ASSESSING LAUDER’S INSTANT E-PLAY

Byline: Kerry Diamond

NEW YORK — The announcement on Wednesday that Estee Lauder Cos. had bought Gloss.com shocked the beauty industry, but after having digested the news, everyone from analysts to rival Web sites acknowledged that the deal makes a lot of sense.
As reported, Lauder purchased Gloss, the multibrand beauty e-tailer, for an estimated $20 million and plans to turn the site into a portal through which shoppers can access e-tail sites for each of the Lauder brands. The new site will launch in the first quarter of 2001.
“It’s a unique strategy and I think it will definitely work,” said Amy Low Chasen, a cosmetics analyst at Goldman Sachs. “This clearly gives Lauder a competitive advantage because they’re covering all relevant channels of distribution and they’re doing it before their major competitors do.”
But Lauder doesn’t plan to leave all rival manufacturers in the cyberdust. Clinique president William Lauder told WWD that the beauty powerhouse will consider selling competing brands on the site as well. “I don’t want Gloss to be perceived as just a Lauder multibrand site,” he explained.
Will the Chanels, Clarins and Lancomes of the world accept Lauder as a retailer? “It would make sense for Lauder’s competitors to consider this,” said Heather Hay, global coordinator and managing director for consumer products for Merrill Lynch.
Even if they choose not to go with Gloss.com, major manufacturers need to act quickly, said Mike May, a senior analyst with Jupiter Communications.
“Companies like Lancome and Chanel need to figure out who their dance partners are,” he said. “Now that the Lauder brands are going to be available online on an aggregator site instead of a brand-specific site, it could accelerate the shift from offline to online beauty shopping. As more consumers buy online, suppliers simply need to be well represented there or they will give up market share.”
As part of the announcement, Lauder said it will finally allow its retail partners to sell the Lauder brands online and that it will not sell to any of the pure play sites. None of Lauder’s retailers have been authorized to sell its brands online up until now.
The merchants, however, must first meet certain criteria, regarding issues like customer service, and they must negotiate with each brand individually, noted William Lauder.
And most importantly, added Fred Langhammer, president and chief executive officer of Estee Lauder Cos., their sites must be brand driven, rather than category driven.
“We’ve invested millions of dollars to create a position and image for our brands,” he said.
For companies like Sephora — which counts Lauder’s Stila among its best-selling brands — this would require a total overhaul of its Web site. Sephora.com, with its black and white pages and three major categories, appears to be more about replicating the in-store experience than providing a platform for the brands.
“Sephora.com is oriented around category rather than brand,” said Lauder. “It commoditizes our brands. They list products alphabetically and by price. We’ve never sold our brands by alphabet and by price.
“Our goal in this whole exercise is to mimic the way a consumer shops for a brand in a store,” he continued. “There’s no such thing as a mascara department. Most consumers shop by brand.”
So where does this leave the remaining pure-play sites? The founders of Eve.com, considered by many to be the leading beauty e-tailer, put a positive spin on the Lauder news.
“We weren’t surprised because we knew that the Lauders were shopping around for a company,” said co-founder Mariam Naficy, who added that it was a smart move for the Lauder corporation.
But she did note that the Lauder Internet strategy will only help Eve.com. “There’s a strong advantage to being a neutral party.”
Added co-founder Varsha Rao, “Vendors don’t want to be financing their competitors. We offer them a level playing field.”
The two also noted that Eve was never intended as a beauty-only site. “We’ve always been in a different situation from pure beauty e-tailers who define themselves through their name,” said Rao. “That’s what’s great about the Eve name. Beauty will be a very important part of our business, but we’ll be launching into jewelry in mid-summer.” The site will carry what Rao described as “bridge and fashion-forward jewelry.”
Gloss.com immediately posted the news on its home page and asked shoppers to vote on which Lauder brands they would want to buy online. Angela Kapp, vice president and general manager of Estee Lauder Cos. Online, said that on Wednesday, MAC and Bobbi Brown had received the most votes, followed by Clinique. Origins and La Mer, she noted, received more votes than expected.
Heather Kleinman, founder of Cosmeticconnection.com, a site with beauty information, reviews and advice, wasn’t surprised by the votes. “I get people asking me where they can find Lauder products all the time,” she said. “They can’t even find Origins. That might not seem like a hard brand to find, but for some people it is.”
Maria Lawson, co-founder of Beautybuzz.com, the online community that features a popular beauty bulletin board, agreed. “People who live in the middle of nowhere want these brands,” she said. “They know who [Stila founder and celebrity makeup artist] Jeanine Lobell is, but they don’t live near a store that carries Stila, or that carries MAC. Maybe they don’t want to make the long-distance phone calls just to try to find them.”
Lauder’s move just might mean the end of beauty’s indie era online. Since Eve.com launched last summer, the beauty Web sites have specialized in the niche brands that are too small to thrive in the department store arena. The Internet provided them with a democratic selling space where they weren’t judged by the size of their counter space.
“The Gloss purchase is a mixed bag,” said Nikki Donin, president of Charmed World, who sells to a number of sites, including Gloss. “We got so much personalized attention from them. I’m definitely concerned that the Internet is going to go in the direction of the big corporate brands.”

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