loreal brandstorm 2015- lancome travel retail experience presentation

60,3 US$ billions

1,087 billion travellers

1,159 US$ billions spend

Perfumes and cosme@cs 30% of market share

Giulia Fraccaroli Anna Frontani Uroš Jovanović

BEAUTY FREE TEAM

AGENDA

6th Con@nent overview

6th Con@nent inhabitants

Lancôme analysis

Conclusions

Roots of beauty

6th Con@nent overview

$ 120

$ 60

2011 2012 2020

Market size and trends

$ 37 $ 56

$ 46

2013 2010 Travel Retail size

[billion]

DDF

New (mega) airports, BM change, Aerotropolis

DDF DDF “fever” in Asia

China-‐ ‘New Caribbean’

Digitaliza@on of services

6° ConMnent inhabitants

6° ConMnent overview Lancôme analysis Conclusions Roots of Beauty

Travel Retail evoluMon 2014-‐2024

2014 Consolida@on Branding Legisla@on Omni-‐channel Convenience

Source: WTM Global Trends Report

Travel Retail evoluMon 2014-‐2024



6th Con@nent inhabitants

Global DF (non-‐)shopper

GLOBAL DUTY FREE SHOPPER

56% 44%

19% 81%

Low (0-‐3) 48% Regular (4-‐7) 34% Frequent (7+) 18%

!   Duty free are preferred POS !   PromoMon !   Gicing

GLOBAL DUTY FREE NON-‐SHOPPER

51% 49%

78% 22%

Low (0-‐1) 38% Regular (2-‐3) 43% Frequent (3+) 19%

!   Lost relevance !   Other acMviMes !   Value percepMon



Source: TFWA Global Duty Free & Travel Retail Non-‐Shopper Research Study

Where do they...



come from?

go to?

Travel retail segmentaMon

Travel purpose

Flying frequency

Gender Age [years]

Income [$/month]

DF purchase frequency

Categories

Bargain seeking self-‐indulgers

<35 1000 -‐5000

Low income promoMon swayed

<30 <2000

Low budget gic shoppers

<35 <2000

EmoMonal high seekers

<30 1000-‐6000

ConvenMonal deal seekers

>50 <5000

ExecuMve pre-‐planners

46-‐60 >9000

AuthenMc product seekers

All ages

>6000

InspiraMon seekers All ages

<5000



Source: TFWA The Travel Retail Industry's 1st Global & Cross-‐Category SegmentaMon Study

China, Russia & Brazil !   Most ac@ve social

media community !   Maximize savings !   Needs:

engagement, experience and trust

!   Imitate the preferences of the West

!   Looking for high quality foreign products

!   Huge untapped market for foreign travel

!   Spending overseas (129 US$ billions)

!   Awareness of product offer and latest trend



Lancôme analysis

Lancôme Brand & Heritage

Armand Pe@tjean

Fragrances

Luxury and femininity

Happiness & Smile

The French Touch Le Château

de Lancosme


6° ConMnent overview

Lancôme analysis Conclusions Roots of Beauty

Digital strategy

Official web site tools Viral strategy

Virtual mirror Elite Rewards CRM




Lancôme Performances

Brand Value 6,811 US million

dollars

Market Share 8,5%

L’Oréal Luxe sales +7,5% (stable growth)

Digital Strategy

Lagging in introducing TR

Division




Source: L’Oréal Annual report

Porter’s 5 Forces

Intensity of Rivalry 6° ConMnent inhabitants



!   Worldwide reputaMon !   Belonging to LVMH !   More than 200 wholly owned POS

!   Specialized in Asian skincare !   Strong presence in Japan !   Low group performances

!   Highest brand awareness !   Strong heritage !   TesMmonials

!   Longer experience in travel retail !   Strong brand reputaMon !   Geographically diverse business

