L’Oréal’s Carol Hamilton on Sustaining Growth in the Luxury Segment

The president of L’Oréal Luxe USA does not want to see an end to the double-digit growth the luxury beauty market has been experiencing.

Carol Hamilton, president of L’Oréal Luxe USA, does not want to see an end to the double-digit growth the luxury beauty market has been experiencing. She believes what will keep the momentum going is educating the consumer about new products and benefits and providing great beauty experiences and education both in-store and online.

This story first appeared in the May 24, 2013 issue of WWD.  Subscribe Today.

She became ever more convinced of the opportunity after recently attending a course in leadership at Harvard University called “Women in Power.” What struck her immediately was that of the 62 high-power women in the course, most were ill informed about beauty, makeup and skin care — and hungry for information. “They kept hounding me and asking, ‘Is there a eye cream that really works? What is the best mascara?….And are your products gluten-free?” With the luxury beauty market generating more than $20 billion in sales in the U.S., the executive said she’s always surprised that women and men are still asking such basic questions. “What renders the confusion in this category?” asked Hamilton in her talk entitled “From Beauty Novice to Beauty Junkie.”

Over the past three years, the luxury beauty market has had an incredible rebound and growth, she said, with an influx of new products leading to double-digit growth. However, a recent Bain study on the worldwide luxury segment noted that luxury beauty will slow to single-digit growth. “I find this completely and totally unacceptable. All of the consumer dynamics suggest this industry is still ripe for double-digit growth on a sustainable basis,” said Hamilton.

She said it’s not just new products that will drive future growth. Hamilton recently did a Google search for the top 10 beauty questions people asked in the last quarter. At the top of the list were questions asking how to apply eyeliner and how to apply eye shadow. By providing service and information in a way consumers can digest and actually absorb, Hamilton said, the beauty industry can continue its trajectory of growth.

To prove her point, Hamilton cited statistics about the habits of affluent shoppers. The luxury beauty market has grown 24 percent, and has been driven by new product introductions, which have contributed 18 percent. Among the affluent, some 98 percent shop online and 31 hours are spent online each week. Affluents spend 50 percent less time watching TV, 20 percent more time online, and are watching 14 percent more videos. Some 83 percent watch videos online. “The consumers can’t get enough of how-tos,” said Hamilton. “It shows how much consumers love beauty and how much they want to know about beauty.”

A study by the Boston Consulting Group revealed that beauty, jewelry and fashion comprise only 14 percent of luxury spending in the U.S., cars make up 35 percent, and the experiential luxury segment represents 51 percent of the market, and is the fastest growing segment. She noted that prestige beauty in the U.S. has benefited from the explosion of new product categories, such as devices, body sprays, brightening specialists and BB creams. “We need to combine the product explosion with the regimen explosion with the information explosion and take all of that, and turn beauty into a highly experiential category. Bottom line, knowing how much the consumer seeks and loves beauty, when you combine it into this kind of experience, it’s a recipe for sustained double-digit growth for years to come,” said Hamilton.

She summed up by asking several thought-provoking questions: “How do we use this information explosion to deliver compelling beauty experiences? How do we turn the regimen expansion into double-digit sales growth? What would be the incremental business value of providing great beauty experiences in store? And lastly, what should we do to reinvent our business models to make luxury beauty truly experiential?” That’s the work for the next year or two, she said.