Undoubtedly, e-commerce increases in importance for all industries - from power tools to books, medical supplies to toys, e-commerce is a source of sales like never before. With advancements in technology, proliferation of portable internet devices and increased functionality of social networks, it is safe to assume this retail channel will continue to grow with force.
But two of the most important spaces for online retail are beauty and luxury. Take Estee Lauder Companies for example. In 2012 web sales increased worldwide, reporting 20% growth in the US, 34% in the UK, 40% in China and a whopping 55% in Germany. They've cultivated about 340 marketing and e-commerce sites in 50 countries since 2001. Total sales climbing 10.2% to $9.7 billion earned them the No. 58 spot on Top 500 list of internet retailers. Where those numbers only make up 5% of their total sales for the year, there is no question that web presence is becoming continually important for the sector.
This focus on e-commerce, however, could mean something quite different for luxury clothing brands. Online retail funding for custom-made clothes doubled last year to $328.7 million. Why are venture capitalists investing so much in this market? Because its booming. Custom clothing startups like J.Hilburn Inc., American Giant and Bonobos Inc. are gaining share in the US e-commerce market- winning customers because cutting stores from the supply chain allows for lower price points than department stores who often marked up 3x from factory to store. Putting it in perspective: a men's dress shirt from J.Hilburn sells around $125, the same shirt from Zegna on Neiman Marcus website sells for $325-$435, even though the fabric is sourced from the same Italian mill.
Lesson: Zegna and other lux brands need to differentiate themselves from this market to give (particularly Millennials) consumers a reason to spend the extra money since they are providing extremely similar services at fractions of the price. I say this is important particularly for the Millennial audience because, where they may be in school debt, they are the largest group purchasing apparel, spending 8% more than those ages 35-44. Millennials are willing to spend, sure, but are also aware of their debt and happy to find a deal, which is why sites like Gilt and Rue la la are so popular with this demographic.
Additionally, online sales are not limited to a computer. 41% of Millennials have made a purchase using their smartphone. We are seeing an influx of purchasing from tablets and smartphones across all demographics, and if companies aren't optimizing they are losing sales. And this is not just in the US- growing mobile device usage in emerging markets like China, India and South Africa create excellent opportunities for cutting edge luxury and beauty brands to increase sales and develop prefernce from Millennials, a fiercely loyal group.
Thursday, August 30, 2012
Friday, August 24, 2012
Digitization of Wine
Wineries are beginning to incorporate more technology into their marketing communications. For example, there are now digital wine menus with videos about products in restaurants, sales teams are using iPads to conduct business with more dynamic content, and QR codes are cropping up on wine bottles to direct consumers to descriptions and reviews.
These advancements are incredibly important for the wine industry, particularly as they continue to foster a relationship with millennial men and women who make up 20% of all wine consumers. Rather than consulting a sommelier, millennials turn to the internet and interactive packaging to gain knowledge about their wines, and are extremely open to trying new wines. Since 65% of millennials report that they are only apart from technology for an hour or so a day, it is imperative that the wine industry moves into this space.
Generally, wholesalers use speck sheets or tastings of their wine to present it to retailers, but digital presentation is on the horizon. Wine store owners feel that digital could be a useful way to access information and promote wine to consumers during the lag time often found between ordering and receiving the product. Owners also expressed that speaking with winemakers and winery owners interests them the most when wholesalers present their wines. And this doesn't just work for retailers. Stores like Total Wine & More are offering in-store iPads showing food pairings while consumers browse their selection. They developed this offering because they've seen an increase in customers wanting more information about their wines outside of the taste. They want to know where it comes from, see the vineyards and understand the process.
Digital is also an advantage for vineyards. In Napa, CellarPass and VinoVisit.com are trying to create the OpenTable of wineries by creating smartphone apps that help visitors plan tours in wine country. Not only do the websites and apps help reach new audiences, but also aid in vineyards staffing and preparations. At the moment, CellarPass is processing 30,000 guests a month and the app has had 6,000 downloads since its launch in March.
