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Comment M&A sweet spots Inside 2 Retail insights 3 Tech bytes Netwatch 4 Trending Companies to watch

5 Data Around the world 6 Interview Lagardère Travel Retail fragrance & cosmetics merchant director duty free global Anaïs Bendjoudi

7 Zoom in on Creating content for Instagram

9 In case you missed it

M&A was a big feature of the beauty industry in 2019, with a string of major deals at high price tags, including Unilever’s purchase of Tatcha for $500m, L’Occitane’s

acquisition of Elemis for $900m, Shiseido’s takeover of Drunk Elephant for $845m and Colgate Palmolive’s $1.69bn Filorga buy. There has also been a swathe of deals on the fragrance house side—for example, this week’s merger of IFF with DuPont Nutrition & Biosciences, and Swiss group Givaudan’s acquisition of German company Drom and French player Albert Vieille, among others. Acquisitions show no sign of slowing down in 2020. One key area of M&A will be

beauty tech. German group Beiersdorf just took a stake in Korea-based skincare and tech company LYCL Inc, and companies with a true digital-first model or data-centered strategy will continue to be attractive for beauty groups. Another field ripe for acquisitions is that of natural-based brands (L’Occitane’s incubator took a stake in French plant-based lipstick brand Le Rouge Français just a few weeks ago), or those with a strong sustainability positioning. Related to this trend will be more brands looking to take over ingredient suppliers, biotech specialists or manufacturers or companies with alternatives to harmful ingredients or access to environmentally friendly packaging, in a bid to have more control over their supply chain and bolster their sustainability credentials. It is also likely that Asian brands (and possibly Chinese brands, which are on the rise) will be a target for Western beauty groups. There is still set to be a fair amount of deals among some of the more traditional brands.

Revlon is up for sale—the whole company is on the block, but it is currently said to be looking to divest some brands individually—while Coty is in the process of offloading its professional beauty division. It is set to be another eventful year in beauty.

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Retail insights• Instagram and UK retailer Selfridges ran a London pop-up store from December 5-15 with digital-first brands in beauty, fashion and lifestyle. The participants, such as vegan skincare brand Tandem, showcased products exclusive to the pop-up and Selfridges offered an edit via its Instagram account.

• London pop-up store Hot Second, described as ‘the world’s first digital clothing store’, let shoppers virtually try on a digital garment in exchange for a piece of clothing they no longer want. Open for three days in November, the shop did not offer any items for sale but aimed to study shoppers’ reactions to clothes that exist only digitally.

• Clothing brand Canada Goose’s new Toronto flagship has no inventory, instead offering a simulator for freezing temperatures so shoppers can test their parkas before purchasing online. Analysts say the move could help the brand fight rising competition—one study, by the Wharton School, Harvard Business School and Idea Farm Ventures—shows inventory-free showrooms boost sales by 60%.

• Lush has created the open-source Fairer Tablet, which it describes as an ethical and eco-conscious alternative to traditional cash registers. The system is expected to reduce the footprint created by the beauty retailer’s 3,800+ POS systems and give a better online-to-offline experience for customers while collecting minimal data. Set to launch in March 2020, the Fairer Tablet could be made available to other brands in future.





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San Francisco-based Tribe Dynamics shares exclusive data about beauty trends and brands making waves on social media

Pixi Beauty gains from anniversary celebration with influencer communityAlthough it landed outside the Top 10 in the UK, Pixi Beauty enjoyed a 53% month-over-month earned media value (EMV) boost, netting $2.9m EMV in October. The brand celebrated its 20th anniversary with its influencer family this month, inviting content creators like Alexandra Cane (@alexandralouise_ on Instagram) and Lindy Tsang (@itsbubz) to a bash

at London’s Somerset House. In a post showing off her outfit for the event, Lindy wrote: “So honoured to be able to celebrate such an amazing milestone. … Forever supporting the Pixi family!” Additionally, Pixi Beauty benefited from momentum around its Vitamin-C collection, which garnered $435.8k EMV via 51 influencers, up from its $321.5k EMV from 46 content creators in September.

Tribe Dynamics is a San Francisco-based software company that helps beauty, fashion and lifestyle brands drive and measure digital earned media at scale. For more stories and rankings of top brands and products in international beauty, check out Tribe Dynamics’ October Tribe Top 10 report for the UK here.

Tech bytes

• Fashion e-tailer Cult Beauty is fighting greenwashing from brands with a new blockchain-based platform set to provide transparency for beauty consumers. The system lets brands provide claims and evidence, such as cruelty-free certifications, which are shown with a green tick if verified by a third party.

• Instagram has launched reminder notifications to tease product drops and encourage shopping through Checkout. Brands can now add tags to launch announcements in Stories and let followers enable push notifications to be sent to their phones one day and 15 minutes before a drop.

• US-based nutritional supplement retailer The Vitamin Shoppe is opening a series of ‘innovation stores’ in the US, with features including digital product guides, mobile checkout and a body composition analysis station. It also has an interactive digital sampling kiosk from Vengo Labs, set to encourage shoppers to try new products while collecting customer data.

