French cosmetics giant L’Oreal (PINK:LRLCY) plans to increase the distribution network for its popular brands like Maybelline, Garnier, Lancome and L’Oreal Paris by selling its skincare and makeup products online in France next year. Apart from its own website, L’Oreal is also considering sales through popular online retailers like Amazon and online Carrefour.
The French experience is expected to be an important test case to plan out the company’s online strategy before it rolls out its online sales platforms for other markets. It competes with behemoths Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL) and niche players such as Estée Lauder (NYSE:EL) and Revlon (NYSE:REV).
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The company estimates that close to 43% European customers shop online today. While its retail presence still constitutes the primary distribution channel for L’Oreal, online channels offer faster sales growth compared to physical stores.
According to a recent Forrester report, European e-commerce is expected to grow 12% annually over the next five years from $130 billion in 2011 to $230 billion in 2016, with steady growth in the proportion of European customers choosing to shop online. In France, the number of online shoppers is expected to increase from 63% in 2011 to 76% in 2016.  L’Oréal is also working on expanding its end-to-end e-commerce website and solutions for its most popular and prestigious brands in the U.S.
Online beauty sales in key emerging markets like China have grown by 200% since 2006, turning it into a the largest online beauty market in the world, nine times the U.S. online beauty market and almost equal to France’s total beauty market size. L’Oreal’s competitors like Estee Lauder have already made a significant push into online sales channels. Estee Lauder is currently the market leader of online cosmetic sales in the U.S., China and Latin America.
We have a Trefis price estimate of $24 for L’Oreal, 10% ahead of the current market price.Notes:
- European e-commerce will grow 12% annually through 2016, Internet Retailer, February 2012 [↩]