Digital is also an advantage for vineyards. In Napa, CellarPass and VinoVisit.com are trying to create the OpenTable of wineries by creating smartphone apps that help visitors plan tours in wine country. Not only do the websites and apps help reach new audiences, but also aid in vineyards staffing and preparations. At the moment, CellarPass is processing 30,000 guests a month and the app has had 6,000 downloads since its launch in March.
Example: Jordan Winery and Vineyard
Sales team used iPad presentations to push their brand to retail outlets and distributors. With a few taps on the screen, a sales representative can move seamlessly from the sales pitch to the order form.
The winery even shot custom videos for its major retailers, which then provided their online and in-store customers with a window into the Jordan harvest or techniques. These videos can also be used in restaurants as digital wine lists or in store.
Jordan is a digital leader in the industry and their climbing sales attest to the necessity for wines to get in the mix with their technologically savvy consumers.
Jordan is a digital leader in the industry and their climbing sales attest to the necessity for wines to get in the mix with their technologically savvy consumers.
Friday, August 17, 2012
Economy of Nails
When economic times are tough, one might imagine that money spent on superficial products like cosmetics and clothes might be the first expense to be cut. Scholars would disagree. And I theorize that nail polish is the new indicator.
Over the past nine decades many learned scholars have shed light on the correlation between economic conditions and seemingly non-necessary products for women. The Hemline Index asserts that as the economy weakens, miniskirts come out. When assessing a representation of women's fashions between 1916 and 1999 in US Vogue, as discussed in a paper published in Human Nature, as economic conditions worsen, skirts shrink. Evolutionary-minded scholars have argues that as economic conditions worsen, intrasexual rivalries yield shorter skirts, perhaps as a unconscious strategy for women to beat out men. What is fascinating as well is that there is a direct correlation between women's education and hem length. Nigel Barber's article Sex Roles he argues that as more women are educated, skirts become shorter, perhaps to augment sexual signaling in the mating market. Where this theory may be reductive and a tad be sexist, I say use what your mama gave you. I'll let the reader judge of how offensive they find these theories, but there is no question that the miniskirt and hot shorts are back on trend during our current economic troubles.
Another theory we are seeing played out today is the Lipstick Index. Developed by Leonard Lauder, former chief executive officer of Estee Lauder, declared in 2001 that as the economy worsens, lipstick sales amplify. Prestige lip category sales in department stores grew in the US over the first half of 2012 by 8%, lead by a 10% growth in lip color and 54% growth in multifunctional lip products. Lip is the third-largest makeup segment. The growth in lip sales is likely due to the fact that lip color is an inexpensive way for women to look put together and try something new. Cosmetics retail giant Sephora has already predicted blood-red lips as the key trend for fall. Transitioning from summer corals and pinks to fall red and burgundy, saturated lips are a popular trend that is economically feasible to achieve.
Hemlines and lipstick are noted, but I'd like to throw my support to a new index: the nail-bar-ometer. Along with many business people, I have been noticing a overt push toward nail color, designs and manicures/pedicures. Articles in fashion magazines and beauty blogs abound on nail art, hot colors and funky styles, and they don't seem to be stopping-- as seen by the abundance of nail products taking center stage at the Cosmoprof North America beauty trade show, often the hotbed for up-and-coming trends. I hypothesize that women participating in nail art, color and trends has a negative correlation to economic conditions, as supported by the following indicators.
Over the past nine decades many learned scholars have shed light on the correlation between economic conditions and seemingly non-necessary products for women. The Hemline Index asserts that as the economy weakens, miniskirts come out. When assessing a representation of women's fashions between 1916 and 1999 in US Vogue, as discussed in a paper published in Human Nature, as economic conditions worsen, skirts shrink. Evolutionary-minded scholars have argues that as economic conditions worsen, intrasexual rivalries yield shorter skirts, perhaps as a unconscious strategy for women to beat out men. What is fascinating as well is that there is a direct correlation between women's education and hem length. Nigel Barber's article Sex Roles he argues that as more women are educated, skirts become shorter, perhaps to augment sexual signaling in the mating market. Where this theory may be reductive and a tad be sexist, I say use what your mama gave you. I'll let the reader judge of how offensive they find these theories, but there is no question that the miniskirt and hot shorts are back on trend during our current economic troubles.
