If e-commerce was a market for L’Oreal, then it would be the biggest in terms of market value, worth nearly €5 billion ($5.9 billion).
The cosmetics giant reached the milestone at the end of September, said its chief digital officer Lubomira Rochet. “E-commerce is our single largest market in the world,” she added. “It is a profitable channel for us and will be our number one growth driver for profit over the next five years.”
Rochet’s comments serve as a fitting coda for a tumultuous year in online media in which e-commerce kept in rude health. Unlike other businesses, L’Oreal was already five years into its own push into e-commerce, having made it a key priority following the arrival of Rochet in 2014 from digital agency Valtech. And having that head start helped once the coronavirus hit.
Here’s Rochet’s take: “E-commerce has compensated for 50% of our revenue from brick-and-mortar stores — and in some countries like South Korea it was 100%.”
As has been pointed out ad nauseam this year, e-commerce is big business. The reasons for this growth vary. More people are buying more products, from groceries to luxury goods, online. Convenience, fuelled by mobile is also becoming key to offline shopping experiences. The one thing advertisers really love is direct-to-consumer opportunities.
But that won’t be enough to post numbers like Rochet reported. As the marketer pointed out: “We did not discover digital in March when covid changed everything.” Anyone can set up an online store, whether it’s their own or via a marketplace like Amazon or eBay. The real test will be whether it can become a large, profitable business.
Back when Rochet started at the company it had clear idea of where it wanted to be in 2020. Online sales would be a fifth of the group’s sales and half of its media dollars would be spent online. Those goals have now been achieved.
“Since 2010, we’ve gone from zero to 25% of our sales coming from e-commerce, and 62% of our media investment is now in digital,” said Rochet.
It won’t take as long to reach the next milestone. Rochet expects half of the cosmetics company’s sales to come from online, whether it’s from an owner site or a marketplace, within the next three to seven years.
In contrast, e-commerce sales now account for between 11% an 12% of Procter & Gambe’s total sales.
“We’re growing two times faster than the rest of the market,” said Rochet. “Today, the group’s gowth of e-comemrce is above 60%, though for some divisions its above 80%.”
And no, the growth of those sales isn’t down to China. Many businesses have their online sales-weighted toward that part of the world, given its a more popular way to shop there. At L’Oreal, however, the growth is coming from everywhere. Even more so as a result of stay-at-home orders. As Rochet explained: “It’s the rest of the world that’s driving our e-commerce business at around 74% whereas the wide market is growing at around 40%.”
Some markets are growing faster than other. In Japan, for example, the company’s e-commerce sales are currently growing at 107%. It’s even faster in Brazil where the rate is at 174%. For Latin America, that figure is around 200% whereas across Africa and the Middle East it’s at 250%.
None of L’Oreal’s secrets for e-commerce will come as a shock. In fact, they’re more of a return to basic media principles: Nurture meaningful brands and pursue multiple revenue streams — L’Oreal has seven different forms of e-commerce including direct-to-consumer commerce, affiliate social commerce, live-streaming shopping and subscription-based e-commerce. Also important, hire specialists. Over the last five years, L’Oreal has hired 3,000 execs, many of whom are part of its e-commerce businesses.
Rochet notes that there is no one-size-fits-all model for e-commerce. An e-commerce site won’t be the answer and neither will a pure-play marketplace and regardless of the model —execution trumps all.
“In 2020, store closures and shifting consumer behavior amid the pandemic have accelerated the shifts to e-commerce and DTC that we’ve been seeing in luxury and in beauty for a number of years,” said Tim Lardner, client strategy partner at digital agency PMG. “Across the industry, we’ve seen brands who have aggressively adapted to the shift in consumer behavior have the most success in driving their business through digital.”
Fifteen companies including Amazon, feature L’Oreal’s virtual try-on technology called Modiface on their sites and apps. If people can see how a different hair color looks on them from the comfort of their own smartphone it’s that much easier for them to know if they want it, said Rochet. Since the business acquired the technology two years ago, it has been used over a billion times.
That number is set to get even bigger. Shoppers searching Google for cosmetics products will soon be able to try those from L’Oreal virtually. They will also be able to do the same when searching for cosmetics videos on Youtube.
While e-commerce sales have been able to offset some losses this year, they did slow down during L’Oreal’s, last quarter as lockdowns were relaxed. However, it was slight and sales are expected to rise once again amid a second wave of lockdowns across Europe.
“There has been an acceleration of all our partnerships due to the pandemic,” said Rochet.