Lancôme CompeMMon




Travel retail experience

Beauty assistant touch Hand luggage burden No taste provided

Being special Buying a gic Time pressure

Shop assistant voice Music Outside noise

State-‐of-‐art POS Excellent visual experience Screens and ads CompeMtors products and ads

Shop fragrances




Lancôme in Travel Retail

Loyal to brand, planned purchase, knows exactly what she wants

Lancoyal

Impusive shopper, fashion vicMm not loyal to specific brand

Beautymo@onal Buying gic for partner, no loyalty, interested in fragrances

Serial girer

Showing their new status, not decided on the brand, needs assistance

6th cont. immigrants

Placement & Physical Evidence

PromoMon Product & Price PersonalizaMon & Personnel




Conclusions

Strengths S trong posiMon on the market

T ravel retail experience provided

R etail POS state-‐of-‐art

E xclusive travel retail porsolio

N oterworthy markeMng acMviMes

G reat digital strategy

T ailor-‐made approach for different naMonaliMes

H igh brand awareness

S upport of L’Oréal




W orld shopper database missing

E ffect of intermediary sales channels

A besence of more natural ingredients

K ey relaMonship formed with some compeMtors (LVMH)

N ot too much direct point of sales

E xperience needed in young populaMon cosmeMcs

S hould have integrated social media channels

S ide effects of L’Oréal relaMonship

Weaknesses




OpportuniMes O pening of new assets and concession space (airports)

P erfumes and cosmeMcs category is N°1 and growing

P urchaising power and middle class is rising in emerging markets

O pportunity of acquaring new consumers

R elevance of air-‐travel increase

T “ravelling = shopping” consumers’ mindset

U nleashed power of digitalizaMon

N ew DDF shops opening in Asia

I ncreasing interest in beauty products

T rend of beauty EuropizaMon among Asian consumers

Y oung populaMon targeMng




Threats

T ravel retail growing complexity

H igh profitability could ayract new compeMtors

R ole of facilitators is crucial E nvironment requirements’ spread

A uthoriMes impact

T ransformaMon of conusmers needs

S ocial media can have a negaMve impact 6° ConMnent inhabitants



Roots of beauty

Roots of beauty idea

Unapeđenje Časova fizičkog

3. General mission of ayracMng and acquring new consumers from emerging countries

1. Provide an unique travel retail experience to Lancome consumers

2. No integrated consumer database with info about travel shoppers

1. Exclusive and once in a lifeMme experience provided

2. Elite Rewards loyalty CRM database expanded specifically with travel shoppers

Post-‐event promo@on

Pre-‐event campaign

Ac@vity Issues Outcomes

3. InnovaMve special event that could be repeated annualy with great viral potenMal

Roots of beauty event



Lancôme analysis Conclusions Roots of

Beauty

Roots of beauty event

Roots of beauty



Lancôme analysis Conclusions Roots of

Beauty

BEAUTY FREE TEAM THANK YOU FOR YOUR ATTENTION

KPI for TR industry

Region / KPI [percentage growth]

Middle East

Africa Asia Americas Europe

Travel retail value (US$) 10,2 2,1 5,6 5,6 1,6

Real GDP growth 4,8 6,1 5,8 2,6 2,7

Arrivals 6,9 5,5 5,5 3,6 2,8 Incoming Tourist receipts

value (US$) 10,0 6,5 5,9 6,3 1,8

Air transport value (US$) 8,8 5,9 7,3 6,5 1,6

Table 2: Key performance indicators for travel retail industry (Growth in %, 2014)

Table 3: Es+mated Air traffic Size and regional growth (2014-‐2034)

PoliMcal

!   Tension between Europe/USA and Russia regarding situaMon in Ukraine (Trade embargo in Russia)

!   Regional (South Korea-‐North Korea, Israel-‐PalesMne, Serbia-‐Albania) and local poliMcal tensions (Hong Kong, Mexico, Burkina Faso)

!   Government poliMcs towards free economic zones !   Different countries policies towards travel documents’ release

