It was a typical chance encounter for Wei Li.
A tall, striking young woman from Shenyang, a city of more than six million in Northeast China, Wei spends her day in a store, speaking Mandarin to customers and selling beauty products.
On this day, a female customer approached. She had made a couple trips to the store previously, scoping out the possibilities. She was finally ready to buy, but not for herself. Wei showed her a product, Nutritious Vita-Mineral Moisture Creme, sold in a four-item set, then quickly realized the woman was buying skin care for a friend. “She, like any Chinese customer, has a question: ‘Do you have any value sizes? Any promotions, any specials,’” Wei relates. “She was looking for which is the best day for the value [to] buy.”
Chinese shoppers are known for their insatiable curiosity and their discipline. They often come into the store with a picture on their phone of a particular product, which they have discovered mining the Internet.
Sometimes men come in to make a purchase for their wives. Before buying, they step away from the counter and call home to double check.
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It’s a long-distance call, because Wei’s store is not in Shenyang or even Beijing. It’s a Macy’s in Flushing, N.Y., in the borough Queens. But as far as the store’s clientele goes, it might as well be in the heart of China. More than 80 percent of its customers are of Asian descent, according to estimates by industry sources, the majority of them Chinese immigrants or tourists. “They come with their luggage and we know they’re tourists,” says Wei, who goes by her American name, Livia, at work. She is the counter manager for the Estée Lauder brand in the store and has worked for the cosmetics company for four years, after coming to the U.S. five years ago. Before Lauder, she had transferred her Chinese college credits to the University of Kansas and graduated with a degree in finance.
Wei—and her clients—are the face of a new America, one which is inexorably emerging, pushed by a profound transformation of the nation’s demographic map. “It’s an evolution of embracing diversity at a retail level with goods and services,” says Jonathan Zrihen, president and chief executive officer of Clarins Groupe Americas.
Speaking of the growing wave of multicultural inclusiveness in both marketing a broader spectrum of products and recruiting counter personnel who speak a boatload of languages, he adds, “If we don’t evolve to create a sense of intimacy with our consumers, we are not doing our jobs.”
Back in Queens, Roosevelt Avenue, which is lined with a low-lying collection of shops festooned with bright-red Chinese signs, seems unremarkable, a typical retail scene. But once inside the gleaming Macy’s across the street, the world comes alive, pulsating with the energy of the newly renovated beauty counters and the lilt of Mandarin, Cantonese and Korean being excitedly spoken in the ground floor department. It is a dynamo of beauty retailing, particularly skin care. While Macy’s executives would not break out store rankings, industry sources speculate that Flushing could place number two in beauty-category sales, especially skin care, among the retail chain’s 660 beauty stores. Beauty alone—skin care and cosmetics—is estimated by industry sources to have generated more than $30 million last year, one third of the store’s total volume, driven by Chinese and some Korean shoppers who spend much more than average—or “overindex”—on skin care. All that productivity is generated by a beauty department that takes “only 30 seconds to walk across,” in the words of a staffer. But Flushing’s beauty business has scored double-digit gains for the last five years.
The Flushing Macy’s has also become a Mecca for hip beauty marketers who describe the U.S. as a new emerging market, fueled by the explosive growth touched off by striving, ambition-minded minority groups—not only the much-heralded ascendancy of the Hispanics but the meteoric rise of the Asian-Americans and the pervasive influence of African-Americans. This demographic shift pushes granularity to the max. By the year 2050, 54 percent of the U.S. population will be composed of non-Caucasian ethnic groups, according to U.S. Census projections. As of 2000, the nonwhite population’s share was only 30 percent. In California alone, Latinos currently comprise 39 percent of the population, about 14 million people, making Spanish-speakers the state’s largest ethnic block. Asians make up another 13 percent.
“If you look at California, that’s the biggest prestige market there is and a majority of those doors are influenced by the Latina consumer,” says Thia Breen, group president of North America at the Estée Lauder Cos. Inc.
Zrihen quotes other studies to further dramatize the pace of growth. From 2010 to 2050, the Asian-American population will grow by 142 percent and the Hispanic by 167 percent, while the general population is expected to expand by only 42 percent. Zrihen estimates that Hispanic purchasing power in the U.S. will grow to about $1.5 trillion, a figure that would rival that of some of the top 20 countries.