Another theory we are seeing played out today is the Lipstick Index. Developed by Leonard Lauder, former chief executive officer of Estee Lauder, declared in 2001 that as the economy worsens, lipstick sales amplify. Prestige lip category sales in department stores grew in the US over the first half of 2012 by 8%, lead by a 10% growth in lip color and 54% growth in multifunctional lip products. Lip is the third-largest makeup segment. The growth in lip sales is likely due to the fact that lip color is an inexpensive way for women to look put together and try something new. Cosmetics retail giant Sephora has already predicted blood-red lips as the key trend for fall. Transitioning from summer corals and pinks to fall red and burgundy, saturated lips are a popular trend that is economically feasible to achieve.
Hemlines and lipstick are noted, but I'd like to throw my support to a new index: the nail-bar-ometer. Along with many business people, I have been noticing a overt push toward nail color, designs and manicures/pedicures. Articles in fashion magazines and beauty blogs abound on nail art, hot colors and funky styles, and they don't seem to be stopping-- as seen by the abundance of nail products taking center stage at the Cosmoprof North America beauty trade show, often the hotbed for up-and-coming trends. I hypothesize that women participating in nail art, color and trends has a negative correlation to economic conditions, as supported by the following indicators.
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| Photo: Ian Langsdon/EPA as seen in Time's "The Olympic Manicure" |
- The popularity of nail bars in this economic climate has skyrocketed, with retail analysts hailing them as some of the fastest growing businesses in both Europe and the US. Nail bars in the UK accounted for 16.5% if new outlets opened in the past three years, seeing a 14% increase in sales of nail varnishes.
- Currently there are about 496 boards on Pinterest devoted solely to nails.
- We even saw the craze during the Olympics with athletes from across the world sporting their countries flags and colors on perfectly manicured hands.
- In US department stores, the nail segment lead prestige makeup sales in the first half of 2012 seeing a staggering 68% growth. This incredible surge is supported by color enamel up 70%, nail care up 38% and base/top coats up more than 100%.
Friday, August 3, 2012
South Korean Beauty Boom
Cultural values of beauty, constantly improving domestic manufacturers and recession repercussions have made South Korea one of the most important beauty trendsetters and booming markets not only in Asia, but the world.
In 2011 the professional skin care products market grew by 5.3%, driven by strong showings in China, growing by 9.3%, and South Korea, growing. Amore Pacific data concludes that the cosmetics market in South Korea is steadily climbing from 7.9 trillion in 2009, to 8.9 trillion in 2010 and 9.7 trillion in 2011. The boom in South Korea is largely attributed to a regulatory change that drove investment in beauty industries as well as greater consumer spending on domestic products. Furthermore, internet and home shopping channels grew by nearly 18% as domestic brands developed e-commerce channels contributing to larger online shopping channels.
All and all the digital sector plays a major role in South Korean beauty, with blogs and social media creating extremely savvy customers and e-commerce not only allowing for more purchases in-country but also from outside as well. If Chinese travelers are driving luxury sales in Europe, they are doing the same for beauty in South Korea. Cosmetic companies in the country have benefitted from the steady increase of Chinese and Japanese visitors and internet customers purchasing beauty products produced in South Korea.
The main reason for the boom, though, is the cultural significane of skincare and beauty in South Korea. Their shoppers are extremely beauty savvy, are knowledgeable about products and take their skincare seriously. They are unique in that 64% of the beauty and cosmetics market is comprised solely of skincare and makeup. South Korean women cherish flawless skin, leading to skincare occupying about 49% of their market. Between the facial skincare, makeup and night routine it is estimated that South Korean women use around 17 products daily.
Foreign beauty brands are recognizing the importance of South Korea, yet their sales are struggling. Beauty giant Estee Lauder is extending their portfolio to include a new DayWear creme in Asian retail stores, as well as adding a trio of Optimizer Intensive Boosting Lotions on-counter this month. L'Oreal also develops unique formulas and patents for its Korean market, citing the climate and lifestyle differences that must be taken into account for skincare. Regardless of tailoring their products, Estee Lauder reported an 11% decrease in sales from the first half of 2012 as compared to 2011, and Lancome posted a 17% fall in sales over the same period.
