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Figure 5: In January 2010, the Lancme brand began using the popular Chinese SNS Kaixin001 as a
means of driving consumer traffic to its official Chinese Lancme website
Consumer traffic is
directed here, to
Lancme's official e -
community
The popular China SNS site, Kaixin001, has helped broaden Lancm e's consumer appeal
Consumer traffic is
directed here, to
Lancme's official e -
community
The popular China SNS site, Kaixin001, has helped broaden Lancm e's consumer appeal
Source: Datamonitor, www.littleredbook.cn D A T A M O N I T O R
Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
Datamonitor. This report is a licensed product and is not to be photocopied Page 12
The beauty contest not only helped people to engage with the brand, but it also generated word of mouth, which proved
important in creating a brand following. The online tests also connected consumers with their friends. In this way, the SNS
site provided added value concepts that have given Chinese Lancme consumers the brand experience they are looking
for. In the short term, the e-community and SNS campaign have served to increase Lancmes interaction with its target
market of middle class Chinese women, enabling them to feel both engaged and involved with the brand. In the long run,
the Lancme community will keep on growing, providing a solid platform for any future promotions. With women who earn
more than $1,400 a month (Lancmes target audience) spending more time per day online than watching TV, the social
media marketing effort was a valuable step in helping the Lancme brand encourage consumer spending on luxury
cosmetics.
Figure 6: Lancme has been ranked first in The Digital Genius and Gifted ranks (with the highest Digital
IQ) ahead of other luxury cosmetic brands such as Estee Lauder and Clinique
Source: Datamonitor, www.europeanbusinessreview.com D A T A M O N I T O R
"From the other brand groups we reviewed before, usually the brand does most of the "talking" open a blog, put up
images, show people some videos, etc. But in Lancme's group, almost all the talking is done by members."
User of the China SNS site, Kaixin001, quoted on www.littleredbook.cn, 2010
Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
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LOreals luxury products have tapped into consumers individualistic needs
L'Oreal's attempts to provide consumers with more bespoke product offerings have proven particularly successful in China.
Due to rising disposable incomes, increased beauty consciousness, and a growing desire among aging consumers to look
younger, the Chinese demand for luxury beauty and cosmetics products is particularly high. Chinese consumers
increasingly believe that spending time and money on their personal appearance is an important aspect of achieving a
state of wellbeing. As a result, the value of the skincare products market has increased by over $20bn between 200209,
with facial moisturizers currently occupying just under 70% of the sales market. Chinese consumers display unique needs
when it comes to skincare products. Their fear of tanning, along with rising annual temperatures, is driving increases in sun
care demand, particularly products with added claims such as waterproofing and whitening function. Furthermore, with the
40+ age bracket of Chinese consumers predicted to make up more than 30% of the entire population by 2013, demand for
anti-aging products is likely to remain high.
With these market-specific needs in mind, L'Oreal has launched a series of luxury skincare products this month under its
Lancme brand. These include:
A whitening serum that contains anti-aging ingredients.
An SPF 50 make-up base which provides 12 hours of UV protection while also giving an even skin tone.
A Hydrazen Neocalm range that is said to hydrate and protect skin from environmental stresses and
pollution (including creams, cream gels, and essence).
Figure 7: Lancme has recently launched a range of luxury skincare products that successfully cater to
the specific needs of the Chinese consumer base
Source: Datamonitor's Product Launch Analytics D A T A M O N I T O R
Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
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Following L'Oreal's success, a plethora of brands are looking to capitalize on the luxury
cosmetics market in 2011
With spending on luxury cosmetics expected to return to pre-credit-crunch levels next year, it comes as no surprise that
numerous brands are getting ready to enter the expanding luxury cosmetics market with the launch of new premium
product ranges at the beginning of next year. With the growth of the luxury cosmetics industry being fueled by growing
demand in emerging markets such as developing Asian countries and Latin America, many manufacturers look set to focus
their efforts on these regions.
Shiseido will relaunch its luxury skincare range in January 2011
It is not just L'Oreal that is focusing on boosting luxury beauty sales as part of a post-recessionary business strategy. The
Japanese brand Shiseido is planning to relaunch its luxury skincare brand Cle de Peau Beaute, in an attempt to strengthen
its competitiveness in the global luxury cosmetics market. In January 2011, Shiseido will consecutively launch 21 new
products in both the US and eight countries in the Asia Pacific region; the focus is on markets where an ultra-affluent
segment is emerging, one that consists of consumers that are demanding the highest level of product quality. With its
current target markets being in North America and China, this new range serves to promote the development of its loyal
customer base. This newly innovated range of products will be marketed without the Shiseido name, so as to build a new
luxury image, and form a second pillar for the brand.
