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Lauder: If You Are Standing Still, You Are Going Backward

At the WWD Beauty Summit, William Lauder discussed what attracts the company to a brand and how consumers are changing.

William Lauder, executive chairman, The Estée Lauder Companies Inc., offered a peek behind the curtain at one of the most revered corporate cultures in the beauty business.

“First and foremost in a larger organization, there is more of a fear of failure and that creates caution,” Lauder said during the kickoff of the WWD Beauty Summit. “So one of the things we try to do in our culture is say it is OK to fail if you are trying something new. Just fail fast and fail cheap.”

While it seems most Lauder-backed ventures succeed, Lauder acknowledged there have been “things we shouldn’t have done.”

There’s the anecdote he relayed about the first time the founders of MAC contacted Estée Lauder. “We had this other brand called Prescriptives and it was doing very well. It was somewhat the spiritual parent of what MAC was. I said, ‘You know, I think $10 million invested in Prescriptives might be a better return on investment than MAC. Well — six months later we said let’s try to reset this and we paid a little more than $10 million then, but it turned out to be an extraordinary investment and a magnificent brand that has been transformative in the industry.”

Lauder acknowledged the rapidly changing beauty world. “Change is a constant. If you are standing still, you are going backward. We are in a consumer industry and that means you are running up the down escalator. If you stop for a moment, you are going backward. You have to be running faster than the speed of the escalator to make some progress. If you’re not, someone else will.”

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The emerging social media influencers are those creating a transformation in the beauty business. “There was a time when the editor was the authority and no one else could have a voice or platform. With the advent of the internet — social media, digital, YouTube and other forms of communication — the notion of authority changed fundamentally and permanently where anybody can be the editor,” Lauder explained.

Beauty is reportedly the number-one category for self-help videos on YouTube and that’s catapulted vloggers to the role of the dominant influencer. “You realize that the vast majority are somewhere between the ages of 14 and 20 and they have millions of followers. In many cases, if you look at the raw numbers, they are more influential than much of network television.”

This market dynamic has ignited interest in independent brands. “We are an industry that has an entire ecosystem dedicated to forming new brands. Barriers to entry are practically zero. Barriers to scale are still very large.” The flood of independent brands provides retailers and consumers with a constant churn of newness that is changing how beauty is marketed and sold including a shift in dollars devoted to print advertising versus digital.

For its part, Lauder keeps its eyes open to acquisition targets. “We like to see all of the great companies — and some of them are very great and they are the ones that join us — but there are other companies who are great that we admire. What’s really great is if the entrepreneurs are motivated not just to create, but to build,” he explained.

Recently, Lauder’s shopping cart has been filled with fragrances such as By Kilian, Editions de Parfums Frédéric Malle, Rodin Olio Lusso and Le Labo. Although Lauder explained it isn’t an “either/or” scenario, he said the company saw an opportunity to fill out its portfolio in luxury fragrance. These scents fit with a trend he observes of consumers gravitating toward a high-touch experience that isn’t just buying “something,” Lauder said.

And he urged brands to look at jewels they may have within their own companies, which can be reimagined for the new beauty world. “Remember Max Factor? What was the most valuable part — SK-II. P&G bought Max Factor and they got a gift with purchase. SK-II turned out to be more valuable.”