Estee Lauder Group's Offline Business Gets Tough ?
- Chaileedo Press
- Oct 13, 2022
- 4 min read
As early as the first half of this year, it was publicly reported in some Chinese media that "two brands of Estee Lauder Group, Clinique and Origins, are not selling as well as they should in the offline channel and are at risk of merging or even closing their counter."
Recently, CHAILEEDO investigation found that the combined counter of Clinique and Origins has appeared in many shopping malls in China. Is this situation a normal brand strategy adjustment of Estee Lauder Group, or is it due to pressure on performance?
Clinique and Origins combined counter
The counter in the mall is one of the important product sales channels for brands and the most frequent place for direct contact with consumers. On September 23, a mall in Inner Mongolia, China, posted on its official Weibo account that "Clinique&Origins' new counter appeared." It can be seen from the video that Clinique and Origins have merged into one counter, with each brand accounting for half.
CHAILEEDO contacted the mall for a phone interview, and the mall contact said, "The new Clinique & Origins counters are brand direct counters in the mall, just combined in one store, and the membership and points of the two brands are not common." There are also many Chinese consumers posting on social media platforms such as Xiaohongshu and Weibo that the new counters in some malls are currently half selling Clinique and half selling Origins.
Meanwhile, CHAILEEDO found through a visit to Intime Department Store in Wuhan that Clinique and Origins on the 1st floor of the mall are still two separate counters at present. According to the staff on site, "Intime Mall here will not be merged. Here originally are two stores, both the old store should not move, but the future new counter is likely to be in the form of a collocation counter."
It is worth noting that since the second half of the year, Estée Lauder Group has made changes to its brand clusters and personnel appointments. In July, Amber Garrison was named President of Origins Global Brands, reporting to Jane Hertzmark Hudis, Group Executive. In September, Michelle Freyre was promoted to President of Clinique and Origins Global Brands, reporting to Jane Hertzmark Hudis.
CHAILEEDO noted that during the brand cluster adjustment of Estee Lauder Group, Clinique, Origins, LA MER, BOBBI BROWN, Tom Ford, MAC and other brands were led by Jane Hertzmark Hudis. In other words, the group management of Clinique and Origins has merged to some extent.
May be related to poor market performance
About the Clinique & Origins combined counter, a senior industry insider analysis that "this may be related to the weak performance of Estee Lauder Group."
According to Estée Lauder Group's latest financial results, the company's full-year net sales for the fiscal year 2022 (July 1, 2021-June 30, 2022) were $17.74 billion, up 9% year-over-year, while net income was $2.408 billion, down 16% year-over-year.
The decline was particularly pronounced in the fourth quarter of the fiscal year 2022 (April-June 2022). According to publicly available information, Estee Lauder Group achieved sales of $3.56 billion in the fourth quarter of fiscal 2022, down 10% year-on-year; net income was $50 million, a sharp decline of 95% year-on-year.
On the other hand, from the brand side, Clinique achieved double-digit growth in both FY2021 (July 1, 2020 - June 30, 2021) and FY2022, according to Estee Lauder Group's FY2021 and FY2022 results reports. However, the specific market sales of the two brands Clinique and Origins were not disclosed in the Estee Lauder Group's public financial reports for FY 2021 and FY 2022.
Many industry insiders told CHAILEEDO that the market performance of Clinique and Origins has been somewhat unsatisfactory in recent years. An industry insider with years of experience in cosmetics retailing bluntly said, "Clinique and Origins are gradually being marginalized." In terms of products, Origins' star product is only an Origins Mega-Mushroom Skin Relief Soothing Treatment Lotion, and Clinique's impression among most consumers is still a CLINIQUE 3-STEP VIRTUAL SET.
The person in charge of a department store in the north told CHAILEEDO that their mall does not yet have a counter for Clinique and Origins. "I heard that the performance of these two brands is not very good, because the market response is not very good, our site will not consider introducing them for the time being." He said.
"Reduce the cost"
Furthermore, the merger of Clinique and Origins counters is also believed to be related to cost-cutting.
Some industry insiders told CHAILEEDO, in the department store channel, because of the lack of goods and personnel, the brand merged counter situation is more common, but this is still mainly domestic brands, international brands are relatively rare. "Merging counters will greatly reduce the cost of personnel and goods, in the case of increasingly poor sales performance, and want to retain the brand, can only reduce the cost of operation." She said.
An industry insider engaged in cosmetics brand management also said that the two brands belong to the same Estee Lauder group, saving staff expenses. In his opinion, "now the overall economic downturn, department store foot traffic is also declining, merging counters can allow the two brands to achieve complementarity and improve the probability of survival, which is also a response measure."
If big beauty brands merge counters to reduce costs, in Innisfree, HERA, Maybelline and other imported beauty brands have withdrawn from offline, Clinique and Origins did not choose to withdraw from the physical channel, in a sense also reflects the importance of the department store channel for high-end brands is still irreplaceable.
An imported beauty trader told CHAILEEDO that European and American brands, especially well-known international cosmetic groups, do not choose to withdraw from offline because of bad business and all turn to online channels. They actually don't like doing online business too much and think that there will be some disconnection in the interaction between brands and consumers online. Ma Xiaoyu, vice president, and general manager of L'Oreal China's premium cosmetics division, has also publicly stated that the roots of high-end beauty brands will always be offline.
It is not difficult to see that the entity channel business is difficult not only for popular brands, high-end brands also face the same problem, but in any case, the entity store for the brand image role of irreplaceable.
Comments