Will Estée Lauder enter and settle in Pinduoduo?

Written by He Zhexin

Edited by Qiao Qian

Under performance pressure, Estée Lauder has chosen the "reformer".

On October 30, the American cosmetics group announced the next CEO candidate, with Stéphane de La Faverie, who is currently in charge of half of the group's brand business, being promoted. One of the previous popular candidates, Jane Lauder, the founder's granddaughter who served as the digital marketing officer, has announced that she will leave the company at the end of this year but will retain a seat on the board. The appointment will take effect on January 1, 2025.

Stéphane de La Faverie's management philosophy is basically the same as that of the current executive chairman and the founder's grandson, William P. Lauder. They both hope to help the company reverse its dependence on a single department store and duty-free business through channel reform. In contrast, Jane Lauder adheres more to her grandmother's "last wish", believing that Estée Lauder should always be a luxury beauty brand group, and excessive distribution will damage the group's image.

After the news of the personnel change was leaked by The Wall Street Journal on the 28th, Estée Lauder's stock price slightly rose by 1%, indicating that the market's expectations for this choice are relatively optimistic, although this candidate does not meet the expectations of some board members and some investors for the company to achieve a thorough reform.

The just-released 2025 Q1 financial report shows that Estée Lauder's net sales were $3.361 billion (approximately 23.922 billion yuan), a year-on-year decrease of 4%, with the largest decline in the Asian region, at 11%. Despite achieving growth in Japan and priority emerging markets, it failed to offset the overall decline in performance; the net loss was $156 million, while a net profit of $31 million was achieved in the same period last year.

China

"Most of the business I manage takes place in the Asian market, especially in China."

Looking back at Stéphane de La Faverie's promotion path, it is almost all related to the Chinese market. In 2011, Stéphane de La Faverie jumped from L'Oréal to Estée Lauder and began to be responsible for the business of Origins in China.

"(de La Faverie) improved the form of the Origins specialty store, and the drainage effect has proved to be very good. The digital marketing plan he created for the brand will also be promoted globally. The Reishi Mushroom + Ginger Health-Boosting Treatment Lotion (Mushroom Water), which is specifically for Asian consumers, sells very well in China and will also be launched globally later." Jane Hertzmark Hudis, the group president, once evaluated the performance of this subordinate in this way.

It was an era when skin care myths were everywhere in the country. In the beauty experience sharing posts that were not so rampant, Mushroom Water can hydrate, eliminate acne, soothe the skin, eliminate redness, and also have anti-inflammatory and antioxidant effects. It has a pleasant smell and a "not bad skin feel". Coupled with the moderate price of 380ml for 200 yuan, it meets the purchasing power of "student parties" and young female white-collar workers who have just entered the society. Origins quickly became the first arrow for Estée Lauder to capture the young market.

According to "Cosmetics Observation", from January to May 2015, the domestic sales growth of Origins reached 72.1%, making it the fastest-growing brand in the Estée Lauder Group, and the growth momentum continued until 2019.

In 2016, de La Faverie took over the global business of the Estée Lauder brand and began the rejuvenation reform of this mature brand in China.

At that time, the growth rate of the high-end cosmetics market in China exceeded that of the mass market for the first time. Compared with department stores, young people are more accustomed to buying cosmetics online. Zhu Zhenghua, the then e-commerce head of the Estée Lauder Group, said, "For a cream that costs three or four thousand yuan, the online purchasing group is as young as 24 years old, which shocked the global team." Estée Lauder, which embraced the online platform, along with foreign companies such as L'Oréal and Shiseido, managed to get a share by selling high-priced creams to young people.

According to Statista data, from 2016 to 2020, the share of the Estée Lauder brand in the global skin care market grew from 7.3% to 10.1%, and this was almost entirely contributed by young Chinese consumers. By 2020, the Asian market, mainly China, accounted for 30% of the Estée Lauder Group's annual revenue.

In the same year, de La Faverie was promoted to group president, managing the perfume and functional skin care brand the ordinary. Since then, de La Faverie has been on an equal footing with his former boss Hudis, but the brands under his management obviously have more room for development: perfume and functional beauty have become the few bright spots in the next market.

