payment relief for salons, freezing payments until their businesses resume. L’Oréal is also providing online education programs while salons are closed. Rinderknech said that salons are gearing up for reopening, as consumers are already looking to book appointments. The company is working with a salon chain in the Midwest, at which there are already 3,000 reservations for hair color. In this new reality of concentrated increased demand for services, adjustments to operational practices may be necessary—for example, customers may be encouraged to shampoo their hair before visiting the salon to help speed up the appointment.
Post-Coronavirus Product Opportunities in Beauty
Rinderknech believes that there will be opportunities for product innovation due to the coronavirus crisis. Changes in consumer behaviors and routines during the pandemic may influence their use of beauty products in the near term—such as the use of lipstick while wearing face masks. Beauty companies will need to adjust to these changes and identify how they can innovate to stay relevant to consumers. Other changes more directly present opportunities for sales in certain product areas, such as hand care products, with consumers washing their hands more often.
Source: Company reports [/caption]
Rinderknech highlighted that L’Oréal’s strength is in its balance between categories and channels; it sells both mass and prestige beauty cosmetics online and in different types of brick-and-mortar stores. During the coronavirus pandemic, this has enabled the company to adapt, because it is not 100% exposed to one channel or category. For instance, although L’Oréal has been impacted by the closure of department stores and hair salons, the company has continued to sell through mass merchandisers and through e-commerce. In fact, the company’s digital transformation has accelerated as a result of the physical lockdown measures. In its sales report for the first quarter of 2020, released on April 16, 2020, L’Oréal estimated that online sales of its products (including estimated sales through the websites of retailers it sells to) accelerated by 52.6% in total. By division, e-commerce grew an estimated 62% for Active Cosmetics, 57% for Luxe, 45% for Consumer Products and 44% for Professional Products.
L'Oréal Is Reinventing Brand Content To Promote Digital Consumer Engagement
As consumers are no longer able to visit hair salons, they are discovering color products for use at home. L’Oréal’s Consumer Products Division is reinventing brand content to teach consumers how to color their hair at home, by releasing online beauty-at-home tutorials. The company is turning its efforts to digital engagement, consumer education and maximizing brand content. Rinderknech said that each of L’Oréal’s businesses is producing content to entertain, teach, livestream to or otherwise engage with consumers—with teams and brands reinventing themselves to stay relevant to consumers during the coronavirus crisis. For example, L’Oréal Luxe is leveraging its field team associates to help livestream content. Through its beauty-at-home tutorials and the consumer hair-color boom, the Consumer Products Division is leading in the hair-color category, with over 50% market share.
Coronavirus Crisis Will Not End Physical Retail but Will Elevate the Shopping Experience
L’Oréal leadership believes that the future of brick-and-mortar stores is still viable, which Rinderknech described as a “convergence of two worlds” rather than “an omnichannel confrontation.” He does not believe that there is one consumer that shops only online or offline, so the beauty sector should use this opportunity to figure out how to best connect to consumers and determine consumer centricity, thus creating an elevated store experience. Rinderknech added that “speed” and “digital” will represent the new normal in the post-coronavirus retail landscape.
Rinderknech highlighted that L’Oréal’s primary learning from China during the coronavirus crisis is the obsession with “consumer satisfaction” through consumer-centricity. He emphasized that while some beauty categories are much stronger in the US—such as makeup and hair color—the principle of customer satisfaction and understanding how to bring the best services to the consumer is a global concept: Digital and e-commerce are ways to serve the consumer; understanding the consumer comes first.
L’Oréal Is Working with Hair Salons To Prepare for Reopening in a New Reality
There will be a new reality in retail as the world recovers from the coronavirus crisis, which will impact hair salons for the next six months to a year, according to Rinderknech. L’Oréal is working with salons to determine sanitation protocols, social-distancing rules (and the impacts of using only one chair out of every two) and mask requirements. L’Oréal is supporting small businesses by providing offering payment relief for salons, freezing payments until their businesses resume. L’Oréal is also providing online education programs while salons are closed. Rinderknech said that salons are gearing up for reopening, as consumers are already looking to book appointments. The company is working with a salon chain in the Midwest, at which there are already 3,000 reservations for hair color. In this new reality of concentrated increased demand for services, adjustments to operational practices may be necessary—for example, customers may be encouraged to shampoo their hair before visiting the salon to help speed up the appointment.
Post-Coronavirus Product Opportunities in Beauty
Rinderknech believes that there will be opportunities for product innovation due to the coronavirus crisis. Changes in consumer behaviors and routines during the pandemic may influence their use of beauty products in the near term—such as the use of lipstick while wearing face masks. Beauty companies will need to adjust to these changes and identify how they can innovate to stay relevant to consumers. Other changes more directly present opportunities for sales in certain product areas, such as hand care products, with consumers washing their hands more often.