Already, the numbers have had a significant impact on beauty. Today, 47 percent of U.S. fragrance buyers are non-Caucasian, as are 35 percent of skin-care consumers and 32 percent of makeup purchasers, according to studies cited by Carol Hamilton, president of the Luxe Division of L’Oréal USA. African-Americans have a lower household income, she adds, “but their retail spend is 30 percent higher on beauty than the total population.”
The ethnic quilt is made all the richer not just by native-born members of ethnic groups and immigrants but also tourists. According to data from the fiscal year ended in 2013, the fastest growing groups of tourists to the U.S. were Brazilians, which grew 15 percent, and Chinese, with a growth rate of 23 percent. The 2.9 million visitors from Brazil spent $9 billion while here; the 2.2 million Chinese tourists spent the same amount. The two groups ranked fourth and seventh, respectively. The number-one group, those from the U.K., spent $13 billion but the growth was only 2 percent.
The stakes become higher when one considers the global game of reverse innovation of product development and L’Oréal’s doctrine of universalization. Local relevance has worldwide reverberations.
“We look at the Chinese consumer regardless of where she shops, capturing the biggest amount of her dollars and servicing her. That’s where it’s a much bigger concept, ” says Hamilton. “The significance of this is that the world now, through the Internet, is global. You can’t sit back and ignore it because then your brick-and-mortar experience does not match your e-commerce experience. We know that e-commerce is the most important channel globally in terms of growth, so it’s a mirror.”
Indeed, Breen points out that Lauder is now in the process of launching a product in the States, a watery lotion called Micro Essence, that is simultaneously launching in Asia. “We look at the global calendar here,” she says. Another launch in the works is Nutritious Rosy Prism, which was developed to freshen fatigued, yellowish skin and was originally aimed at Asian women. This new ethnic frontier is being explored within Lauder, brand by brand, door by door. “If this is deemed a Latina door, what does that mean in terms of components that Bobbi Brown would have?” Breen asks. “What does it mean in terms of shades? In terms of print material? In terms of tester units?”
During a press briefing last year, Fabrizio Freda, president and ceo of Lauder, drove home the importance of microtargeting based on demographics and geography. “When you calculate it with the concept of growth in mind, what you understand is that 80 percent of the growth will come from ethnicities other than Caucasian in the U.S. in the next 7 years and 65 percent of all future growth will come from the aging of the population,” he said. “You understand the opportunity to direct the company’s resources to tackle these huge growth opportunities and understand why I say the U.S. is my biggest emerging market.”
Beauty marketers and retailers have always prided themselves on drilling down into the consumer psyche, door by door. Now they are riding the multicultural dynamic into a new world. The stakes are enormous. As an example of the possible payoff, after Clarins began reaching out to the Hispanic audience, its counters in the Dadeland and West Dade malls, in Florida, grew from about $500,000 to $1 million in sales over three- and four-year periods, respectively, according to industry sources. The Macy’s flagship in Boston, considered an Asian door, also hit $1 million a year. The Clarins counter in Flushing, which was renovated this spring, reportedly did $800,000 last year and is aiming for $1 million this year. Industry sources calculate that the counter could reach $2 million in two years. Clarins had no comment on the figures.
For Hamilton, the new demographic opportunity has brought new focus to the industry. “We’re taking every single door and profiling our business based on what is selling there versus the general population. Obviously in an African-American market, the darker shades in foundation sell better, but they are still not at their potential. It’s tricky and it requires a lot of resources to get every single counter right.”
Each consumer base has its own nuances. “The most important thing if you’re in an African-American market is to make sure your beauty advisers are primarily African-American, not just because they understand what their consumer base wants but because their consumer base trusts them,” says Hamilton. Turning to Latina markets, she says, “We know that signage in Spanish is extremely important, plus [having a] BA who speaks Spanish. And then tailoring the mix for them as well.”
When it comes to dealing with different ethnic groups from Asia, one common error marketers make is grouping them together. As an example, Hamilton points to Flushing, which consists mostly of Mandarin-speaking Chinese and Koreans. A contrasting example is the Eastridge Center mall in San Jose, Calif., which is dominated by shoppers of Vietnamese descent. “All Asian counters are not alike,” she says. “We’re trying to tailor not only our [beauty advisers] but the way we train them to talk to the consumers.”