Last year, the performance of various departments of Estée Lauder shrank, only the perfume category remained strong. This is mainly driven by the mid-single-digit growth of high-end perfume brands. Le Labo continued to achieve double-digit sales growth in the new quarterly financial report, continuing the growth rate of the entire last year. The company mentioned in the appointment announcement of de La Faverie that he has "played a particularly important role" in strengthening the company's perfume product portfolio and skillfully responded to industry changes and changing consumer behavior.

de La Faverie visited Shanghai four times between 2023 and April 2024. During his most recent trip to Shanghai, de La Faverie introduced the complex perfume matrix of the group to 36Kr and continued to emphasize the importance of localization. He took Le Labo, which has already launched the second Shanghai City Limited Edition perfume, as an example, saying that there will be more products like this that combine "local inspiration and global innovation" in the future.

Will It Enter Pinduoduo?

H&M recently announced its entry into Pinduoduo, becoming the first foreign clothing brand to "test the waters". H&M replied to 36Kr stating that entering Pinduoduo is an important part of its continuous promotion of the omni-channel strategy.

Estée Lauder, which has not seen any new channel expansion for a long time, will it also become the first foreign beauty brand to enter Pinduoduo? This is not a baseless speculation. The "populist" reform of Estée Lauder has quietly begun in the United States.

William Lauder, despite his father Leonard Lauder's opposition, allowed Estée Lauder's makeup line to be sold in discount supermarkets Target and Kohl’s. Clinique was listed on Amazon in March this year, making it the first brand in the group to try the third-party e-commerce platform.

According to Forbes, the group's senior management was disturbed by the news that Macy's was seeking an acquisition, believing that Amazon is the "fastest" way to transfer Clinique's inventory. Coincidentally, the latter is also transforming into an omni-category e-commerce platform, striving for the entry of more fashion and beauty merchants.

The author of this article said that if the department store sales of other high-end products of Estée Lauder continue to be sluggish, entering Amazon is the most likely solution, and "the Estée Lauder brand will soon become ubiquitous."

In 2023, the second-generation leader Leonard Lauder stepped down from the board. He was the most fierce opponent of the distribution reform. With the exit of Jane Lauder, the members of the Lauder family will no longer be responsible for the daily operations of the company. Compared to the "from grassroots to nobility" counterattack story, the well-off third and fourth generations are more willing to focus on the top and bottom lines of the financial report - doing business well is more important than anything else.

Not long ago, the Estée Lauder Group announced the completion of the acquisition of the skin care group Deciem. The most famous skin care brand under Deciem, the ordinary, has an average customer unit price of only $10 - $20, which is equivalent to only about 100 yuan in RMB. It is undoubtedly a mass product. Estée Lauder's investment in Deciem began seven years ago. According to a visit by 36Kr, the ordinary, which has undergone a round of product updates, has entered the Sephora stores in the European and American markets.

"In a large company, you have only two roles, either a specialist or a generalist," de La Faverie is obviously the latter. Coming from a marketing background, he spent most of his early career visiting the bosses of luxury department stores and duty-free retailers around the world, and is well aware of every link in retail, because this was crucial to Estée Lauder's business at that time.

In the early days of the epidemic, de La Faverie realized that social media and e-commerce would completely change retail. "Although offline shopping will eventually recover, you have to admit that some things will definitely change and never come back," he said in a podcast.

While mentioning the problem of "excessive distribution" in the European and American markets, he also mentioned that there is huge potential in the blank third- and fourth-tier markets in China, and online transactions have become the focus. He predicted that "online income in the Chinese market will account for 50 - 60% of ours, about 40% in the United States, and 30% in Europe."

To achieve this goal is not a simple process of putting goods on a virtual shelf. "What I need is an absolutely new discourse model to establish consumer connections, rather than changing to a cheaper and more cost-effective marketing plan, which is meaningless for Estée Lauder. We are willing to take risks," he continued.