Here’s How Estee Lauder’s Latest Collaboration With Google Might Help The Beauty Company

by Trefis Team
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After delivering a strong first quarter in fiscal 2018 on the back of its travel retail, online, inorganic, and organic growth, Estee Lauder is gearing up to introduce more digitally innovative solutions to woo its customers. Towards that end, it recently partnered with Google to provide customers with customized beauty related advice within the confines of their homes. While its closest rival, L’Oreal, keeps launching newer digital solutions for its users, it is inevitable that Estee Lauder also needs to gear up in order to maintain its leadership position in the premium beauty segment. We have a $96 price estimate for Estee Lauder, which is around 24% lower than its current market price.

How Will Users Be Benefited By This Collaboration?

Through the help of Google Assistant, present in Google Home, users can use voice activation to get skincare and other beauty related suggestions. Expected to be launched in December, this new offering will let users talk to their Google Home asking for the ‘Estee Lauder Nighttime Expert’ and then through a chat session, users can find the best skincare regimen suited to their requirements. The app will also provide advice about the application procedure. The facility will be first launched on the Estee Lauder Nighttime Expert app, and gradually on mobile, through Google Assistant, on EsteeLauder.com, and in ads on the Google Display Network. Estee Lauder plans to expand the services beyond its Nighttime Expert from the next year. Google Home was launched as a link to Google Assistant in 2017, allowing shoppers to make instant purchases through voice activation.

Where Does Estee Lauder Stand In Comparison To L’Oreal In Digital Initiatives?

Estee Lauder experienced a 10% increase in its stock price earlier this month after the release of its Q1 fiscal 2018 results. The company’s strategic acquisitions, coupled with its success in China, the rise in its travel retail, and online sales helped it deliver the robust quarter. The company is currently one of the leaders in the premium cosmetics market. Estee Lauder’s closest rival L’Oreal is a market leader when it comes to digital initiatives. L’Oreal currently spends over $1 billion on its digital initiatives, annually. Starting from UV skin patches that detect sun exposure to hairbrushes that detect the quality of one’s hair, from funding digital startups to connecting its beauty products with the help of the Internet of Things, when it comes to digital innovations, L’Oreal leaves no stones unturned. Recently, the beauty giant has announced the plans for launching a program in Paris that will involve the collaboration of start-ups in order to produce more products like ‘smart’ hairbrushes and skin patches.

Estee Lauder’s $11 billion annual revenues is significantly less than L’Oreal’s ~$30 billion annual revenues. However, Estee Lauder only operates in the premium beauty segment, while L’Oreal’s offerings expand from the premium to the mass cosmetics category. In order to maintain its leading position in the premium segment, Estee Lauder also needs to gear up its digital offerings and hence initiatives like these might help the company by providing it with a competitive edge over its peers.

Estee Lauder’s Online Sales Are Growing Impressively

In fiscal 2017, Estee Lauder’s strong online sales were mainly driven by the third-party and retailer sites. Each of its metrics, traffic, conversions, and orders, witnessed a healthy growth. China’s Tmall witnessed a surge in sales especially since the launch of its makeup brand MAC in May. MAC has further launched an online platform in South East Asia called Lazada, which is owned by the Alibaba Group. With a Tmall-like model, this store might be a further catalyst for the company’s growth in the region. The company’s effort to expand its online footprints continued with the launch of 100 new websites in the quarter. Around 70% of its online sales were contributed by mobile and hence this medium is a prime focus in Estee Lauder’s digital initiatives.

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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

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