Byline: Brid Costello / Jennifer Weil

PARIS — E-commerce is laying siege to prestige beauty sales in Europe.
For almost 10 years, prestige brands have been able to control to whom they sold their products, following the creation in 1991 of selective-distribution contracts. Although originally created to fend off hypermarket sales, the so-called selective-distribution contracts have also been used to shut out the growing e-commerce sector.
The latest development was this week’s ruling by the Commercial Court of Nanterre, a suburb of Paris, that prohibited the sale of YSL Beaute’s Yves Saint Lauren and Van Cleef & Arpels products via Parfumsnet’s Web site, The ruling sets a precedent for prestige beauty manufacturers looking to guard their image on the Web.
The decision comes a few months after the European Commission changed its stance on selling high-end beauty items over the Internet. Until June, high-end beauty manufacturers were protected by selective distribution contracts allowing companies to limit their distribution and refuse retailers in the European Union that did not meet key criteria in ambience, service and prestige assortment. In launching the case, YSL Beaute, a division of Gucci Group N.V., said it did not intend to be anti-Internet. Instead, it wanted to regain full control of its brands
“Our priority is to protect the selective distribution of our prestige products and to protect our current distributors,” said James Ragesdale, director of fragrances for Van Cleef & Arpels and director of e-business for YSL Beaute. “We are for the Internet but under certain conditions.
“We are very happy about the decision since it sets a precedent,” he added. YSL was one of the two companies that crafted the original selective-distribution contracts.
Brands are currently hammering out what selective criteria they want sites to fulfill in order, and are particularly keen on the court outcome. According to Claude Palatin, president of Escada Beaute and chairman of the Federation’s electronic commerce committee, one key point is that online boutiques should be linked with brick-and-mortar stores that have selective-distribution contracts.
But the decision is not set in stone, and Parfumsnet said it is going to take action. “We will appeal; we believe the outcome was unjust,” explained Carlos Soler, manager of the Parfumsnet France site. “In terms of volume, [our not selling those brands is] not going to a make a big difference. People want to buy luxury products on the Internet.”
Parfumsnet, which went live in 1999, has local platforms in France, Italy and Spain. It sells fragrances, cosmetics and skin care products from more than 70 brands, including Chanel, Givenchy and Christian Dior.
Soler claimed Parfumsnet contacted prestige-brand executives in an attempt to set up bona fide contracts, but that some did not respond. Some sent contracts, but since the documents were meant for brick-and-mortar retailers, the pure-play Parfumsnet couldn’t sign them. As a result, said Soler, Parfumsnet was obliged to sign on with an “authorized” distributor of prestige goods.
That explanation doesn’t fly with all the brands, though. “We don’t know where they get the products from; for us, that’s parallel distribution, and clearly that is something we can’t tolerate,” said Ragesdale, who added that the site never contacted his company. “We did not get an official note from them until we started proceedings.”
Parfumsnet discounts significantly. For example, it currently has a 100-ml. Dior J’adore fragrance at $54 (FF 405). The same item sells at the Sephora on the Champs-Elysees here for $67 (FF 505). All figures are at current exchange rates. Patrick Choel, president of perfumes and beauty for LVMH Moet Hennessy Louis Vuitton, which owns Dior, said legal action is being taken.
Others are following suit, including Parfums Lolita Lempicka, which is expecting to start court proceedings today, said Philippe de Painnette, director of France for Parfums Lolita Lempicka. Ralph Lauren Fragrances is also studying the situation, said Andrea Robinson, general manager at the firm.
Meanwhile, retailers are forging ahead with plans to sell prestige products online. France’s largest perfumery chain, Parfumeries Marionnaud, for instance, started retailing Isabella Rosselini’s Manifesto online as an exclusive last week.
Germany’s intends to “buy perfumeries on a large scale in the future, so we won’t be just online retailers,” and therefore able to qualify to sell prestige beauty brands, according to Finan Pefin, chief internet officer at the site.

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