!   North Africa’s civil wars !  Middle East civil wars

Economical

!  Emerging markets’ strong economic growth (BRICS)

!  The 2008 world economic crisis !  VariaMons in taxaMon policies !  GlobalizaMon !  Growing cost of energy and transportaMon !   Interest and exchange rates values

Social

!   Demographical changes (increase of ageing populaMon in developed countries and younger populaMon in undeveloped ones)

!   Rise of the middle class in BRICS ! ServiMzaMon !   Growing complexity in consumer behaviours and needs !   Internet as the main source of informaMon !   Different concept of beauty different countries !   Fear of Ebola epidemic spread-‐out and terrorist acMons !   Cultural differences in travel retail shoppers !   Health and wellness consciousness

Technological

!  DigitalizaMon !  Sustainable transportaMon trends !  New technologies and venues introduced in airports to control traffic (Aetropolis concept)

!  Expansion of e-‐commerce tools !  Shorter product life-‐cycle !  Growing importance of R&D acMviMes (innovaMons and patents)

Environmental

!  Rising awareness on environmental polluMon reducMon

!  Growing importance of “green” technology in transportaMons

!  Consumers` awareness about eco-‐friendly products/services

!  Climate changes and global warming !   Increase of the volume of the exploitable oil reserve

Legal

!  Different regulaMons regarding duty free areas throughout world

!  Growing restricMons on tobacco industry (i.e. cigareye ban in Australia)

!  Different restricMons on what passengers can bring on the plane (liquids, gels and aerosols)

!  RegulaMons on products’ ingredients !  Presence of anMtrust laws !  Consumers and employees laws

Air-‐travel trends

Region Asia Pacific

North America

Europe La@n

America Middle East

Africa

Market size 2.9 billion 1.4 billion 1.4 billion 605

millions 237

millions 294

millions Annual avg. growth rate

4.9% 3.3% 2,70% 4,70% 4,90% 4,70%

Table 3: Es+mated Air traffic Size and regional growth (2014-‐2034)

Porsolio and its SWOT Porsolio’s Strengths

Good cleansers; Almost all of the sunscreens contain either avobenzone, ecamsule (Mexoryl SX), or Mtanium dioxide for sufficient UVA protecMon; Several excellent foundaMons with beauMful shades for almost every skin color; Lancôme is known for their mostly outstanding mascaras; Some fantasMc lipsMcks and automaMc lip liner.

Porsolio’s Weaknesses

Expensive for what amounts to mostly mediocre to below-‐average products; Silicones and Parabens present in almost every product; No AHA or BHA products; No products to effecMvely treat blemishes or lighten skin discoloraMons; Several foundaMons with sunscreen do not provide complete UVA protecMon; RelaMvely unimpressive makeup brushes.

PercepMon map

Threat of new entry !   Government & Legal Barriers: Different laws and regulaMons on cosmeMcs ‘composiMon

according to the countries (FDA RegulaMons in U.S.A, (CE) n. 1223/2009 in Europe, CFDA in China).

!   Duty free & travel regulaMons (APTRA in Asia-‐Pacific, ETRC in Europe) !   Economies of scale and scope used by umbrella companies such as Procter&Gamble,

Estée Lauder and L’Oreal. Many large scale cosmeMc firms which enjoy economies of scale make it a barrier to entry especially for middle and small scale firms

!   Product differen+a+on: the huge variety of products that are already present in the beauty market

!   Absolute cost advantages that the major firms of the beauty industry can exploit !   Access to the distribu+on channels: the massive presence of elder and established

brands in distribuMon channels !   High capital requirements needed to enter in the travel retail market !   Retalia+on by established producers: possible lobbying acMons !   Barriers to exit include the high development and research costs. Due to the high costs

associated with developing cosmeMc products, it is difficult for firms to leave the industry without achieving the costs for producMon.

