Does the “lipstick effect” work? Estee Lauder’s cosmetics products fell 21.6%, and the group lost $ 6 million.
Text / US stock channel
Produced / Node Finance
Unsurprisingly, under the influence of the new global spread, giants in the cosmetics industry cannot escape the fate of decline in performance. On May 1, the Estee Lauder Group released its third quarter financial report for fiscal year 2020. From January to March 2020, the group’s total sales were US $ 3.35 billion, down 11% year-on-year; the net loss attributable to shareholders of the parent company was US $ 6 million.
Fabrizio Freda, President of Estee Lauder, said at the performance meeting that since the end of February, the store has been shut down on a large scale, and the sales of physical stores have been dismal. Consumer homes are driving the growth of online sales at home, but they cannot reverse the decline in overall performance.
In terms of product categories, the performance of cosmetics products dropped the most, down 21.6%; the sales of skin care products fell the smallest, only 1.2%; in addition, perfume products fell 11%, and hair care products fell 12.5%.
Data source: Estee Lauder Financial Report
The Estée Lauder Group ’s make-up brands, Clinique and Tom Ford’s sales have fallen by a total of 260 million US dollars. In addition, M · A · C, Too Faced, BECCA and other brands are also weak.
In skin care products, the Estee Lauder brand and Dr. Jart +, which completed the acquisition in 2019, drove performance growth, but it was not as good as Clinique, La Mer, Origins, Aveda and GLAMGLOW.
From a regional perspective, the Americas region was the most affected, with sales falling by 22.8%. Europe, the Middle East and Africa fell by 6.2%, and the Asia-Pacific region fell by 3.9%.
Data source: Estee Lauder Financial Report
From January to March 2020, sales in the Americas region were US $ 890 million, a year-on-year decrease of 22.8%, which was lower than the US $ 930 million sales in the Asia-Pacific region and US $ 1.53 billion in Europe, Africa, and the Middle East. The Americas is the only region in the three major regions where performance has declined, and it has also become the region with the lowest contribution to the group’s performance. In fact, since the second half of 2018, the Americas region has shown signs of declining performance.
It is worth noting that under the general trend of declining global performance, sales in mainland China have increased against the trend. In addition to the decline in the peak performance of the February epidemic, sales in January and March both increased year-on-year.
So the question is, is Estee Lauder ’s Q3 fiscal year 2020 performance decline and the group ’s losses completely the epidemic? After the epidemic, to what extent will the group’s performance rebound?
Established 40% off duty-free shops at Estee Lauder Airport
Estee Lauder ’s third quarterly report revealed that from January to March 2020, sales in the entire Asia-Pacific region were US $ 930 million. In addition to the growth in mainland China, other Asia-Pacific regions have experienced declines, especially in Hong Kong, Australia, Japan and Malaysia.
At present, mainland China contributes at least one-fifth of sales to Estee Lauder. From 2017 to 2019, the proportion of sales in China rose from 9% to 17%. The financial report disclosed that apart from China, there are no countries with sales exceeding 10%. In 2020, with the steady increase in purchasing power and the first recovery after the epidemic, the proportion of China’s performance will further increase.
Mainland consumers ’demand for high-end skin care products is strong and stable. In 2019, the two brands with the highest sales of the Estee Lauder Group in China, one is the Estee Lauder represented by the essence of the “small brown bottle”, and the other is the highly sought after sea mystery with the “miracle cream”. A 75ML bottle of “Little Brown Bottle” is officially priced at 1080 yuan, and a 100ML can of Aquamarine Mystery Cream is priced at 3900 yuan, both of which are enduring star products of the Estee Lauder Group.
Skin care products are the “just needed” products used by girls in daily skin care. Once they develop a habit of using a product, users will have a high repurchase rate. It can also be seen from the financial report that from January to MarchUnder the influence of the epidemic, the sales of skin care products were almost the same as the same period last year, and were not hit hard. Users keep their skin care products in stock through e-commerce, airport duty-free shops and other channels.
