LAUDER, CHANEL, CLARINS FORM BEAUTY TROIKA IN CYBERSPACE

Byline: Pete Born / With contributions from Jennifer Weil, Paris

NEW YORK — A bit of history was made Thursday morning when top executives from Estee Lauder Cos., Chanel Inc. and Clarins USA sat down in a midtown conference room to rewrite the rules of beauty retailing in cyberspace.
The troika had come together to unveil a partnership — representing a degree of commercial cooperation unheard of in the cosmetics industry — in which all three companies now share ownership of gloss.com, the beauty Web site acquired by Lauder in April. Chanel and Clarins have acquired a stake in the site, which will retain the gloss.com name. Terms were not disclosed, but it was earlier estimated that Lauder originally spent $20 million to acquire the Web site.
Fragrance, color cosmetics and skin care products from different Estee Lauder, Chanel and Clarins divisions will be retailed on the site, when it is relaunched in the first quarter. Recently, the Web site was taken down for renovation. As of Thursday, gloss.com’s temporary home page bore the Chanel and Clarins names and visitors were redirected to the existing Web sites of those companies plus the five Lauder brands, which operate their own Web sites.
In addition to the Estee Lauder brand, other names that will be retailed on the renovated Web site will be Clinique, Bobbi Brown Essentials, Origins and MAC Cosmetics, which commenced online retailing Thursday. Lauder has not yet decided which of its other brands will be included on the site.
Then there’s the question of other non-Lauder brands that were merchandised on gloss.com before the Web site was acquired. They run the gamut from Calvin Klein Cosmetics and Escada to indie brands like Dirty Girl and Demeter. Sarah Kugelman, chief executive officer and founder of gloss.com, said, “We are in the planning and developing phase of repositioning and rebuilding the site and we have not made final decisions.” When asked about some of the indie brands, William P. Lauder, president of Clinique Laboratories and a member of the Lauder board, said, “We may have a couple of pilot fish brands, but not a lot.”
Lauder president and ceo Fred Langhammer and William Lauder are major players in shaping their company’s Internet strategy and in sparking the formation of the new triumvirate.
“We are all about the brands and finding ways to increase awareness,” Lauder said, driving home, once again, his contention that the company’s individual brand Web sites actually drive traffic into the department stores. He and the other executives also asserted that it is a very effective way to put tremendous amounts of information before the consumer, which is a chief attraction of the Internet.
Moreover, Lauder’s research indicated that consumers prefer — by a margin of 2.5 to one — multibrand Web sites over those with a single player.
“By being associated with the best in our world,” Lauder noted, “we will thrive and survive in the reflected glory of being with the others.”
Joseph Horowitz, president and ceo of Clarins USA, also seemed intent on increasing exposure for his brands — not only Clarins but also Thierry Mugler and Azzaro — and hopefully generating some department store business while serving those who wish to shop online. Horowitz, however, strongly reaffirmed his commitment to department stores as his principal focus. As for the business potential, he speculated that the Web site could eventually generate a volume comparable to a large department store door.
Chanel has a similar philosophy. But the advantages of e-commerce were not lost on Jean Hoehn Zimmerman, executive vice president of sales and marketing for beauty and fragrances at Chanel Inc. “The exciting part for us,” she said, “is that the world is our oyster.”
And then there are the practical points. Staffing stores with top sales people is expensive and difficult, she noted, and the consumer can find out about the products without fear of intimidation. “It’s a wonderful way to discuss a brand without any pressure,” she said.
Another major player in the equation is Arie Kopelman, president and chief operating officer of Chanel. Reached by phone while traveling out of town Thursday, he said that being part of a multibrand Web site is very attractive, as long as the assortment is under control. He observed, “15 to 20 brands makes sense. When it hits 100 plus, that’s confusing. It’s like a department store.” He added, “It seemed to make a lot of sense to get together.”
Kopelman noted that there also are pragmatic reasons for collaboration. One is shouldering the costs of building backroom infrastructure, like fulfillment capability. “This is a marriage made in heaven,” he said. As for the business potential, Kopelman noted that it is difficult to speculate.
As an aside, he indicated that Chanel, like Clarins, will continue to operate its own Web site, primarily for informational purposes. “The potential to communicate the personality and image of the brand is greater on our own site than on somebody else’s.”
Each company will create its own brand module that will be major components of the gloss.com architecture. The firms can then also use their modules on Web sites of their retail customers, like Macy’s and Neiman Marcus, as they individually choose.
Horowitz pointed out that gloss.com will direct its e-commerce to U.S. zip codes only.
Lauder noted that gloss.com will be run by a “board of managers” representing the members of what he fondly referred to as “the club.” He noted, “we’ll share the expenses first and then for whatever spoils there are, each of us can fight for the nickels on the floor.”
Reached in Paris on Thursday, Christian Courtin, president of the Groupe Clarins, said: “I think it is a great venture. E-business is a very costly business and there are definitely certain economies that can be done [by linking up with other companies]. We know by experience, and through consumer research, that customers love to have choices of products.
“The Internet is a fantastic tool to have contact with the consumer. With it, you can also reach new customers — for instance, those who do not read the traditional women’s press.”
Could the site eventually include other brands? “It could,” said Courtin.
And what about possible sales in Europe? “There, we still have to understand the importance of e-business.”
Word of the gloss.com development spread quickly throughout the industry and elicited comment from one very interested observer. “There is not room for too many players,” said Steve Bock, executive vice president of merchandising at Sephora, whose Sephora.com has been one of the largest cosmetics players on the Internet. The consolidation of stand- alone pure-play cosmetics Web sites continues at a lethal pace and only a few will be left standing, Sephora being one, he added.

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