Estee Lauder’s Online Growth Will Help Reach Emerging Market Customers

by Trefis Team
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Estee Lauder Companies Inc. (NYSE: EL), the global cosmetics and personal care products manufacturer and retailer, plans to further expand its online sales efforts including mobile commerce following strong web sales growth over the past year. In the last fiscal year, the company launched e-commerce and mobile site in six new markets bringing the total number of markets it serves to fifteen. For the current year, it plans to add another six markets into its fold. Dennis McEniry, President of Estee Lauder Companies Online, told analysts on the company’s recent year-end earnings call that the company registered strong double-digit growth in sales from every region addressed by their brand sites as illustrated by a 24% overall growth in 2012. In the U.S. alone, the online sales grew by 20% year on year. Online sales grew 34% in the U.K., 55% in Germany and 40% in China. [1]

We currently have a price estimate of  $64 for Estee Lauder which is 6% above its current market price.

E-commerce to help reach previously unexplored markets

The company reported that online sales have tripled in the last 5 years and that the big brands constitute more than half of sales. Skin care is the top-selling category followed by make-up, and fragrances contribute the least to online sales. The company expects to leverage growth in emerging markets like China, India and South Africa better through e- and m-commerce.

We expect the growing online presence to bring in more business for the company as its products become increasingly accessible to locations where it currently does not have physical presence. This is inline with their observation that almost 2/3rd of online sales in China came from cities where they have no brick and mortar stores.

In addition, the growth in disposable incomes across emerging economies should help them gain more of the global market share for its products. The company’s portals will also let shoppers receive advice from beauty advisers via live chat, email or telephone. These services are being adapted for the mobile platform while being progressively being rolled out in other markets. This is expected to boost brand and company loyalty bringing in further sales especially in the already established markets.

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Notes:
  1. Estee Lauder Q4 2012 Earnings Transcript, Seeking Alpha, August 2012 []
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