• Pinterest is rolling out Pinterest Trends, a new tool listing the top search terms on the platform in the US over the last 12 months. The tool will show trends in terms of precise topics and is set to help marketers focus on specific products, colors or imagery depending on customers’ interests, in real-time.

Netwatch






https://pages.tribedynamics.com/top-uk-beauty-brands-10-19


Trending

Companies to watch

One Ocean Beauty. Founded in 2018, this clean skincare brand focuses on active marine ingredients and peptides. Its range of products, such as the Replenishing Deep Sea Moisturizer ($82) and Revitalizing Sea Serum ($98), have been created using ‘blue biotechnology’ to harness protective properties from marine microorganisms, said to help heal skin. With a ‘look good, feel good, do good’ tagline, the brand has pledged a $250,000 donation to non-profit ocean conservation organization Oceana.

MyBeautyBrand. Launched in December 2019 by Eyeko founders Robin Derrick and Max Leykind, this beauty platform allows individuals to set up stores and share make-up looks to sell its brand through commission-based social selling. The brand has 60 skus, including eye shadows and nail polishes, priced around £15 ($20). It also encourages recycling by offering free shipping to customers wanting to return empty packs. The UK-based platform is backed by investors including L Catterton and Manzanita Capital.

GoLong. Founded in 2012, this Chinese beauty e-commerce platform and incubator aims to help international niche beauty brands set up in China. It offers services such as supply-chain management, social-media marketing and e-commerce. GoLong has so far signed more than 50 global brands.

Eyebrow lamination, a semi-permanent treatment

akin to microblading without needles, could be next year’s big eyebrow

trend.

Pay-over-time solutions are being

adopted by more brands as they appear to

drive more sales than advertising.

‘Non-touring’, or a dewy and natural

make-up look, is set to be a dominant trend

in 2020.





As shopping locally becomes an increasing concern for consumers, developers are creating new apps that highlight

independent businesses in a given area.







Data

The selective distribution channel in Europe

• Online sales of cosmetics products represented 13.9% of the selective distribution channel in Germany, and between 7.6% and 10% (depending on the source) in France (the biggest market for cosmetics in selective distribution in Europe), according to a survey carried out by Kantar for RBB Economics and Cosmetics Europe and presented by French cosmetics association Febea.

• When it comes to the main reasons for purchasing in physical stores, 70% to 85% of those questioned said being able to touch and try a product is vital when it comes to purchasing an item they have not bought before.

• In France, Italy and Poland, between 20% and 35% of those questioned said they go to stores for personalized advice from sales staff, while in Germany this figure was 13%. Some 15% to 20% of consumers said that they go to stores as they enjoy the overall purchasing experience.

• However, 65% to 80% of consumers check prices online during their visit to a store, and 75% will buy online if the product is cheaper.

Around the world • A landslide victory for the Conservative Party in the UK general election saw sterling surge. The result means Brexit looks inevitable, with prime minister Boris Johnson pledging to ‘get Brexit done’ by the end of January 2020. However, for businesses, there is still much uncertainty regarding trade agreements and the impact of Brexit.

• The US and China have reached what they call a Phase One trade deal. China has agreed to make substantial additional purchases of US goods and services. In exchange, the US will not proceed with higher tariffs on $156bn of Chinese consumer goods and will cut tariffs from 15% to 7.5% on $120bn of imports. It will maintain 25% tariffs on around $250bn of Chinese imports.

• Russia’s central bank cut interest rates by 25 basis points to 6.25% in a bid to boost the economy. This is the fifth rate cut this year. The bank said that it still sees room to cut the rate further. Russia’s economy is sluggish, with incomes having fallen for five years in a row. The central bank expects GDP to grow between 0.8% and 1.3% this year.

• US retail sales rose 0.2% in November from the previous month, according to the Commerce Department, missing expectations of a 0.5% increase. Sales at department stores fell, while online sales increased. News of the lower-than-expected increase comes in the midst of the key holiday shopping period.



How is your business performing? We are seeing double-digit growth in beauty, the category that drives the business. The two fast-growing categories of make-up and skincare were at +10% and +19% respectively year-to-date August. In skincare, institutional and luxury brands are core to our turnover and have achieved double-digit growth. Sales have been fueled by serums and anti-aging. We are rolling out new brands and segments to boost skincare and address the needs of our clients in natural and clean beauty, with brands like REN, Caudalie and Nuxe, and also in dermocosmetics. We are developing a specific concept integrating these brands with key signage and an inviting atmosphere—with a green color scheme and plants—to attract our clients’ attention. We also aim to design an appealing Asian beauty offer, as these brands appeal to millennials.

