Coronavirus vs. Beauty
Estela Manotoc | Market Report | FASM 220 | Demesko
nCoV vs. Beauty
I.
Current News
II. Impact on Beauty
III. Opinions
I. Current News The coronavirus (nCoV) has shaken the beauty industry. A strong demand for high-end skincare and make up among Chinese shoppers have powered sales growth for market leaders Estee Lauder and Loreal.
However, with the recent outbreak sales have dipped. The beauty market in China has slowed down and companies have begun to anticipate a decrease in net sales.
With global travel restrictions, closing retail stores and the absence of more than half of Asia-Pacific revenue for big beauty companies , it is predicted that the virus will outperform the beauty market.
II. Impact on Beauty
Backfiring: Asia
Decline in Travel Retail
Push for Diversification
Omnichannels
1. Backfiring: Asia • Loreal and Estee Lauder have strategized to focus on luxury skincare and Asia (mostly China) in the recent years. • More than half of their Asia- Pacific revenue which once came from Chinese consumers have been compromised. • Estee Lauder trimmed its fiscal 2020 forecast for earnings per share by 4%
Korean cosmetics giant Amorepacific’s share price has fallen by 8.47%
2. Decline in Travel Retail • Loreal reports that 9% of its global sales come from travel retail • As the Chinese face travel restrictions and global travel drops, there is less passenger traffic, yielding less sales. • A 58.3% decline in travel to other key countries, such as South Korea ($10.43B), Thailand ($1.24B) and Japan ($1.12B), that contribute to travel retail has been recorded
Travel Retail
Travel retail is worth $79 billion, $31 billion of which is thanks to cosmetics and fragrance.
Cosmetics & Fragrance
Others
3. Push for Diversification • Beauty companies that have focused on the Chinese market are suffering. •
However, LVMH which chose to focus on diverse markets and products is prepare to handle the effects of the outbreak.
• More beauty companies are looking to invest in other lucrative markets.
4. Omnichannels • With the halt of beauty services in store and closing of brick & mortar stores, brands have to turn to other channels for retail and marketing • Omnichannel sales strategies have never been more crucial. Local Chinese beauty brands have been selling via WeChat and offering quick home delivery. • Livestreaming sales may become more popular during the country lockdown
Streaming by KOLs has become the current most effective way for beauty brands to reach their consumers.
III. Opinions • The impact of the coronavirus affects the success of merchandising in the beauty industry as it reveals that the industry is heavily reliant on Chinese consumers and the Asian market and will struggle if no adjustments are made. • Leading companies in the industry are negatively affected as Net sales decline, profit declines too. • The outbreak challenges companies to have better omnichannel marketing and retail strategies.
nCoV directly affects PLACE
Brands are pushed to have stronger ecommerce channels for beauty products. This can be challenging for products like makeup or fragrance which are usually tested in person before being bought.
nCoV directly affects TIME
Beauty retailers must adjust to the times and discover which other markets they can earn profit from besides China.
PROFIT
nCoV is an important event that directly affects the profit of major beauty companies which rely on the Asian market – especially China. For successful merchandising, beauty retailers need to sell products on different platforms for now at the right time, and invest in products that cater to customers other than Chinese consumers.
Sources Kirk, Donald. “Coronavirus Hits Korean Duty-Free Shops, Cosmetics Companies.” Forbes, Forbes Magazine, 28 Jan. 2020, www.forbes.com/sites/donaldkirk/2020/01/28/coronavirus-hits-korean-duty-free-shops-cosmetics-companies/#32add5701ad6. “Travel Retail on the Front Line as Coronavirus Spreads.” WWD, WWD, 19 Feb. 2020, wwd.com/beauty-industry-news/beauty-features/travel-retail-onthe-front-line-as-coronavirus-spreads-1203493653/. Abboud, Leila. “France's L'Oréal Says Coronavirus to Weigh on Sales in Asia.” Subscribe to Read | Financial Times, Financial Times, 6 Feb. 2020, www.ft.com/content/d1b088b4-4901-11ea-aeb3-955839e06441. A, Collins. “Estée Lauder Lowers Guidance Due to Coronavirus.” WWD, WWD, 7 Feb. 2020, wwd.com/beauty-industry-news/beauty-features/esteelauder-lowers-guidance-due-to-coronavirus-1203463504/. Bloomberg, Andrea Felsted |. “Analysis | There's a Lesson for Luxury in the Coronavirus Crisis.” The Washington Post, WP Company, 7 Feb. 2020, www.washingtonpost.com/business/theres-a-lesson-for-luxury-in-the-coronavirus-crisis/2020/02/07/3eb0c1f8-49b2-11ea-8a1f-de1597be6cbc_story.html. Zheng, Ruonan. “Luxury Brands Take Action as Coronavirus Spreads.” Jing Daily, 11 Feb. 2020, jingdaily.com/brands-take-actions-as-coronavirusspreads/. Hallanan, Lauren. “How Livestreaming Is Helping Beauty Brands in China.” Jing Daily, 17 Feb. 2020, jingdaily.com/how-livestreaming-is-helping-beautybrands-in-china/.