To understand the future, you must first look to the past. So says Paolo Gasparrini, the man who established L'Oréal's business in Mainland China in 1997 and still oversees operations as president and managing director of L'Oréal China. During his tenure in China, Gasparrini has seen the country change in significant ways. But as modernized — and Westernized — as the population has become, one fact is crucial to understanding the market, the executive told attendees at the WWD Beauty CEO Summit, speaking before news broke of the devastating earthquake in the Sichuan province that day.
"China always strives to represent a balance between modernity and tradition," Gasparrini said. "China is the country of balance. So everybody tries to have a balance between the past and the present."
To demonstrate his point, he showed a picture of a young Chinese woman, dressed in Western garb, eating a Western-style breakfast of orange juice, eggs and toast. "This is an image of radical change," Gasparrini said, moving on to slides that showed traditional Chinese symbols — such as the New Year's knot and intricately patterned cutout art — which are also very popular in the country. "Despite the modernity and evolution, a lot of traditional values remain," said Gasparrini.
While he noted that the present seems very promising indeed for multinational marketers — a population of 1.3 billion — Gasparrini revealed that at least 700 million of those people don't have access to consumption or consumer products. In other words, for almost half the population, very little has changed in the 70 years since the rise of Mao Zedong and the 40-plus years since the Cultural Revolution. (As an aside, Gasparrini noted that despite the atrocities of the Cultural Revolution, Mao did implement one positive change: empowering women so that they were equal to men.) Following Mao came Deng Xiaoping, who Gasparrini said had the goal of enriching the country's elite, believing that the wealth would spread to the rest of the people. "It is true that part of the population became rich," Gasparrini said. "It's less evident that this spread to the rest of the population."Still, he noted that China has undergone a radical change since it entered the World Trade Organization in 2000, both from an economic and a cultural point of view. Though Chinese consumers do have more access to Western influences because of that event and the increasing influence of the Internet, it's still necessary for Western brands to prove their bona fides if they wish to do business in the market, Gasparrini stressed.
"Chinese consumers are very demanding and very curious. We had to start from zero and explain to people who we, L'Oréal, was, as a company and our history," Gasparrini said. "Then they say, 'OK, we understand that you represent this big company, but why do you think that you are legitimate to sell products to us? Our skin is different from yours. Our hair is different from you. Our taste is different from you.'"
To answer those questions, L'Oréal took two strategic steps: The first was to set up industry in China, "because that means that you want to get married, not just have an adventure or a date," said Gasparrini. The second was to set up a research and development facility in the country. "This means we can really demonstrate to the consumer that we are deeply involved in research and in understanding Chinese skin and Chinese hair, and also gives us an opportunity to form relationships with the dermatological and botanical centers."
Consumer mores have also evolved since the time of L'Oréal's launch. In 1997, the company's target demographic was aged 20 to 35. ("Anyone older was involved in the Cultural Revolution, so didn't really have the concept or use of cosmetics products with the exception maybe of some very cheap skin care products," Gasparrini said.) Ten years later, the target consumer is more interested than ever in antiaging skin care products, Gasparrini noted.
In addition to products that contain ingredients indigenous to the country, consumers also like to see their ideals of beauty reflected in the products they buy. "Chinese women don't like to follow stereotypes of beauty. They don't want to be beautiful like an Italian or a Frenchwoman or an American," Gasparrini said. "They like to take something, but at the same time, to combine it with their traditional beauty and fashion because they think this makes them more natural and more authentic." That fact has also driven L'Oréal's marketing and acquisition philosophy, particularly with Yue Sai, a brand that employs Chinese ingredients.The strategy has worked, said Gasparrini, revealing that L'Oréal's Chinese subsidiary closed last year with sales of about 544 million euros, or $856 million, at current exchange.
In conclusion, he highlighted the renewed pride the Chinese have in their country and the huge impact this will have on marketers in the years to come. Noting that historically, the country has always had something of an inferiority complex, "Today, because of recent events and the Olympic Games, the Chinese are reminded of how important they are, not just for themselves, but for the rest of the world. In terms of beauty and fashion, they are rediscovering their pride and we have to face this for the future."
Gasparrini was asked by an audience member about L'Oréal's recent introduction of hair care in China, a category the company only recently launched despite being well established in other categories. "When we started, we made some strategic choices," he answered. "Together with [former chief executive officer Lindsay] Owen-Jones, we decided to launch a brand and franchise that could build up loyalty, because the awareness of L'Oréal was zero."
To that end, Maybelline New York was launched, followed by L'Oréal Paris. "We chose makeup, skin care and hair color and decided to leave shampoo for later because we thought it's not necessary to build up loyalty."
He added that skin care is the primary loyalty-building category.
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