With Wearable Technology, Is L’Oréal Taking The Beauty Industry To The Next Level?

The latest product being launched by L’Oreal (OTC:LRLCY)  is a stretchable skin sensor designed to monitor ultraviolet light exposure via a wearable called My UV Patch. Currently in beta form, this technology is expected to be rolled out later this year under the company’s dermatological skincare brand, La Roche-Posay. ^[1]. The UV patch will provide recommendations for sun safe behavior to the user, once the user uploads the picture of the patch, after use, to a mobile app. L’Oréal is ahead of the competition in its technology initiatives and this appears to be its first step in developing wearable products which will enable users to get personalized skin care recommendations. We believe L’Oréal’s initiatives to drive consumers towards smarter purchases of beauty products based on their skin type should be a growth driver for the company in the future.

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Ability To Make Smart Purchases Can Attract More Consumers

L’Oréal believes that its wearable patch will enhance consumer experience and enable them to make smarter purchases depending on their skin type. The overall market for wearable technology is expected to reach $31.27 billion by 2020 at a CAGR of 17.8% between 2015 and 2020. ^[2]. As an increasing number of consumers adopt wearables in their daily lives, we believe skin patches introduced by L’Oréal will get a wider adoption allowing the consumer to choose products wisely. This should lead to better customer satisfaction and create a feedback mechanism for the company on the types of products required by customers, thus leading to product development which meets consumer requirements even better. L’Oréal has the largest research and innovation team in the industry with their research budget amounting to nearly 4% of its sales, and technology based customer feedback should complement its research efforts.

The skin care division of L’Oréal accounts for nearly 30% of its valuation according to our estimates and the company enjoys a leading market share in this segment compared to other beauty and personal care competitors. We expect L’Oréal’s market share in this segment to increase steadily over our forecast period and reach around 18% by 2022.

As the company stays ahead of the competition in terms of technology initiatives, and equips consumers with smarter ways to identify skin care products, it should be able to gain market share in the longer term.

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1. This Wearable Gadget Alerts You If You’re Getting Too Much Sun, Fortune, January 6, 2016 [↩]
2. Wearable Technology Market worth 31.27 billion USD by 2020, Markets and Markets [↩]