Decisions to purchase domestic products are supported by a variety of factors.
1) South Korean manufacturers have produced at a much higher quality over the last decade.
2) Aggressive marketing of "one brand shops"over the past few years, and their opening locations in major shopping districts, hypermarkets, malls and even residential areas.
3) Foreign cosmetic companies primarily sell at department stores, which customers have been avoiding during the recession.
4) Domestic products are significantly cheaper than foreign brands.
Foreign beauty brands should continue making products especially formulated for South Korean skin and environment, but they also need to look at their marketing and product placement. Using a KIO program to partner with bloggers to promote their products would be beneficial in gaining the trust integral to recruiting new customers would be key. Focused sampling plays, trial events and discounts could assuage the fear to spend during the recession.
Perhaps more importantly, recognizing the cultural differences in approach to skincare: South Korean women treat their skincare as a medical necessity, not superficial fun. Placing products in pharmacies and promoting a message of scientific benefit would be more in line with South Korean perceptions of beauty. Finally, creating one brand shops of their own, or partnering with domestic companies to get shelf space out of the department store could be a crucial win for foreign competitors.
In 2011 the professional skin care products market grew by 5.3%, driven by strong showings in China, growing by 9.3%, and South Korea, growing. Amore Pacific data concludes that the cosmetics market in South Korea is steadily climbing from 7.9 trillion in 2009, to 8.9 trillion in 2010 and 9.7 trillion in 2011. The boom in South Korea is largely attributed to a regulatory change that drove investment in beauty industries as well as greater consumer spending on domestic products. Furthermore, internet and home shopping channels grew by nearly 18% as domestic brands developed e-commerce channels contributing to larger online shopping channels.
All and all the digital sector plays a major role in South Korean beauty, with blogs and social media creating extremely savvy customers and e-commerce not only allowing for more purchases in-country but also from outside as well. If Chinese travelers are driving luxury sales in Europe, they are doing the same for beauty in South Korea. Cosmetic companies in the country have benefitted from the steady increase of Chinese and Japanese visitors and internet customers purchasing beauty products produced in South Korea.
The main reason for the boom, though, is the cultural significane of skincare and beauty in South Korea. Their shoppers are extremely beauty savvy, are knowledgeable about products and take their skincare seriously. They are unique in that 64% of the beauty and cosmetics market is comprised solely of skincare and makeup. South Korean women cherish flawless skin, leading to skincare occupying about 49% of their market. Between the facial skincare, makeup and night routine it is estimated that South Korean women use around 17 products daily.
Foreign beauty brands are recognizing the importance of South Korea, yet their sales are struggling. Beauty giant Estee Lauder is extending their portfolio to include a new DayWear creme in Asian retail stores, as well as adding a trio of Optimizer Intensive Boosting Lotions on-counter this month. L'Oreal also develops unique formulas and patents for its Korean market, citing the climate and lifestyle differences that must be taken into account for skincare. Regardless of tailoring their products, Estee Lauder reported an 11% decrease in sales from the first half of 2012 as compared to 2011, and Lancome posted a 17% fall in sales over the same period.
Decisions to purchase domestic products are supported by a variety of factors.
1) South Korean manufacturers have produced at a much higher quality over the last decade.
2) Aggressive marketing of "one brand shops"over the past few years, and their opening locations in major shopping districts, hypermarkets, malls and even residential areas.
3) Foreign cosmetic companies primarily sell at department stores, which customers have been avoiding during the recession.
4) Domestic products are significantly cheaper than foreign brands.
Foreign beauty brands should continue making products especially formulated for South Korean skin and environment, but they also need to look at their marketing and product placement. Using a KIO program to partner with bloggers to promote their products would be beneficial in gaining the trust integral to recruiting new customers would be key. Focused sampling plays, trial events and discounts could assuage the fear to spend during the recession.
Perhaps more importantly, recognizing the cultural differences in approach to skincare: South Korean women treat their skincare as a medical necessity, not superficial fun. Placing products in pharmacies and promoting a message of scientific benefit would be more in line with South Korean perceptions of beauty. Finally, creating one brand shops of their own, or partnering with domestic companies to get shelf space out of the department store could be a crucial win for foreign competitors.
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