To promote innovation of brand communication, the new range of products will employ the actress Amanda Seyfried as the
new image model and face of the brand. Shiseido considers Seyfried to be popular among its target market, and also
believes that as a spokeswoman, she will help attract those women in their 30s who do not compromise on paying a
premium for the sake of beauty. This is an emerging segment in regions like Japan.
The product range is formulated using an innovative "illuminating complex," which is a novel moisturizing ingredient derived
from natural silk and pearl. This ingredient helps align the skin's corneocytes (cells in the outer layer of the skin) and
improve its nanostructure, thereby enhancing the radiance of the skin.
Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
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Figure 8: Amanda Seyfried is the image model for the new Cle de Peau Beaute skincare range that will be
launched by Shiseido in January 2011
Source: Datamonitor, www.shoppingblog.com D A T A M O N I T O R
Sephora will tap into the luxury beauty market through a joint venture with Grupo Axo
Sephora is planning on entering Mexico's luxury beauty market next year though a joint venture with Grupo Axo, which
distributes, operates, and promotes prestigious brands in Mexico. This forms part of Sephora Americas' expansion plans for
the Latin American market, where Mexico represents one of the most highly developed fragrance and cosmetics markets in
the region. In addition, Sephora's parent company Louis Vuitton Moet Hennessy (LVMH) has this year acquired a major
state in Sack's, the leading online retailer of fragrances, cosmetics, and toiletries in Brazil.
This partnership between Sephora Americas and Grupo Axo is a strategically wise move on both accounts. Sephora's
extensive experience in the global fragrance and cosmetics market perfectly complements Grupo Axo's 15 years of
experience in the field of commercial and strategic development of luxury brands in Mexico. As a result, Sephora will be
able to successfully capitalize on the brilliant growth opportunity that exits in Mexico, starting with the opening of two initial
retail stores in the second half of 2011. To date, no retail store comparable to Sephora is present in Mexico. Sephora offers
a unique store design, sales consultants that can offer expert advice on beauty, and an unparalleled selection of classic
and emerging brands. It is therefore predicted that the beauty retail experience that Sephora offers will be well received by
Mexican consumers.
Analysis
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Conclusions and recommendations
The issues explored in this case study bear some important points for consideration:
Manufacturers of luxury cosmetics may benefit from going "green" Given that, by their very nature,
luxury cosmetics tend to involve lavish and excessive packaging, the recent emergence of a new affluent
consumer segment that has a growing awareness of green issues now presents an interesting challenge to
premium cosmetic brands. As the eco-consciousness of luxury consumers continues to develop,
manufacturers of luxury cosmetics will have to look into improving sustainability to ensure long-term
profitability. Although some may argue that going green will dilute luxury brand image, it actually appears
that the values associated with luxury brands such as timelessness, innovation, and durability perfectly
align with the goals of sustainability. There exists a market opportunity for luxury cosmetics brands to
capitalize on being both sustainable and profitable, reaching out to this new generation of wealthy
consumers. If luxury brands do not attempt to move away from needless, indulgent packaging they are
likely to drive away the increasing number of eco-conscious consumers.
Mobile advertising will become a platform that luxury cosmetics brands cannot afford to ignore It
has become clear that in order to succeed in the luxury cosmetics market, companies must create the most
meaningful connections between the brand and the customer. Mobile advertising networks look set to join
social networking as a favored digital marketing strategy used to enhance brand names. iAd, Apple's mobile
advertising network, allows cosmetic companies to launch their own campaigns and, in doing so, reach out
to millions of iPhone and iPod Touch users around the globe. L'Oreal will be one of the first to utilize this
advertising platform when it launches its own campaign in December 2010 led by the Lancme brand.
Although mobile advertising will not make or break luxury cosmetics companies in the immediate future, the
accelerated growth of this advertising medium means that, moving forward, the platform cannot be ignored
by companies.
The biggest opportunity for luxury cosmetic brands will be the emerging Chinese market
Consumers in emerging markets are armed with disposable incomes and a growing appetite for luxury
goods, with China offering the greatest market opportunities for luxury cosmetics brands. In 2009 it
surpassed the US as the world's second largest luxury market, and in the next five years its luxury
consumption is forecast to increase to $14.6bn. What distinguishes China from other emerging markets is
the vast number of Internet users (384 million, growing to 840 million within three years) and the marketing
opportunities that this provides. For luxury cosmetic brands to fully capitalize on this lucrative emerging
market, they will have to optimize their digital competence by embracing as many digital marketing
opportunities as possible.
