Article January 6, 1995

<CR><RD><BR><CS:BOLD>NEW LANCOME CHIEF: THE ROAD TO THE TOP IS PAVED WITH PRODUCT<BR><BR>Byline: </CS>Julie L. Belcove<BR><BR>NEW YORK -- Behind Philip Shearer's desk hangs a message written in bold, black Japanese characters that he translates as...


Byline: Julie L. Belcove

NEW YORK — Behind Philip Shearer’s desk hangs a message written in bold, black Japanese characters that he translates as “Continuity brings strength.”
The adage is one that Shearer, the newly installed general manager of Lancome, intends to apply to the giant Cosmair division. “If anything, the people who stay focused tend to survive in good and bad times,” he said in a recent wide-ranging interview.
Shearer has ascended to Lancome’s top post at a time when the company remains locked in a struggle with Estee Lauder and Clinique — what department store executives call “the big three” — for domination of the prestige cosmetics industry. The war between Lancome and Lauder raged in the Eighties, but the current state of affairs is far from detente.
For Lancome, the 42-year-old Shearer said, the focus has to be on product. “What we’re good at and what we’ve always been good at is product,” he said, reeling off a list including Renergie, Dual-Finish makeup and the company’s selection of cleansers, toners, eyeshadows, pencils and foundations.
The challenge, he said, is in training sales associates to communicate the products’ benefits to consumers, particularly in the Midwest and South, which have been tougher regions to conquer because the “Frenchness of our brand” has intimidated some customers. The company needs to wade through the distractions and “make sure at the end of the day it’s a product game,” Shearer said.
In a highly competitive, slowly growing market, Shearer recognizes that goal may be hard to attain.
Since taking the American post Sept. 1, the Moroccan-born Shearer has traversed the country, visiting retailers in Chicago, Los Angeles, St. Louis, Dallas, Houston, Boston, Washington, San Francisco and Little Rock.
In his travels he has discovered a dramatically different market from the one he knew in the late Seventies and early Eighties, when he was fresh out of Cornell University’s MBA program and working for Elizabeth Arden.
After stints for Arden in Mexico and back in the U.S., Shearer joined the L’Oreal organization, working here briefly before taking top posts in the U.K. and Japan and returning now to run Lancome.
“It’s changed quite a lot,” Shearer said of the U.S. retail climate. “The key word is concentration. Now we have two major players that do almost 50 percent of the cosmetics business.”
Shearer was referring to St. Louis, Mo.-based May Department Store Co. and the new Federated-Macy’s behemoth. He noted that the vendor side of the industry has also become more concentrated, as “the big three” have gained market share.
After several years of growth, Lancome’s market share is still on the rise, Shearer said. While the industry as a whole grew by roughly 4 percent in 1994, he said, Lancome’s volume rose by a percentage in the teens.
Although Shearer declined to reveal the firm’s volume, sources have estimated Lancome did more than $400 million in 1993, putting last year’s total somewhere between $450 million and $475 million.
Shearer pointed out, however, that growth has become harder and harder, as price points fall or hold steady, while the cost of doing business, especially where media is concerned, is on the rise.
The consolidation of retailers is a natural result of the industry’s maturation, Shearer said, adding that the effect need not be negative “as long as there still is competition.”
Still, the fewer the retailers, the more crucial each becomes, leading Shearer to make Lancome’s retailer relationships his top priority.
“We have to become more important to each other,” he said, pointing out that cosmetics’ share of department store sales has increased.
For that task, Shearer can draw from his experience in Japan, where trust and a mutual sense of obligation prevail in business relationships.
Another tenet from Japan — service instead of promotion — may be more difficult to translate to the American market.
“This market is very promotional,” Shearer said. “In Japan, there are no promotions. We grew the brand — upper-double-digits unit growth — with no promotions.”
But in the U.S., whether it’s cosmetics or cars, Shearer said, “No one wants to buy anything at full price.”
Gift-with-purchase offers and other promotions are unavoidable here, he said, because unlike Asia, where the market is rapidly expanding, the U.S. has matured to the point that increased competition has given the consumer more options in terms of price and product. Or, as Shearer said, “You don’t have that many more lips.”
Still, it’s not as though doing business in Japan is any easier; without the draw of giveaways, Shearer said, “you’ve got to be perfect.”
The need for gwp’s in the U.S. does not preclude a careful marketing strategy for them. Shearer said a gwp must serve three purposes: a reward for customer loyalty, a sampling exercise and a discount. Lancome should, therefore, select products that will encourage a return visit from the consumer.
But he noted that promotions cannot be seen as a substitute for service, which Shearer defines as everything from the beauty adviser’s smile and application tips to the product’s price.
Shearer is, in fact, a stickler for service, not just at Lancome’s counters but in other facets of life. U.S. hotels, for example, are one of his pet peeves.
