The coronavirus lockdowns have sparked broad changes to how women discover and shop for beauty products by pushing more activity online, especially among older demographics who were previously wary, according to L’Oréal’s chief digital officer.
“The crisis has profoundly accelerated the digital transformation of the beauty sector,” said Lubomira Rochet in an interview.
“In ecommerce, we achieved in eight weeks what it would have otherwise taken us three years to do.”
L’Oréal, which is the world’s biggest cosmetics maker by sales, believes many of these consumer behaviours will last after the pandemic subsides. New marketing tools, such as virtual try-ons for make-up and hair colour and one-on-one beauty consultations via video chat, also proved their usefulness while stores were closed.
Even before coronavirus hit, the cosmetics sector was already further along in adopting ecommerce and digital marketing than other categories of consumer goods, such as grocery or household products.
Market leaders L’Oréal and Estee Lauder have spent heavily in recent years to boost their digital firepower, while newer celebrity-helmed brands such as Huda Beauty and Charlotte Tilbury have grown rapidly by wooing consumers on social media.
About 20 per cent of L’Oréal’s revenues now come from its own branded websites or those of online retailers such as Amazon or Walmart. In the first quarter to the end of March, the French group’s ecommerce sales grew by 53 per cent compared with a year earlier.
In contrast, Unilever, which sells packaged foods, household and beauty products, earned 8 per cent of its first-quarter sales online, while Nestlé, the world’s biggest packaged food manufacturer, recorded 10 per cent of its sales from ecommerce during the same period.
Beauty salons and department stores were closed during lockdowns, but some retailers through which L’Oréal usually sells remained open, such as pharmacies. Ms Rochet said that, initially, shoppers stocked up on personal care products such as Garnier shampoo, and later as they realised lockdowns would last, they bought hair dyes, nail polish and face masks to take care of themselves at home.
With some of its distribution channels closed, L’Oréal’s sales fell 4.8 per cent year on year in the first quarter on a comparable basis. Barclays forecasts a 9.2 per cent decline in revenues this year, before rebounding to grow 7.8 per cent in 2021.
Despite the dip in sales, there were some bright spots in the crisis. L’Oréal quickly shifted its advertising and marketing spending online, taking it to about 70 per cent of the total from 50 per cent before the pandemic.
As a result, ecommerce grew rapidly even in places where it was originally less developed. For example, in Latin America, online sales jumped 300 per cent in April, and in Africa and the Middle East they rose 400 per cent.
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The crisis has also pushed more retailers through which L’Oréal typically sells its products to develop their own online offerings. Fifteen companies including Amazon, Boots, and AS Watson have added L’Oréal’s virtual try-on technology called ModiFace to their websites and apps. Consumers spent nine minutes on average using ModiFace to test out hair colour or foundation tones on themselves, up from two minutes before the crisis.
“ModiFace has been a big competitive advantage in the crisis for us,” said Ms Rochet, who convinced L’Oréal chief executive Jean-Paul Agon to buy the Canadian start-up in 2018.
Back in 2013, L’Oréal set goals for its digital transformation, which were for ecommerce to reach a fifth of group sales by 2020, and for half of its marketing dollars to be spent online. Those goals have now been achieved thanks to shifts in consumer behaviour wrought by coronavirus, and L’Oréal will now think even bigger on digital, according to Ms Rochet.
“We had targets for the second stage of our digital transformation but Covid-19 has changed the landscape profoundly, so we have to reassess them,” she said.
“We are setting ourselves up for a world where half of the business is ecommerce and 80 per cent of consumer interactions will happen online.”
L’Oréal’s shares now trade at valuations not seen since 2003 with a forward price-to earnings valuation ratio of about 35 times, according to S&P Global Market Intelligence. Its shares are largely flat this year, having recovered from a 21 per cent slump from January to mid-March.