Analysis
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APPENDIX
Case study series
This report forms part of Datamonitor's case studies series, which explores business practices across a variety of
disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and
insurance, pharmaceuticals, and software.
Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,
highlighting the ways in which the company has become one of the best in its field or how it deals with different problems
encountered within that sector.
Methodology
This case study draws upon a mix of primary and secondary research, including Datamonitor's Market Data Analytics
(MDA) database and Product Launch Analytics (PLA) database, alongside an extensive review of secondary literature and
other in-house sources of information. Data have also been selectively extracted from the findings of the consumer
fieldwork conducted for the purpose of Datamonitor's New Consumer Insight (NCI) research.
Secondary sources
Rebecca Mann (2010) L'Oreal sales edge ahead despite tough trading conditions; Luxury Products and
travel retail struggle, May 2010, http://www.moodiereport.com/document.php?c_id=29&doc_id=20641
Andrew Roberts (2010) L'Oreal Sales rise 12 Percent on Luxury Cosmetics, July 2010,
http://www.businessweek.com/news/2010-07-12/l-oreal-sales-rise-12-percent-on-luxury-cosmetics.html
Zoe Wood (2009) All smiles at L'Oreal and Boots as cosmetics buck recession, August 2009,
http://www.guardian.co.uk/business/2009/aug/28/boots-loreal-recession-makeup
L'Oreal (2010) L'Oreal Half-year Report at June 30th, 2010, http://www.loreal-
finance.com/_docs/us/half_year_report_2010/Rapport_Semestriel_va.pdf
Sherry (2010) Lancme; China social media campaign offers optimized engagement, August 2010,
http://www.littleredbook.cn/2009/08/12/lancome-china-campaign-offers-optimized-engagement/
Tim Arnold (2010) Is Luxury Dead? Maybe Not, June 2010,
http://www.theadvertisingshow.com/en/art/1448/
Leah Armstrong (2010) 'Consumer infidelity' is biggest problem for the luxury sector, May 2010,
http://www.cosmeticsdesign.com/Products-Markets/Consumer-infidelity-is-biggest-problem-for-the-luxury-
sector
Katie Bird (2010) China set to become the world's largest market for luxury goods, July 2010,
http://www.cosmeticsdesign.com/Financial/China-set-to-become-the-world-s-largest-market-for-luxury-
goods
Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
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Scott Galloway and Maureen Mullen (2010) The biggest opportunity for luxury brands in a generation, 2010,
http://www.europeanbusinessreview.com/?p=2391
Jing Daily (2010) L'Oreal Expects China to become Third-Largest Market This Year, July 2010,
http://www.jingdaily.com/en/luxury/loreal-expects-china-to-become-third-largest-market-this-year/
Fibre2fashion (2010) Grupo Ax to bring leading French beauty brand, October 2010,
http://www.articlesbook.com/grupo-axo-to-bring-leading-french-beauty-brand/
Guillaume Gauthereau (2010) Sustainable Luxury Presents New Opportunities, November 2010,
http://luxurysociety.com/articles/2010/11/sustainable-luxury-presents-new-opportunities
Katie Bird (2008) Emerging markets and the internet are the future for luxury, April 2008,
http://www.cosmeticsdesign.com/Products-Markets/Emerging-markets-and-the-internet-are-the-future-for-
luxury
Further reading
Datamonitor (2010) Product Insights: Skincare in China, July 2010, DMCM4756
Datamonitor (2010) The Future of Skincare: Capitalizing on Emerging Trends and Changing Preferences,
March 2010, DMCM4720
Datamonitor (2010) The Future of Makeup: Capitalizing on Emerging Trends and Changing Preferences,
March 2010, DMCM4721
Datamonitor (2010) Shiseido Tsubaki Case Study: Breaking into the luxury hair care market with an
effective marketing strategy, February 2010, CSCM0294
Ask the analyst
The Datamonitor Knowledge Center Writing team can be contacted at askfs@datamonitor.com
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Analysis
L'Oreal Luxury Brand Case Study CM00056-008/Published 12/2010
Datamonitor. This report is a licensed product and is not to be photocopied Page 19
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