If there is one company that understands the Asian customer, it is Shiseido, which arrived in the U.S. in 1965 and established a foothold in markets with strong concentrations of Asian shoppers. While trying to Westernize its selling strategy, the Tokyo-based company continued to nurture its original base. In some of the bigger doors frequented by one large ethnic group or another, “we have been doing all of our communications not only in English but in Vietnamese, Japanese and Chinese for years,” says Heidi Manheimer, chief executive officer of Shiseido Cosmetics America. Part of this effort is in the staffing, too. According to industry sources, in the Macy’s in Eastridge Center, which draws on a large Vietnamese population, Shiseido has seven Vietnamese beauty advisers and the brand ranks second in its department. In the Macy’s in the Westminister Mall in southern California, all nine of the staffers are Vietnamese and the counter is a top performer. Since the early days, Shiseido has printed sales pamphlets in the different languages; more recently, it has been “hugely successful” with multilanguage iPad selling tools. “If we have a customer now, no matter who is behind the counter and what language they speak, we can service them in English, Spanish, Chinese, Vietnamese, French, Korean, Portuguese and Japanese,” Manheimer says. These strategies have paid off. Industry sources estimate that Shiseido has about 30 doors, all considered “multicultural,” that do at least $1.5 million in sales each.
Manheimer, herself a retail veteran, sees the new emphasis on tailoring and micromanaging marketing door by door as part and parcel of the dramatic shifts in American retailing of the last decade. “When we talk about having these large Asian doors, 10 years ago they were easier to track. Now, consumers are shopping online, they’re shopping in self-service, they’re shopping in department stores, they can’t even tell you where they’re shopping anymore.
“This just adds to making sure that each counter is understanding their customer base, getting in touch,” she continues. “It goes back to the department stores’ need to be focused on service and knowing their consumer so that we can better meet their needs.”
At Coty, Marc Rey, president of Coty USA and senior vice president of North America in the Global Markets division, says he is not so sure that the U.S. is a newly emerging market. “The U.S. is the world,” he states, noting that parts of it may be emerging but other parts, like the traditional Caucasian base, are maturing. “If you look at the Caucasians,” he says, “they tend to stop using fragrance. The penetration of the Caucasian is dropping. But African-Americans and Latinos are overindexing like crazy.”
As an example, he points to the Calvin Klein Euphoria brand. Latinos overindex in sales of Euphoria by 130, or 30 percent above the average. Caucasians, on the other hand, underindex at 85. Rey says that for all the fuss made over Flushing, Dadeland in Florida is the Latino equivalent, with Portuguese and Spanish as the main languages. He speculates that Dadeland ranks fourth nationwide in fragrances.
Succeeding in a store like Dadeland or Flushing requires understanding buying habits and also quirks. As has been often stated, Asians tend to use seven skin-care products daily—starting with a cleansing lotion or cleansing oil then working through a serum and finally a moisturizer—compared to three for a typical American.
“Latinos are the group that are most into beauty,” says Hamilton. “They overindex on virtually every single category. For skin care, acne, uneven tone and discoloration are their top concerns. In makeup, after mascara, the most important priority for Latinas is eyeliner, and they are heavy, heavy users of traditional lipstick and liners.”
For Asians, the prime concern is skin care—whitening, antiaging, hydrating, pore reducing; African-Americans are deeply interested in hair products. In terms of color cosmetics for African-Americans, “their top concerns are uneven skin tone, difficulty in finding the right shades of makeup, then finding the right shades in eyes and lips that show up and have a good pay off,” says Hamilton.
Both Hispanics and African-Americans are attracted to strong fragrances. Hamilton cites sales figures from Viktor & Rolf’s Flower Bomb showing a high index of African-American and Hispanic purchasers, and says Latinos comprise more than 50 percent of fragrance sales in some doors during the Christmas season.
These pools of consumer demographics are scattered across the U.S., forming a U-shaped pattern on the map, stretching from the Asians and Latinos on the West Coast, Hispanics in the Southwest and African-Americans crossing the South to a concentration in Atlanta, Spanish and Portuguese speakers in Florida and Asians in the East and Northeast. Philip Shearer, chief executive officer of the parent Paris-based Groupe Clarins, is a walking encyclopedia of department-store demographics in the U.S.—by the zip code—from his days here at L’Oréal USA and Estée Lauder.
Shearer, who maintains that the most impactive trends start in California, says, “What has changed dramatically is the mix of the people you find here. This new emerging market in the U.S. is more due to the extraordinarily changing mix of the ethnic groups that make up America and that’s what makes it very different. You will see that the U.S. is one of the few countries that still has a decent demographic.”