At the same time, users are very sensitive to the price of high-end skin care products. For products with high demand and high prices, once discounted and promoted, they will be snapped up. Estee Lauder understands the consumption habits of Chinese users, so in the face of severe performance pressure, it chooses to stimulate consumption through discounts, relying on the rise of Chinese market performance to stabilize financial reporting data.
In late February, when a large number of store closures led to a steep decline in performance, a message swept the screen among many purchasing groups: domestic airport duty-free shops, multiple brands under the Estee Lauder Group, and discounts of 3 or more. The official Weibo of Haikou Airport Duty Free Shop also sent the same news, officially confirming this rare discount.
It seemed that the gun was starting to fire, and a large number of consumers and purchasing staff poured into the duty-free shops, and long queues were formed when the epidemic situation was not yet clear. However, this intensive promotion did not last long, and was reportedly stopped at the end of February due to increased aggregation risk. According to media reports, this 40% off activity is an operation of the Estee Lauder Group, which was originally planned to last for half a year.
There is strong demand in China, but Estee Lauder will also seek performance growth and expand its customer base on this basis. For high-end brand positioning, relying on discounts to drive sales is neither in line with brand tonality nor a long-term solution.
Advertising and marketing have become the most important way of connecting brands and consumers. In the third quarter, Estee Lauder’s marketing management expenses were 2 billion US dollars, accounting for 61% of total sales. Compared with other regions, Estée Lauder’s advertising and marketing efforts in China are even stronger, mainly affecting consumers through digital advertising and social media marketing.
However, although sales in China have increased year-on-year, profits have decreased year-on-year. Estee Lauder’s financial report said that the decline in operating profit in mainland China in the third quarter was due to higher marketing expenses, which led to an increase in operating costs. Performance growth can’t be exchanged for profits. What is Estee Lauder’s marketing strategy in China?
Star effect + heterosexual fan economy
Compared with skin care products, color cosmetic products with stronger fashion attributes are more diverse, and the single product is more replaceable. For example, there are 10 series of Estee Lauder lipsticks, each series of products are divided into different color numbers, and some series have up to 50 color numbers. In addition, the price of makeup products is generally lower than that of skin care products, and the price of lipstick for high-end brands is generally around 300 yuan. The lower cost creates more opportunities for “impulsive consumption” for users.
These characteristics of make-up products make them very suitable for celebrity endorsements and social e-commerce sales. Under the star effect,The hottest lipsticks and eyeshadows will be sought after by many young women.
In September 2019, Estee Lauder signed Li Xian as the spokesperson for skin care and makeup in the Asia Pacific region. A month later, Estee Lauder announced again that Xiao Zhan became the brand’s Asia-Pacific makeup and fragrance spokesperson. Estee Lauder’s favorite is the star’s ability to bring goods, the potential energy behind the rice ring, and the conversion rate of traffic.
However, this series of operations has been questioned by many people as Estee Lauder’s compromise to the “male age” of beauty makeup. Apart from the opposite sex effect, working with popular stars is not entirely risk-free. Whether Estée Lauder can “gold” his brand through a star with a higher national popularity is questionable.
Xiao Zhan, who has 25.8 million Weibo fans, is one of the most popular stars. However, due to the influence of his “227” incident in the rice circle, fans have escalated their conflicts with other groups to maintain idols, leading to more and more The people pointed their disgust toward Xiao Zhan and set off a wave of “resisting Xiao Zhan” across the entire network.
As Xiao Zhan’s brand partner, Estee Lauder will be affected more or less. What made him cry and laugh was that many original consumers of Estee Lauder in order to resist Xiao Zhan, have expressed their desire to change the makeup brand. Some people, in order to create “trouble” for Estee Lauder, asked merchants to make invoices for products they bought.
The initial charm of many long-established brands comes from the founders themselves, but as the times change, the value and connotation of the brands will change. Today, Estee Lauder has already stepped out of the aristocratic circle, and the business philosophy has gradually evolved from a high-end service to a “grounded air” and “favorite”. Spending a lot of money to bundle traffic stars to drive sales of explosive products, which has a great impact on the group’s long-term profit growth and brand value, and Estee Lauder also needs to find the answer.
