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Changes to the beauty business have been so earth shattering in recent years that Jean-Paul Agon, L’Oréal chairman and chief executive officer, exclaimed, “Sometimes it looks like another planet.”
This story first appeared in the June 1, 2012 issue of WWD. Subscribe Today.
Indeed, today’s beauty consumers can sometime seem like Martians.
They “are very different from what they used to be,” Agon said during his opening-night keynote speech at the WWD CEO Beauty Summit here. “They are totally diverse. They are perfectly informed. They are hard to capture. They’re increasingly demanding, critical, combative, but this new consumer is also very creative, involved — even to the point of making suggestions about products or advertising campaigns. The consumer, in fact, has become the best prescriber and the best spokesperson for our brands.”
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Agon pointed to major shifts: The consumer has become universal, digital and socially responsible.
“These three fundamental changes are crucial for our industry, but at the same time they create tremendous opportunities and are also completely revolutionizing the way we work,” he said. “They make, I think, our industry more interesting than ever. They are inspiring us.”
Hundreds of millions of new consumers in new economies are now able to buy modern beauty products, and Agon feels such markets will surpass mature markets sizewise in three years. Already, a trio of them — China, Brazil and Russia — are in the top five worldwide.
“So the beauty needs and expectations are also becoming increasingly diverse,” said Agon. “Chinese, Indians, Brazilians, Russians [and] Indonesians will form the majority of our customers, leading to an extension and diversification of beauty needs.”
Demand for products for colored skin, darker hair and hot and humid zones are on the upswing, for instance. At the same time, it’s key for companies to pay attention to countries’ specific beauty customs and cultures, such as whitening creams in China and kajal in India.
“All these traditions are invaluable sources of inspirations for all markets of the world,” said Agon.
To wit: L’Oréal has developed a strategy of “universalization.”
“Beauty for everyone is primarily a matter of beauty for each individual,” said Agon. “With universalization, we certainly globalize our brand, but we localize the formulas. We create tailor-made products. These products are adapted to different cultures, beauty traditions, lifestyles and purchasing powers in every part of the world. In fact, universalization is the new approach to globalization.”
Universalization is driving the cosmetics industry toward better science, he said, explaining each country represents a new technological challenge to overcome. Further, L’Oréal has initiated “reverse innovation,” where some local creations — such as Maybelline BB Cream — are now rolled out worldwide. That’s led to a different organization structure.
“It’s a kind of new hybrid concept, a model of a new kind, which combines a strong central nervous system with a strategic vision but also with several local hubs, both in research and marketing,” said Agon.
Due to the digital revolution, consumers are changing how they research and buy products.
“Beauty is the most hotly discussed topic on social networks,” said Agon. “The huge popularity of these networks opens new opportunities for interaction and conversation between consumers and our brands. Seventy-eight percent of beauty sales are directly influenced by the Internet.”
And increasingly, transactions occur in the digital space. “Digital tools allow us to help our consumers and to offer them personalized one-to-one service, so that we can increase the quality and perceived value of using our products,” said Agon.
He envisaged a Shazam-like service for beauty, where smartphones could decode what a person on the street is wearing in terms of makeup or skin care, for example.
“Digital and physical distribution channels will nourish each other, increasing purchasing opportunities,” he said, adding, “I think that digitalization gives the power back to ideas and boosts creativity.”
Meanwhile, Agon said consumers are increasingly responsible citizens.
“Expectations about large companies are becoming more demanding, with people believing [firms] should invest more in sustainability, share [their] prosperity and create value for society as a whole,” he explained. “We have to share our prosperity and our development with the communities around us.”