Shearer related a story of being in an American hotel and calling for morning room service. After waiting five rings, he said, an employee answered and told him that to get breakfast delivered he should have hung his order on the doorknob the previous night.
“In some stores, the same thing happens,” he lamented.
Although several firms have been experimenting with open-sell fixtures, Shearer remains in favor of more personal service, not less.
“When we slide toward the mass market part of the business, we lose a lot,” he said, in terms of both image and pilferage. “It’s not Lancome.”
But Shearer allowed that the company can learn from the Polo Sports and CK Ones of the world, which mastered the art of prestige self-service.
“To some extent, the success of these shows I’m not doing my job — if people prefer not talking to me,” he said, adding that his dedication to fully staffed counters “doesn’t mean we cannot create areas within the counter where people can play with colors. It doesn’t mean we don’t have to be creative in how we organize the counters.”
Shearer said he is less concerned with competition from the mass market than from specialty retailers, such as Body Shop, Bath & Body Works and H2O Plus. The chains have developed “more focused merchandise and slightly more focused environments,” he explained.
In addition, firms making prestige cosmetics have to deal with the threat of women going elsewhere for apparel, thereby leading to a downturn in department store traffic.
“Where the opportunity is in department stores is to recreate — or reemphasize — the environment, to make it special again from other channels of distribution,” Shearer said. “We’re all competing for the same wallet.”
Shearer said the burgeoning niche of makeup-artist lines also has a thing or two to teach, whether it’s the lack of promotion or the varied application techniques.
“There’s something to be learned from those guys,” he said. “It must be fun for a person to come play.”
But Shearer firmly believes Lancome’s place is in the mainstream. “The bulk of the market is at the center of the market.”
Color cosmetics traditionally have been Lancome’s strength, Shearer said, adding that the company’s greatest opportunity for growth is in treatment.
“It’s the fastest growing market in both the mass market and department stores,” he said. “I don’t think we’ve got any major holes, but basic treatment is not as strong as it should be.”
Bienfait Total, the liquid moisturizer that was Lancome’s major launch this year, is doing well, Shearer said, but the company may not sell the two million units it predicted last spring.
Lancome invested heavily in the launch — a reported $12 million in advertising and promotion — but Shearer said, “It’s a colossal market.
“Of course our business is market share, but that doesn’t mean we buy it with a quick buck,” he continued. “We want long-term gains in market share.
“[Bienfait Total] is going to be a long build. Skin care takes time,” he said, noting that the moisturizer is a good example of Lancome tailoring products to suit the American market, where lotions are preferred to creams.
Lancome is planning another important treatment launch geared toward the American market for April. Hydracontrole Hydrating and Matifying Long-Lasting Treatment Oil-Free Fresh Gel was launched first in Asia and has become a bestseller there, according to Shearer.
“It was designed more for that market, where there are more people with normal-to-oily skin and where the climate is more humid,” he said.
“Technology is evolving very quickly,” he continued. But alluding to the fact that the best-selling moisturizer on the market, Clinique’s Dramatically Different Moisturizing Lotion, is 25 years old and low on the technology totem pole, he added that high tech is not necessarily consumers’ first demand. “Maybe we try too hard occasionally,” he said.
As for the fragrance category, Shearer said Tresor, which he claims is the number-one women’s fragrance in the world, is still doing “very well” in the U.S.
Industry estimates of Tresor’s worldwide wholesale volume have ranged as high as $150 million.
Shearer said the company has yet to set a date for the launch of a follow-up scent, reportedly to be called Poeme. Neither has Lancome resolved whether to orchestrate a worldwide introduction of the new scent or to launch it first in Europe.
“When we’re ready, we’ll launch another fragrance,” he said. “We’re in a hurry, but we’re not impatient. Fragrance is a different game [from treatment and makeup]. It’s more volatile. It’s more fickle.”
In New York four months, Shearer continues to carry with him the notebook containing his Japanese homework. He said he misses studying the difficult language.
Although he is trying to infuse his life in the U.S. with knowledge acquired in Japan — the Japanese, for example, “start meetings when we stop them” — Shearer is embracing much about the American lifestyle. He is most excited about his new Jeep.
Shearer, named general manager when Pierre Rogers left his post as president to develop cosmetics brands for Sears, Roebuck & Co., acknowledges that he found Lancome in tip-top shape, in need only of “fine-tuning.” Nonetheless, Shearer said tweaking a huge brand can be harder than building a small one from scratch.
“You know what’s next,” he said with a smile. “You don’t want to be one of [the Big Three].”
To institute his strategies for becoming the market leader, Shearer said he prefers not issuing orders. Instead, he said, “I will spend whatever time it takes to convince a person — and convince them it’s their idea.”
Shearer said the strong team he inherited at Lancome will come in handy because “you can’t win on your own — except in comic books.”