Zrihen estimates that there are at least 250 solidly ethnic department-store doors, 150 with large Hispanic populations and 100 dominated by Asians. Hamilton puts the number at 173. But the ethnic influence is powerful, considering that 250 doors is about one quarter of the department-store distribution of a brand like Clarins, and they tend to be among the highest-grossing stores in the country. Zrihen estimates that the basket of purchases in those doors could be 20 percent higher than the average because the Asians’ beauty routine is more expanded or “the fact that we can sell body products in addition to face [makeup] to the Hispanics.”
A number of manufacturers credit Macy’s with its My Macy’s program of tailoring doors to specific locations, as well as Nordstrom in providing the department store backbone for multiculturalism. Muriel Gonzalez, executive vice president and general merchandise manager of cosmetics, fragrances and shoes at Macy’s, says the retailer exercises great advantage by being a national chain with the added benefit of being able to focus local stores to satisfy demographic pockets.
“In the old operating divisions, Macy’s East might have had a few Asian doors, Macy’s West might have had a few Asian doors, but neither of them had enough to really put together a complete strategy,” she says. “One Macy’s gave us the opportunity to look at our doors based on the customer who shopped there and be able to do things that were not just one off, but that were scalable.
“We definitely do a tremendous amount of Hispanic TV,” she continues. “We also participate in local publications that reach the Chinese or Korean consumer or even the Vietnamese consumer in southern Los Angeles. We are able to take the national strategy and, in the doors where it’s appropriate, add to it. We now have the scale to ask a manufacturer to produce collateral in Mandarin or in Spanish or in Korean. We have the scale to be able to look at the images that we show. Many of our manufacturers have multiple international models and we can customize them, based on the demographics of the door.”
Gonzalez cites examples such as the Flushing door stocking brands like Clé de Peau Beauté and La Prairie that are not found elsewhere in the chain in response to its strength in skin care. “There is no question that in our heavily Hispanic doors in Miami and in Texas we have enormous fragrance businesses,” Gonzalez says, noting the Miami International store is 88 percent Hispanic. “All the collateral there is in Spanish,” she says, adding that there are other malls heavily influenced by African-American customers or young people where celebrity fragrances, such as Jay-Z’s Gold, are a big hit.
“It’s important that the whole staff is diverse and reflects the community around them,” says Gemma Lionello, executive vice president and GMM of cosmetics at Nordstrom. As part of the drive to make customers feel at home, Lionello cites Nordstrom’s Santa Anita store in Southern California. “[It] is an amazing store because it performs very well in skin care and color. More than half of our employees are bilingual. There are Hungarian, Italian, Spanish, Armenian, Mandarin, Cantonese, Ethiopian, Thai and Vietnamese speakers.
“Some stores will skew one way or another in percentages of ethnic customers,” she says of the 117-store chain. “We make sure we have the right selection for them,” says Lionello, who pointed to the Ala Moana store in Hawaii, which is one Nordstrom’s highest performing units in luxury skin care. In response to customers’ requests, the store recently added La Prairie, SK-II and Amore Pacific.
During August, Nordstrom had a merchandising focus on foundation to emphasize the depth and breadth of its offerings to consumers. “As we grow as a company, we have to make sure we do a good job, taking care of each market in a unique way, as needed,” says Lionello. “Staying in tune by market is probably our biggest challenge; that’s about learning about the immediate customer base in the immediate market.”
But this multicultural flowering puts more on the hiring and training capabilities of the brands. “When you think about it from a macro-historical perspective, it’s really just another manifestation of the American dream that you can have these amazing clusters of stores that cater to immigrants or to tourists who are coming to America, and we’re not treating them as one suit fits all but realizing that there is real value in addressing them as respectful of the culture from which they came,” says Hamilton.
On the subject of providing more personalized service, Hamilton says a different kind of training is required. “It’s another evolution towards the luxury market needing to invest in service that is extremely micro-targeted to each door, according to the customer clusters in that door. The more you master that, the more you’re going to drive your business,” she says.
Zrihen says that Clarins realized that in the ethnic doors, the company had to offer the products that many visitors knew from home, which may not be available in the U.S. The counters have to be designed with sensitivity, too. “In Asia, they sit, they don’t stand, and they don’t like to have high chairs,” he says. Often, shoppers bring their friends or family along. “That’s why in Japan, you have all these consultation tables with five or seven seats,” he says.
Breen agrees. “The counter design is different. You put much more in terms of consultation areas so that there’s room for people to sit down, because it’s not going to be one-offs. You’re generally going to be selling to two or three people at a time.”