The makeup market in China is a tempting cake. Ai media consulting industry report shows that China’s cosmetics market scale in 2019 was 45.02 billion yuan, and it is expected to exceed 50 billion yuan in 2020. Foreign-funded enterprises such as Estee Lauder and L’Oréal have always dominated the market, but since 2015, the market share of domestic-funded beauty companies has started to increase year by year.
2019 Tmall Double Eleven, the top of the makeup brand list is the perfect diary of domestic cosmetics brands, surpassing M · A · C, Estee Lauder, Lancome, Armani and other international big names. 28 minutes after the opening of the perfect diary, the transaction volume exceeded 100 million. Local make-up brands have natural advantages in seizing the sinking market, social media planting and live streaming, and improving product cost performance. Facing increasingly fierce competition, Estee Lauder is bound to maintain or continue to increase marketing investment in mainland China. How to convert sales into higher profits is a major challenge facing Estee Lauder.
North American market
Compared with skin care products, color cosmetic products with stronger fashion attributes are more diverse, and the single product is more replaceable. For example, there are 10 series of Estee Lauder lipsticks, each series of products are divided into different color numbers, and some series have up to 50 color numbers. In addition, the price of makeup products is generally lower than that of skin care products, and the price of lipstick for high-end brands is generally around 300 yuan. The lower cost creates more opportunities for “impulsive consumption” for users.
These characteristics of make-up products make them very suitable for celebrity endorsements and social e-commerce sales. Under the star effect,The hottest lipsticks and eyeshadows will be sought after by many young women.
In September 2019, Estee Lauder signed Li Xian as the spokesperson for skin care and makeup in the Asia Pacific region. A month later, Estee Lauder announced again that Xiao Zhan became the brand’s Asia-Pacific makeup and fragrance spokesperson. Estee Lauder’s favorite is the star’s ability to bring goods, the potential energy behind the rice ring, and the conversion rate of traffic.
However, this series of operations has been questioned by many people as Estee Lauder’s compromise to the “male age” of beauty makeup. Apart from the opposite sex effect, working with popular stars is not entirely risk-free. Whether Estée Lauder can “gold” his brand through a star with a higher national popularity is questionable.
Xiao Zhan, who has 25.8 million Weibo fans, is one of the most popular stars. However, due to the influence of his “227” incident in the rice circle, fans have escalated their conflicts with other groups to maintain idols, leading to more and more The people pointed their disgust toward Xiao Zhan and set off a wave of “resisting Xiao Zhan” across the entire network.
As Xiao Zhan’s brand partner, Estee Lauder will be affected more or less. What made him cry and laugh was that many original consumers of Estee Lauder in order to resist Xiao Zhan, have expressed their desire to change the makeup brand. Some people, in order to create “trouble” for Estee Lauder, asked merchants to make invoices for products they bought.
The initial charm of many long-established brands comes from the founders themselves, but as the times change, the value and connotation of the brands will change. Today, Estee Lauder has already stepped out of the aristocratic circle, and the business philosophy has gradually evolved from a high-end service to a “grounded air” and “favorite”. Spending a lot of money to bundle traffic stars to drive sales of explosive products, which has a great impact on the group’s long-term profit growth and brand value, and Estee Lauder also needs to find the answer.
The makeup market in China is a tempting cake. Ai media consulting industry report shows that China’s cosmetics market scale in 2019 was 45.02 billion yuan, and it is expected to exceed 50 billion yuan in 2020. Foreign-funded enterprises such as Estee Lauder and L’Oréal have always dominated the market, but since 2015, the market share of domestic-funded beauty companies has started to increase year by year.
2019 Tmall Double Eleven, the top of the makeup brand list is the perfect diary of domestic cosmetics brands, surpassing M · A · C, Estee Lauder, Lancome, Armani and other international big names. 28 minutes after the opening of the perfect diary, the transaction volume exceeded 100 million. Local make-up brands have natural advantages in seizing the sinking market, social media planting and live streaming, and improving product cost performance. Facing increasingly fierce competition, Estee Lauder is bound to maintain or continue to increase marketing investment in mainland China. How to convert sales into higher profits is a major challenge facing Estee Lauder.