Est é e Lauder China still hasn't solved its biggest crisis right now
jiangcr81
发表于 2024-6-24 19:23:33
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The beauty industry's financial official account "Cosmetics Watch Outlook" recently quoted a source saying that Estee Lauder Group in China may withdraw the operation right of China's duty-free channels in July 2024. Previously, Est é e Lauder Group had long implemented a "dual track" system, with regular retail business managed by the China region and duty-free channels managed by the global headquarters.
However, Est é e Lauder Group's China PR team told Interface News that the news about the end of the "dual track system" is not true.
However, Est é e Lauder Group's business in China has indeed been affected by the existence of a "dual track system". The tourism retail business accounts for nearly 20% of Est é e Lauder Group's total revenue, and according to a report by Barron Weekly, the Chinese market contributes about 30% of Est é e Lauder Group's total sales.
In the three years of the epidemic, the high-end beauty market in China has developed rapidly due to the return of overseas consumption. During this period, the introduction of Hainan's new tax exemption policy has greatly increased the proportion of Est é e Lauder Group's tourism retail business in China. As expected, when society returns to normal, Chinese consumers will have a higher willingness to shop. Therefore, Est é e Lauder Group will bet more resources on Hainan, including more goods.
Expectations have not kept up with the changes, and the demand for Chinese consumers to purchase brands under the Est é e Lauder Group in China has decreased. However, visas, international flights, and group tourism have not fully recovered in 2023, resulting in a failure to meet expectations for the recovery of tourism retail business in overseas countries. In the fiscal year 2023, Est é e Lauder Group's tourism retail sales decreased by 34%.
Due to the existence of a "dual track system", Est é e Lauder Group's China region finds it difficult to handle a large amount of goods piled up in domestic tourism retail channels. The CEO of the group, Fabrizio Freda, previously stated in the financial report that due to the tourism retail business being severely affected by the epidemic and failing to rebound, they had to increase promotional efforts to clear excess inventory in the Asian tourism retail business.
This has led to the chaos of Est é e Lauder Group's retail channel price control system. At the official flagship store of Tmall, Est é e Lauder's 50ml seventh generation small brown bottle is priced at 960 yuan, but on Taobao, purchasing agents can offer a price of less than 300 yuan for a 100ml small brown bottle. Regardless of the authenticity of the product, consumers will first doubt the actual value of the product when they see the price comparison.
For Est é e Lauder Group, even if the tourism retail business is recovered in the China region, it is only a single level adjustment to the company's operational status. The aging image combined with disorderly prices in tourism retail channels is the reason for the poor performance of Est é e Lauder Group.
Est é e Lauder Group's brands have not launched any new well-known products for a considerable period of time. Analyst Callum Elliott from consulting firm Bernstein pointed out that the image and customer base of Est é e Lauder Group are aging, and the group's CFO Tracey Travis has previously acknowledged that it is currently being impacted by a large number of niche brands.
Est é e Lauder and The Mystery of Sea Blue are the two most well-known brands of Est é e Lauder Group in China, while also driving the most significant performance of the two brands. In the past few years, these two brands have relied heavily on classic products and lacked the ability to manufacture new and popular products. The combination of several rounds of price increases and a decrease in demand for high-end skincare products has naturally put pressure on performance.
The mystery of Hai Lan is positioned as high-end, and its products still maintain a basic price range of thousands of yuan despite the chaotic channel prices. However, Est é e Lauder, as the main brand, has seen the prices of popular brands appear in third-party channels, which undoubtedly has a greater impact on it.
Est é e Lauder Group has also attempted to promote other sub brands, such as Clinique, Dolphin, and Yuemuzhiyuan. But these brands are also in an awkward situation where only basic products are popular and advanced products are not popular. Perfume brands Fumar and Kelian have shown outstanding growth, but their overall scale is too small, which has limited impact on the group's performance growth.
Compared to adjusting tourism retail channels, Est é e Lauder Group's current strategy is focused on reshaping its high-end image. Its latest move is to adjust prices in the Chinese market starting from July, involving brands such as Est é e Lauder, The Mystery of Sea Blue, Zumalang, Yuemuzhiyuan, Bobbi Brown, and M A.C。
Another measure is to launch more high-end products. Mystery of the Sea Blue has recently launched three new products, namely, Yuling Cloud Wool Cream, Yuling Miracle face cream and Yuling Chilling Cream. Estee Lauder has invested more marketing resources in high-end Re Neutriv series. Brands such as Qianbi and Yuemuzhiyuan have adjusted their positioning and placed more emphasis on skin science research to shape their professional image.
For the Chinese market, Estee Lauder Group plans to launch a batch of localized new products in the second half of 2024, one of which belongs to the Perfectist Pro series of Estee Lauder. The previous "fiber carving essence" and "spot bullet essence" belong to this series, but the new products focus more on meeting the needs of Chinese consumers for sunscreen efficacy.
According to the latest Q3 financial report for the 2024 fiscal year, Est é e Lauder Group's sales increased by 5% year-on-year to $3.94 billion in the three months ended March 31, with the Chinese market, which has been dragging the group down for two consecutive quarters, returning to low single digit growth. According to business division, the sales of skincare products increased by 9%, mainly due to the effective promotion of the plan to reduce inventory levels.
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声明:该文观点仅代表作者本人,本文不代表CandyLake.com立场,且不构成建议,请谨慎对待。
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