Beauty's Changing Landscape: The Year Ahead


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Leonard Lauder

Photo By WWD Staff

Scott Beattie

Photo By Courtesy Photo

Marc Puig

Photo By Courtesy Photo

Appeared In
Special Issue
WWD Special Report issue 01/29/2010

The past decade was a pivotal period for the beauty industry that triggered both an expansion and contraction of retailing and manufacturing, the rise of the Internet as a channel of authority, a surge of premium-priced skin care and the further globalization of the way the business is conducted.

What happened in the last 10 years also set the stage for the present era of multiple choices. Or as Leonard Lauder, chairman emeritus of the Estée Lauder Cos. Inc., said, “[This] decade will be the multidecade — multichannel, multibrand, multinational companies, multinations, multiethnic, and multiselection in the channels that sell these products.”

This multiplicity is carving grooves into the surface of a much larger globe, thanks to the reach of new technology. “We are living in World War III,” noted Lauder, who, perhaps more than anyone, has determined the shape of the prestige beauty business during the last half-century. “We are all as interested in the BRIC countries [Brazil, Russia, India and China] as we are in more traditional countries, such as Japan, the U.K. and France. One can’t simplify say the battle is only in the emerging markets. The battle is raging everywhere.”

E. Scott Beattie, president, chairman and chief executive officer of Elizabeth Arden Inc., pointed to the evolution of technology and education during the last five years in particular that allows companies to manage global businesses better. “The last decade — not just for beauty, but for all personal care — has shown the importance of having a global platform,” he said. “I think the next 20 years will be some of the most exciting times for growth and success that we have ever seen. Emerging markets — including Southeast Asia, Northern Asia, South America and Eastern Europe — will continue to grow in importance. Beauty products are one of the first aspirational products consumers in emerging markets buy.”

The dynamics that shaped the Naughts decade were outlined by Lauder, Beattie and a number of other key executives, who discussed the forces that impacted business.

Noting that the revolution of the early 20th century was ignited by the invention of the internal combustion engine, Lauder maintains the most impactive change late in the century was the advent of consumer credit cards, the significance of which fully flowered in the last decade. Previously, department stores had a monopoly because they provided credit. All of a sudden, shoppers could take their own credit anywhere, opening the door to the creation of freestanding stores — such as Sephora, Ulta and Bluemercury — in beauty. “People tend to blame department stores for almost all their ills; don’t blame management, blame plastic,” said Lauder.

This also empowered a new, younger customer, who “did not necessarily want to buy where her mother shopped,” Lauder continued. The retailers that benefited were chains like Gap, Zara and H&M, that were nimble enough to change fashion assortments every six weeks — a supply chain flexibility that department stores couldn’t match. This then led to more impulsive buying. “New fashion became the Kleenex of the emerging century,” Lauder noted.

In beauty, with the dawn of the decade, the acquisition frenzy of indie brands that had characterized the Nineties began to change. Prices rose and distribution began to diversify with TV shopping channels, like QVC and HSN, on one side and specialty chains, like Bath & Body Works, on the other. “It seemed that freestanding stores were going to be the wave of the future,” Lauder recalled. As perhaps an outgrowth, distribution lines between mass and prestige fragrances began to blur as “it became OK to sell prestige brands in mass.” The economics changed to emphasize fragrance launching over long-term brand building. “It went from fragrance of the year to fragrance of the week,” Lauder quipped.

Marc Puig, chairman and ceo of the Barcelona-based family owned firm of the same name, observed that the fragrance category was dealt a competitive blow during the decade by the rise of sexy gadgets, ranging from DVD players to iPhones, as alternative affordable gifts. “We’ve lost our coolness,” said Puig, adding the beauty industry has to recapture its cachet with the consumer “or else we are lost.”

Puig also noted the industry has been squeezed by the consolidation of retailers. Once there were a thousand perfumeries in each of the major European markets. Now a handful of chains dominate the whole continent.

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