Threat of subsMtutes

!   Buyer propensity to subs+tute: on average, women in the U.S. keep the same makeup style for 11 years and conMnue to use their favourite brand or item of makeup for about 4 years

!   There are many cosmeMc products which are tailored to meeMng the needs of different market segments so the consumers can easily switch products

!   Performances of subs+tutes: emerging trend of natural and organic beauty products’ usage

!   Possibility for the consumer to buy diverse gicing opMons (indirect compeMMon)

Bargaining power of buyers

!   Price sensi+vity: personal care market’s elasMcity is -‐1.28 that is relaMvely elasMc (demand is affected to a greater degree by changes in price)

!   Bargaining power: the growing complexity of markets made customers’ choices more diversified. If the firm is not able to understand customer’s needs, there will be losses in profitability

!   Bargaining power: social networks have become new measurements systems of the customers’ saMsfacMon. Nowadays the customer can deeply influence companies’ image through reviews and opinion sharing

!   Due to the huge supply, consumers have the power to influence the market prices as opposed to the suppliers

Bargaining power of suppliers

!   Bargaining power: high number of market players and large supply of diverse products to the market

!   The renMng of physical points of sales (airports’ spaces, retail shops, on plane sales, downtown duty free shops, cruises retail spaces) are managed by external enMMes

!   The cost of switching suppliers is not high because there are many cosmeMcs companies that manufacture and create their own makeup using their own ingredients

!   Bargaining power: being a relevant source of profitability for the companies that are responsible for the stocks in points of sales (limited stocks and shelves space)

Key segments descripMon

G Age

Travel reason

and frequency

Disposable income for beaut

y

Purchase process Looking for

Loyalty to the brand

Lanc

oyal

F 35-55 Business

(frequently)

Medium to High

Planned shopping, know what they want, do not require too

much need or assistance

Skincare Makeup High

Seria

l G

ifter

s

M All ages Business

(frequently)

Low Interested in buying a gift, need

assistance and persuasion Fragranc

es Low

Bea

uty

mot

ion

al

F < 35 Leisure (often),

travelling High Impulsive shopping, need assistance

persuasion Make up Skincare Medium

6th

cont

inen

t im

mig

rant

s F All ages

Leisure, not

traveling often

Medium to High

Confused, not decided on the brand, want to show their status by buying

premium products, need assistance and persuasion

Exclusive goods Low

CompeMMon analysis

L’Oréal LVMH Estee Lauder Chanel Shiseido No. of beauty brands 38 16 32 32 23 Travel retail market

coverage P&C P&C, F&A,

W&S P&C P&C, F&A P&C

Employees 77500 110000 40000 1270 47100 Group Revenue [millions

EUROS] 28784 36515 10182 7892 4583

Group Revenue growth [%] 2,29% 3,70% 4,82% -‐ -‐0,69%

Net profit (loss) [millions EUROS] 2964 4304 1020 1954 -‐101

Opera@ng margin [%] 16,90% 21,00% 15,30% -‐ 3,80%

ROE 14,90% 12,87% 18,05% -‐ -‐5,10% Beauty Travel retail market

share 21,30% 8,70% 7,02% Est. around

5% 3,16%

Brand comparison Average price (Italy)

[€] Patents

(2009-2014) Target Core

competence

Forbes’

World’s most Valuable

Brand [ranking] E-shop Retailers

(Sephora)

125 36 70+

120 35 65+

20

•  Women between 30’s and 40’s

•  Men

Skincare Makeup

#90

151 34 65+

114 30 45+

39

•  Middle aged Women

•  Men

Skincare

-‐

140 40 65+ -‐

130 29 70+ -‐

48 •  Women •  Middle

aged Men Fragrances

#79

115 31 55+ -‐

110 30 50+ -‐

7 •  Women •  Men Fashion

-‐

Estee Lauder SWOT

Chanel

ChrisMan Dior

Loreal Luxe performance

Performance

References 1.  Resource pack data and

hyp://www.dufry.com/idc/groups/dufry_investors/documents/dfy_en/dufry_ar13_140307_web.pdf 2.  hyp://www.wtmlondon.com/files/wtm_global_trends_2013.pdf 3.  hyp://www.thenuancegroup.com/investors_and_media/Annual-‐Reviews/ 4.  hyp://www.aerotropolis.com/airportCiMes/aerotropolis-‐the-‐way-‐well-‐live-‐next 5.  (

