MILAN — The Italian beauty industry is heading off the 4.0 road. As more and more local consumers are approaching digital channels, cosmetic companies and retailers need to invest online to seize sales opportunities and engage customers.
“Italian consumers are ready for e-commerce — as they already buy from foreign web sites — but what’s lacking is a wide offer of online stores,” said Cristina Scocchia, L’Oréal Italia’s former president and chief executive officer, who exited the company last month to pursue a career in private equity.
Scocchia was one panel member of Pambianco’s first Beauty Summit, hosted by the Italian fashion and beauty consulting company in partnership with Ernst & Young and held on Thursday at the city’s Bourse building.
In Italy, mass distribution and drugstores, perfumeries and pharmacies still represent 75 percent of distribution of cosmetic goods. These channels edged down 0.6 percent last year, while stand-alone stores and e-commerce grew 5 and 35 percent, respectively. However, the latter only accounted for 2 percent of total last year. Both brands and customers — who are more informed and independent compared to the past — are increasingly aiming to interact directly with each other.
“Internet and e-commerce are growing in the cosmetic industry, but haven’t registered that exponential growth as in other product categories, yet,” noted Scocchia.
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Scocchia underscored how just 6 percent of the global cosmetic sales are made online, with China, the U.S. and the U.K. leading the list with 20, 15 and 8 percent, respectively. “There are three advanced countries but the rest are all [performing] under 5 percent,” she noted. “So I believe that in the short term, [traditional channels] will continue to be strong[…]even if I expect the e-commerce to increase 6 percent in the next five years,” she concluded.
Ferragamo Parfums’ chief executive officer Luciano Bertinelli considers e-commerce essential, regardless of the figures. “For fragrances, the first purchase is always made at the perfumery stores, as you need to smell the scents,” he said, “but the following are made on e-commerce, especially in the American and Chinese markets.”
“Nowadays the consumers don’t go online anymore, but they live online,” said Elisabetta Taverna, at the helm of Google Italia‘s health-care and consumer-goods division. The company’s data confirm that more than one-third of customers prepare the purchase online, which is then made at a physical store, comparing prices and features (36 percent); reviews and advice (33 percent), and inspirations and new ideas (26 percent) on the Internet.
Taverna also illustrated how tutorials and professional advice are easily accessible online. Editorial creative contributions are replaced by the image and authority of influencers.
Companies are exploiting these tools with investments online. For example, Taverna showed how L’Oréal’s luxe division implemented its presence in Google’s top research pages during the two weeks before Christmas in the past two years, aiming to intercept the attention of consumers.
According to Google’s data, YouTube also has a huge impact on sales, as more than 41 percent of users purchased the product after watching tutorials by influencers, who are trusted for their authenticity, claimed Taverna. They create content starting from the daily needs and demands of viewers, she explained, adding the example of Maybelline’s Hail Beauty cab project. As part of this, influencers are challenged to create makeup looks during a ride in a taxi.
Figures also show how 61 percent of digital beauty consumers are mobile-oriented and strongly influenced by social media in their purchases, with Facebook and Instagram listed as preferential tools. “Mobile [devices] are key today for the kind of attention and engagement they can attract,” said Facebook Italia’s country manager Luca Colombo, underscoring how users spend an average time of three hours per day on their smartphones.
To keep up, traditional distribution is investing in service, which needs to be more qualified and customized and assorted, which should comprise also niche products in order to diversify the offer and respond to the growing demand of exclusive proposals.
“For many years, perfumeries tried to increase foot traffic of a younger audience,” said LVMH P&C Italia’s chief executive officer Gianluca Toniolo. The executive said Sephora was a leading example as it appeals to Millennials through a dynamic assortment, a constant rotation of brands and digital communication.
On a national scale, Michelangelo Liuni, president of Fenapro — the Italian federation of perfumes retailers — explained how the association has launched the “Beauty Coach” project in order to unify and enhance the formative standards of sales assistants. “The know-how in beauty consulting is the main asset we have to set ourselves apart from the rest of the market,” Liuni said.
The quest for a diversified offer and portfolio, which includes niche brands, different product categories and the implementation of emerging markets, defines the increasing number of merging and acquisition transactions worldwide, which were 64 last year and 17 in the first three months of 2017. Italy is the third market for M&A operations, after the U.S. and France.
As reported, Italy’s cosmetic industry is ranked fourth in Europe — after Germany, the U.K. and France — counting 35,000 employees and more than 200,000 associated with the sector. Last year, sales of the local cosmetic sector totaled 10.5 billion euros, or $11.5 billion. Of this figure, exports totaled 4.2 billion euros, or $4.6 billion, climbing 12.3 percent compared to 2015. More than 57 percent of exports were destined to Europe and the U.S., pointing to potential growth opportunities in the Asian market in the future.