Demonstration is key, especially in selling skin care, to Asians. “Their routine has a lot of layering,” Zrihen says. “At all our counters we have a demonstration of how to apply the products. Typically in the U.S., we try to be smart and efficient and quick and easy so you have two or three steps and you’re done.
“In Asia, they want to have six to eight layers and they will note each order. They want a full regimen,” he says, adding that an entire education team is needed, complete with someone from Asia. For Hispanic customers, the consultation also is involved, but more like a party, complete with makeup artists and a makeover. “You put out five chairs, a bit of music and you make it a fun event,” Zrihen says. “We created this happy hour of beauty, which they loved.”
Latinas make emotional connections with the brand and relationships, introducing their daughters to the counter people. “With the Latina consumer, it’s very much—in most cases—a family situation,” says Breen. “She’ll come in with a sister, a daughter, a mother. There’s a lot of strong family shopping happening.”
“I built my Dadeland business by doing applications and events at the counter, not with additional gift-with-purchases, and no promotions,” Zrihen says. “It was all about service. It’s the same for the Asians. They have to have great service. You have to have patience, you have to spend time with the customer, sitting down in chairs, listening to their beauty concerns.”
In recounting what he has learned, Zrihen says, “You need service for the Asians and you need trust for the Hispanics. To build trust, you need also to spend time and to create intimate relationships. With the Asians, it will be more an expertise relationship; Hispanics will be more community or a close relationship. They basically operate by trusting one another.”
Hamilton says that presentation is also important. “When you have either a Latino or African-American door, it’s important to have the darkest shades prominent at the beginning of the range, going from dark to light, rather from light to dark.”
Perhaps the most dramatic illustration of the opportunities of emerging multiculturalism came in the form of a presentation inside Estée Lauder headquarters by Breen. She described a triangle between Manhattan, Queens and Brooklyn. First came the heavily Asian Flushing, 12 miles from Manhattan. Then she moved six miles to Macy’s in downtown Brooklyn, which has a large African-American clientele and a strong fragrance business. The third leg was Rego Park, also in Queens, with a large Latina audience and a vibrant makeup business. “I said, ‘Here’s 12 miles apart in Manhattan, three different Macy’s doors. One dominant in skin care. One strong business in terms of fragrance. Another strong business in terms of makeup,” she concluded.
Breen readily agrees that Lauder is out to promote its growth, but points out, “It’s also the consumer experience. We want her to have the best experience at any counter she goes to. Of course we’re looking for growth, but it’s got to be with her experience at the core of it.”
While Lauder has always focused and tailored the presentation and product offering of each door to the local audience, the game has reached a more sophisticated level. “We’re using information much more rigorously in terms of determining what’s right; we’ve got more globalization in terms of the consumer base and we also have much more sophisticated tools in being able to identify these things,” says Breen.
As an example, Lauder has developed metrics that allow marketers to pinpoint what stores can be considered Asian or Hispanic or African-American. “For instance, there’s a new product that we have in Estée Lauder,” Breen says, “and I said, ‘Well, where are we going to introduce it?’ They said, ‘We’re going to put it in the Asian doors.’ They know exactly where these Asian doors are, and so that product goes to the Asian doors,” Breen says, estimating that there are nearly 100 such doors in the Macy’s chain.
“If we have products for brows, the Latina consumer loves eye products,” Breen continues. “We know exactly how many doors there are. The product differentiation is important, the service expectation is different, the makeup artist and/or beauty adviser and the look of that makeup artist has to be reflective of the consumer in that particular door or that mall.”
Meanwhile, back at the Lauder counter in the Macy’s in Flushing, Wei is talking about the future. “Makeup is a challenge for us, but it is also an opportunity,” she says, explaining that most Chinese women are afraid to put cosmetics on their face. “That’s the biggest problem, application. They don’t know how to put it on.”
Wei sometimes tempts customers by wearing different colors. “They are curious, but they want something that is simple, easy, fast to use,” she says. Wei believes there is such maniacal adherence to skin care because women are afraid to use color, partly because of age-old Chinese taboos which frowned upon makeup usage, meaning their skin must look perfect naturally.
But the dam is cracking. Recently Wei’s team did four makeovers at once in Flushing, when an ecstatic customer called her friends and relatives. “Right now, everybody wants to look fancy and pretty,” Wei says. “Everything will change, a big change; it’s open.”