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hyp://www.guestlogix.com/files/PDF/in-‐the news/guestlogix_in_the_news_onboard_hospitality_oct_november_2013.pdf)

11.  (hyp://www.cruising.org/sites/default/files/pressroom/Market_Profile_2011.pdf) 12.  hyp://www.wtmlondon.com/files/wtm_global_trends_2013.pdf 13.  hyp://www.tnooz.com/arMcle/travel-‐retailing-‐in-‐2023-‐a-‐brief-‐look-‐into-‐the-‐future/

#sthash.xL0jaQn8.dpuf)

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Annual-‐Review-‐The-‐Nuance-‐Group.pdf 15.  hyp://www.forbes.com/sites/sap/2014/08/08/airport-‐retail-‐the-‐golden-‐hour-‐and-‐4-‐missed-‐opportuniMes/

(hyp://www.swa.com/duty_free/fileadmin/user_upload/ap/conference-‐workshops_2012/3. GarryStasiulevicuis_-‐_TFWA_Chinese_Passenger_Research_Study_PresentaMon_SIN_0412_-‐_GS_FINAL.pdf

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18.  (hyps://press.hotels.com/content/themes/CITM/assets/pdf/CITM_UK_PDF_2014.pdf) 19.  (hyp://press.hotels.com/en-‐gb/files/2013/11/RITM_FINAL_WEB_V3.pdf ) 20.  hyp://www.rwguide.com/russian_women_cosmeMcs_preferences.cfm 21.  hyp://www.rwguide.com/russian_women_cosmeMcs_preferences.cfm 22.  hyp://russiansearchmarkeMng.com/domesMc-‐foreign-‐product-‐preferences-‐russia/ 23.  hyp://www.etoa.org/docs/default-‐source/presentaMons/2013-‐wtm-‐presentaMon-‐brazil.pdf?sfvrsn=2

hyp://www.travelretailpr.com/media/pdf/press_review/javierlabartabwconfidenMalmars2014.pdf 24.  hyp://www.m1ndset.com/content/documents/201210%20%20TFWA%20Daily%20Cannes%202012.pdf 25.  hyp://www.paulaschoice.com/beautypedia-‐skin-‐care-‐reviews/by-‐brand/lancome?

sort=brand&direcMon=asc&pageNumber=1&pageSize=25&brand=lancome 26.  hyp://www.loreal-‐finance.com/eng/news-‐release/first-‐half-‐results-‐2014-‐972.htmhyp://www.loreal.com/

brands/loreal-‐luxe/lancome.aspx

References

27.  hyp://www.lancome-‐usa.com/on/demandware.store/Sites-‐lancome_us-‐Site/default/Search-‐Show?cgid=discover-‐lancome&bookmark=7716

28.  hyp://www.mckinsey.com/insights/consumer_and_retail/winning_the_bayle_for_chinas_new_middle_class

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loyalty-‐program-‐159333 31.  (hyp://www.vault.com/company-‐profiles/personal-‐care/chanel,-‐inc/company-‐overview.aspx) 32.  33.  L’Oreal annual report 2013 34.  hyp://www.industrysourcing.com/news/304223.aspx 35.  L’Oreal annual report 2013 36.  LVMH S.A. annual report 2013 37.  Estee Lauder S.A. annual report 2013 38.  Shiseido Co. annual report 2013 39.  hyp://www.wwd.com/beauty-‐industry-‐news/beauty-‐features/the-‐2013-‐beauty-‐inc-‐

top-‐100-‐7824155?offeset=0