In 2019, with its sales revenue growing by 35%, L'Oréal China created the best performance in the last 15 years. But under the impact of COVID-19, the global economy is estimated to shrink by 2.2% in 2020 according to some economists. How will L'Oréal China react to safeguard their business in this continuous turbulence? Fabrice Megarbane, President and CEO of L'Oréal China, revealed their key strategies in 10 aspects during an interview with Professor Zou Deqiang from School of Management, Fudan University.
What's the priority of approach for L'Oréal to grow their business in China?
The market of beauty in China is relatively lower in term of development, and the sophistication of the Chinese consumers is pushing them to accept more and more products. The recipe of L'Oréal’s success in China is that we keep a balance between existing brands and new brands, between killer products and new products. We launch a lot of innovation while maintaining the growth and penetration of our iconic products in the market. For example, our 3CE STYLENANDA Korean makeup brand introduced a year ago has been growing extremely fast; meanwhile, Genefique from Lancôme launched almost a decade ago is still a killer product.
How does L'Oréal China secure the hit rate of the iconic products?
Beauty is a quest for better – better quality, better results. Fundamentally, what we've been doing for more than 100 years, is investing on the innovation in terms of quality and formula.
In the digital era, algorithm of the e-commerce is pushing the big products to get even bigger. New technology is allowing us to offer it to the biggest number of consumers and promoting targeted innovation to different consumers, but a good product is always the starting point. L'Oréal has more than 30 brands worldwide and each brand has a certain number of iconic products, targeting different needs of the consumers.
How do you prioritize the marketing tools and evaluate the performance?
Ten years ago, our CEO Jean-Paul Agon said that digitization will revolutionize the beauty industry – and by then the digital age was just beginning. We realized at a very early stage that digitization is a perfect match with the beauty industry because it amplifies and personalizes beauty. That has been a fairly strong belief.
We also believe that digitization and marketing are inseparable and we combined the two instantly. This is why instead of “a digital marketing strategy”, we say “doing marketing in the digital age” – meaning that we need to access all the possible tools to become more consumer centric.
From a marketing perspective, what never changes is the consumer-centric principle. As long as the consumers are adapting to a new technology, the marketer will respond with the same technology.
In L'Oréal, we have this strong culture of test and learn. We don't always know what will be the ideal recipe for the marketing of a certain product or a brand, but we always encourage our teams to test and learn. This is why we've been well adapted to all these new marketing tools.
What's your vision for new revenue streams of L'Oréal?
We always believe beauty is beyond a product. It’s also about the experience and the services. Like other big companies around the world, L'Oréal is also seeking to change its business model.
L'Oréal has always been acquiring brands and has a huge portfolio of brands. But two years ago, for the first time, we acquired a tech company called ModiFace. It provides a personalized service and we believe that this will be the future. This is the new transformation that is championing in L'Oréal today. We call it the “beauty tech transformation”.
Beauty is about the brand, the service and the experience, and tech enables beauty to be more personalized. How to be more precise when targeting the consumers? How to empower the beauty industry to be even more consumer centric? This is where we are going as a company: to continue with our fundamental – the research, the innovation, the marketing – but also to offer more to our consumers with the help of technology.
How to play a key role in the platform model?
The perspective of L'Oréal in the coming ten years is that we will develop from a big company to a HUGE company: H means the new “horizon” in this age where we'll have a huge destiny and huge role here in China; U means “you” as an empowering element and co-creating with our consumers and employees; G refers to the healthy and sustainable “growth” of the future; and E is the “ecosystem”. The ecosystem China offers is unique. For a beauty company that wants to champion in the beauty tech, the platform economy is exactly what we believe we need to accelerate in the coming years. We are opening up to this ecosystem by partnering with the startups. This is the role of L'Oréal China in the future: to open up and to provide a better service in the end for consumers.
How do you respond to the change of values of the consumers, especially the younger generation?
Our young employees want to change the world, and they want to have the means and the power that will allow them to change the world. The value of L'Oréal is also to take actions to build a better world and we have launched many initiatives.
One of them is a global program called “Sharing Beauty with All” which was about commitment to the environment. Last year, China became the first country of all L'Oréal markets to have achieved carbon neutral. And we went further. We decided to launch a green parcels project, where we switched all our parcels for the selective division into green parcels, meaning there is no usage of plastic and everything is recyclable.
We're still moving ahead. Now “Sharing Beauty with All” has become our new philosophy. From the conception of a product, to its packaging and the way we activate it in the market, we are promoting a set of social value, environment value and ethical value. And this is what we call a good consumption.
What is the vision for the personalization of marketing in the user experience?
We acquired ModiFace because it can capture the entire pigmentation of your face and show how your skin will look like when using a certain beauty product. So it's going beyond the try-on, and becoming a way to capture the condition of your skin and present very precise results.
We have also incorporated ModiFace into the services of our partners, which means that consumers will see the virtual makeup test results and make judgments as part of the consumption journey. In this way, we may really scale it up and then impact on the beauty routines.
How do you solve the conflict between the speed and the scale during your development?
L'Oréal is a very entrepreneurial company from its origin. And today we still say we are a big company with a startup mentality; we're a leader with the challenger spirit. So we are taking advantage of our size to give us the means to test and learn.
It's also very important to empower people, because when your team members feel empowered and trusted, they feel safe to take risks. That’s one of our secret recipes in L’Oréal. Every one of us believes that L'Oréal is his own company. This is a wonderful spirit, because it pushes you to be an entrepreneur. And at the same time, we are big family. That’s why we are able to handle all these experimentation and move our big company into the future.
What's the methodology in L’Oréal regarding the talent management?
Everyone is talented in some way. The question is how we can develop the individual talent in a team, how we can make somebody feel that he has been developing and improving since he has entered L'Oréal. So, the talent management in L'Oréal is about helping them learning and growing. And we have a very strong and agile learning approach. The learning agility is in the heart of what we do. This is why we do a lot of upscaling, self-learning and e-learning. We provide the right training for the right people at the right time. And this is the best way to make them grow and to engage them.
It's not about evaluating the performance of people, but about evaluating the capacity of the people to adapt, to grow and to learn. And if they have this capacity, this learning agility, they will have a great future in this company.
How to detect and cope with the new normal after the COVID-19 epidemic?
When this epidemic is over, things will come back to a certain extent. I think beauty industry has a big role to play in this and we've seen it in many crisis. We saw this during the financial crisis in 2008; and during the SARs epidemic, there was also a V shape – the sales went down, and then went up with an even stronger force.
Why is that? Because beauty is not a commodity. It is the quest for something better. When the consumption resumes, they will probably have a new desire or a new expectation. They may want to see innovation or new brands because they want to shake off the memory of this period by discovering something new. In response, there may also be new ways of marketing and retail. The O+O will probably become a new reality. So the mindset of adaptation has always been at the core of our development.
The willingness is there; the consumer centricity is there; and we have the talents. So if things will not resume just like before, they can only be better for people who are ready to respond positively.
I'm very confident about the China market and the Chinese consumers. I'm very confident about my Chinese teams here in L'Oréal China. I also have confidence in this beauty industry, because beauty is about building a better world and we will always have a role to play in that.
