How Is Estee Lauder Growing Its Online Presence?

by Trefis Team
-0.98%
Downside
130
Market
128
Trefis
EL
Estee Lauder
Rate   |   votes   |   Share

Estee Lauder ended its fiscal 2017 (fiscal year ends in June) on a strong note. After delivering one of its best quarters in Q3 FY 2017 (fiscal year ends in June), it delivered an even better fourth quarter. One of the biggest drivers for Estee Lauder’s robust growth in the recent times has been its soaring online sales. Here, we discuss how Estee Lauder has grown its online presence and what initiatives the company is undertaking to grow its digital sales even further in the future.

Where Does Its Online Division Stand Now?

The online division created over two decades ago currently employs around 700 people internationally. With a presence in around 39 countries, the online division works with hundreds of direct-to-customer and retail websites (these two sources contribute around 60% and 40% of Estee Lauder’s total online business). Historically, this division has demonstrated around 25% y-o-y annual growth, however, in fiscal 2017, the figure rose to 33% amounting to $1.3 billion. Some of the most successful brands sold online in the past fiscal year have been Estee Lauder, La Mer, MAC, and Tom Ford. The company’s recent acquisition, Too Faced, more than doubled its online sales on a 12-month comparable basis. Currently, online sales contribute 11% of the company’s total sales, a significantly higher contribution when compared to a 4% contribution just five years back. The company outperformed total online retail growth in its top online markets, the U.S. and the U.K. In its third largest market, China, and also in markets such as Russia, Turkey, South Africa, the company almost doubled its online sales. It recently expanded its online presence in the UAE, Saudi Arabia, and India.

The company has so far launched 45 direct-to-consumer websites on its own platforms and on third parties, such as Tmall. Other than that, it engages beauty experts with a comprehensive knowledge on beauty products as well as artificial intelligence and related technologies to provide some of the best beauty advice through the online channels. Mobile technology accounts for half of its online sales and around two-third of the online traffic comes through mobiles. These proportions are expected to grow further with time.

Partnerships To Boost The Digital Game

Technologies such as virtual makeup try-on applications are helping the company in luring millennial users to the brick-and-mortar-stores. Just a few quarters ago, Estee Lauder was struggling to rope in customers in its biggest market, North America. The most important customer segment currently for the beauty companies is millennials. In order to address these issues, Estee Lauder acquired some of the brands popular among the millennials in North America. Coupled with this, the company upped its digital game like never before. It partnered with YouCam Makeup (to launch Pure Color Love Lipstick) in order to provide personalized experiences to its customers both through the online and offline channels.

In May, it collaborated with ModiFace, the company dealing with augmented reality, to help create try-on features for its desktop and mobile websites. The partnership lets users virtually test products by using the Light Field Rendering technology by Modiface. This technology responds to the exposure of light, texture, and shine of a photo or video. This will facilitate customers across mobiles, web and tablets to virtually try out  a product before making a decision to buy it. This might have a significant positive impact on Estee Lauder’s product sales as the digitally connected millennials will be more prone to buy a product if they can check that it suits their face.

 

Potential For Further Growth

Some of its recent acquisitions such as Glamglow, Too Faced, Le Labo, and Becca along with some of the older brands like Jo Malone and La Mer, have potential for building their online presence in several untapped markets. Fragrance remains the fastest growing category through the online channel, however, it currently contributes to only 10% of the total online sales. This proportion is expected to increase over the next three years as the segment expands in markets with potential for high demands, such as the Asia Pacific markets.

Editor’s Note: We care deeply about your inputs, and want to ensure our content is increasingly more useful to you. Please let us know what/why you liked or disliked in this article, and importantly, alternative analyses you want to see. Drop us a line at  content@trefis.com

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Estee Lauder

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!