Digital beauty

A traditional media acted passively and so did the Internet in the early days; however, companies have seen the opportunities in the fast-growing Internet, such as many tools available to share and have conversations. According to Sean Singleton, a group managing partner at Skive group, "Brands are used to controlling their brand message, but must accept a loss of control. However, there is a big opportunity for deeper conversations with these new tools." He also pointed out that internet advertising have shown 10% growth year on year. On the other hand, cosmetics brands have been slow to respond to the changes in the market; however, keep in mind that they have reached a turning point. Billions of consumers are waiting to have conversations out there ! Surprisingly enough, one out of 4 women access the internet via smartphones. Enter Lauren Luke. A number of people learn how to apply make-up on her webpage, leading her to become a brand in herself. With that in mind, cosmetics brands should make it sure their website is optimized for them and provide them with tools for communications.I would say that the key to success is how well digital store augment reality, which is made apparent when accessing MAC cosmetics Iphone application. MAC has been the most successful with over 1.5 million fans.

L'Oreal's success in China

 L'Oreal entered the China market late, compared to other competitors; however, its sales growth is far more remarkable. The L'Oreal's significant success lies in well thought out strategies, including multi-brand strategy and local acquisitions.

 First of all, capitalizing on a multi-brand strategy enables L'Oreal to cover the mass market in China. L'Oreal Paris, Maybelline Garnier and Mini Nurse targets the bottom of the pyramid. Brands such as Kerastase, Vichy and Matrix attracts consumers at the middle of the pyramid who look for mid-level quality of products. The very top of that pyramid is reserved strictly for the high-end products sold in retail outlets, high-end department stores and specialized boutiques, such as Lancome, Shu Uemura, Biotherm and Kiehl's. Each of diversified brands with different tiers of sales channels has a distinguished personality-Maybelline is fashion driven, Garnier is regarded as a natural brand, and L'Oreal Paris is known for a high-performance technology brand.

 Secondly, acquisition plays a critical role in penetrating Chinese market. As case in point, L'Oreal China acquired Mini-Nurse, a chinese mass-market skin care brand and Yue-Sai, a local make-up brand. By absorbing 280,000 outlets of Mini-Nurse that held a huge market share in the low-end market, L'Oreal gained access to market consumers with local distribution and operation knowledge. Given the fact that nearly 60percent of L'Oreal's sales in China come from mass markets, the acquisitions of local brand needs to be considered very carefully when companies penetrate the emerging markets they are not used to.

 However, there's one more thing that needs to be added here. As in Coca-cola Brazil, an unexpected competitor is playing a significant role in China. Amorepacific, South Korean cosmetics giant, are luring consumers by stressing that its products are more suited for Asian skin. Furthermore, thanks to so-called Korean wave which refers to spread of South Korean entertainment culture, Amorepacific is appealing  to star-struck chinese women having strong preference over Korean brand.

 How can L'Oreal edge out new strong player in this game?

Unexpected markets

In the case of Coca-cola in Brazil, a huge and new emerging consumer segment with enhanced purchasing power, the Social Class C,  resulted from the economic stabilization plan. Coca-cola usually battles with Pepsi in the so-called "Cola war" and other powerful global players; it has, however, been overlooked that another big unexpected competitor, Tubainas, is encroaching on the market with different business model. Unexpected changes in the economic conditions necessitate company's strategic moves against new competitors.

Then, what about cosmetics market?

Luxury cosmetics markets has shown significant growth in asian countries, including china and south korea despite recession, while in american markets, luxury cosmetics brands have faced a big challenge resulting from the unexpected change in consumer's behavior. Women have gravitated toward lipsticks and other inexpensive pick-me-ups during recession. This resulted in the Drug stores' expansion of their beauty sections. This is compelling news for L'oreal (brand) and P&G that are gaining higher margin from mass retailers, compared to department stores Estee lauder relies heavily on. For this reason, Estee lauder (brand) took a move downscale to grocery stores like Wal-Mart; however, it might have been a myopic strategy ruining its first-ranked brand image. Furthermore, P&G started to flirt with luxury cosmetics to broaden its portfolio, thereby raising competition in the luxury cosmetics market.

(Whether a move downscale works or not depends on the market - For your information, some luxurious brands, such as Hermes and BMW, attracts a lot of Korean customers by launching inexpensive "entry-level" products without cannibalization as a Masstiage strategy, which means downward brand extension, knowing that there exists strong Veblen effect.)

I learned from the case of Coca-Cola Brazil that a short-term strategy can affect product's profitability eventually. There is no magic to this. Consumer's perceived value should come first for a long-term success without affecting emotional value. 

Luxury packaging

The picture on the left side shows the Luxe Pack New York in May 2011, a boutique-like show where innovative packaging manufacturers meet leading packaging decision-makers from all luxury sectors, including cosmetics & Fragrances.

For women, cosmetics products are things necessary for daily life and have a direct influence on their skin. As a result, luxury cosmetics market has been affected not that much despite recession, thereby resulting in the higher growth in the luxury packaging market which is a key factor for brand identity.

How can companies express a luxurious image with low cost?

I would like to share one interesting story. In February 2005, DuPont innovated new Thick Wall Bottle technology, thus making it possible for cosmetics companies to give fascinating decorative effects in luxury packaging. Surprisingly enough, those effects were impossible to achieve with glass. The thick outer wall has an effect of looking like glass closely, optimizing manufacturing costs and offering more design freedom.

Packaging is critical to brand identity.

On one hand, packaging is one of the most pivotal elements which determine whether cosmetics product can grabs customers' attention at a glance. On the other hand, it must be wondered whether the final price would be set at a high level due to the high cost of the packaging, thus turning off customers.

It should be noted that cost and packaging cannot be considered separately. Along with the inseparable relationship between them, whether to collaborate with competitive packaging suppliers is a key factor which decides on a long term success. The other reasons lie in the fact that a high rate of defective finished packaging can ruin the quality of the inner material and the brand image. Furthermore, the packaging design is highly and directly connected to new technologies in three types of blow molding: extrusion blow molding, injection blow molding and stretch blow molding.

"Whether your brand is aimed at luxury, specialty or mass consumers, ignore packaging's power to define your brand at your own peril."