Does this mean there will be less branded space for beauty? As we aim to be more client-centric, we need to introduce dedicated areas in the customer path where we can highlight our growing categories, with, for example, make-up artist brands, natural skincare or niche fragrances to clarify the experience and ease the navigation of consumers. These new spaces can be both generic or branded spaces. For example, we set up a dedicated Make-Up area with branded spaces combining new make-up artist and trendy brands we launched since the beginning of the year, such as Too Faced, NYX, Nars, Becca and Sephora Collection, which has been introduced for the first time in travel retail.

Is there a strategy to have more affordable brands? It is not just about luxury brands—we have very high expectations from our consumers for an affordable offer, so we need to extend our selection of brands. Therefore, we’ve developed a concept for Low Cost Carrier travelers, with pilots in Marseille and Beauvais airports in France. We’ve worked on a concept where consumers don’t expect luxury only, with a mix of value and volume driving brands. Accessible offers such as personal care, easy take-away products or accessible brands like Sephora Collection and Maybelline are clearly expected by these travelers, half of whom are millennials. These pilots are seeing very good sales, with a stop ratio that underlines the relevance of this concept—from 20% to 40% more compared to what we had before.

How is your digital and click & collect business developing? Click & collect is performing well and shop & collect even better. We aim to go further with this kind of service, to offer to our clients at least the same standards as the local market, as they are used to this and expect a high level of service. Operational excellence is our target by making sure the execution in our stores allows a frictionless customer experience, for example by reducing the time to prepare orders or implementing collection points so that the products can be available any time. In addition, we will focus more on developing the exposure of our services through communication campaigns—especially before the trip—as it is not something travelers would expect from airports. n

”Lagardère Travel Retail fragrance & cosmetics merchant director duty free global Anaïs Bendjoudi

Click & collect is performing well and shop & collect even better. We aim to go further with this kind of service, to offer to our clients at least the same standards as the local market, as they are used to this and expect a high level of service

“

Interview Lagardère Travel Retail fragrance & cosmetics merchant director duty free global Anaïs Bendjoudi

Lagardère Travel Retail’s Anaïs Bendjoudi on expanding the retailer’s affordable offer, new in-store trend areas and digital







Zoom in on: Creating content for Instagram

Instagram is now central to beauty, with everything from brand marketing and new product launches to showcasing trends planned around the platform. Earlier this year, digital-forward beauty brand Glossier created suspense by using the channel for the launch of its color cosmetics brand, Glossier Play.

Kylie Cosmetics likewise asserted its social-savvy status with the launch of an AR feature on Instagram Stories letting users try on different shades of the brand’s lip kit shades. However, even as the tools and trends evolve, brands are seeking to promote more

transparency as users look for unfiltered looks and more informative content, like tutorials, swatches and product insight through influencers’ routines. Brands that focus on communities with user-generated content (UGC) and content that offers followers a realistic understanding of how to use a brand’s products, tend to see high rates of engagement, comments Conor Begley, co-founder of US-based Tribe Dynamics. Brand-sponsored events and getaways can also spark impactful influencer content, he notes. Social-media analytics company Socialbakers vp, EMEA Damien Landesmann confirms: “When it comes to how beauty brands are using Instagram, there is a clear focus on influencer marketing, UGC and even contests. Contests are a smart way to engage with your audience and build an authentic rapport with them along the way,” he says. According to Socialbakers’ findings, campaigns around events like Halloween and advent calendars have been effective. As an example, the firm highlights the noticeable rise in engagement for Lancôme when the brand posted the Eiffel Tower installation dressed as a Christmas tree at St Pancras International station in London. Begley adds: “More recently, Instagram Stories and IGTV have opened up opportunities for new kinds of content creation—while Stories lends itself to playful, in-the-moment snapshots, IGTV has enabled Instagram to host longer-form beauty routines.”

UnfilteredConsumers are demanding more authenticity and transparency. There is a move away from hi-fi video and ‘picture perfect’ images, towards raw, unfiltered content, like macro shots and uncurated content, says Julie Meredith, senior director of marketing at Dash Hudson, a visual marketing software company. “While sharing a photo of a product in its aesthetically pleasing packaging or leveraging celebrity endorsement may be effective in generating attention, it’s simply not enough anymore. Consumers want up-close photo and video that shows texture and application, as well as education on how to use the product and incorporate it into their day-to-day.” Brands are also highlighting transparency around ingredients, sourcing, and

sustainability, continues Meredith. “It’s no longer enough to just be a ‘cool’ brand. [...] The more brands share the details of their products and move toward clean and sustainable offerings, the more they will see increased engagement and brand adoption,” she comments.For make-up brand Deck of Scarlet, posts featuring texture videos, polls and bold looks

work best, and the strongest-performing influencer content is the step-by-step tutorial or polls showcasing different shades of products, confirms Scentbird & Deck of Scarlet

An analysis of the type of content brands are focusing on for Instagram and how their use of the platform is set to evolve







communications and social media specialist Kate Artemyeva. “We are posting more tutorials and make-up looks and focusing more on showcasing how to use our products in multiple ways rather than monetization. We are trying to create a community of make-up lovers and we tailor content not to be too promotional,” she comments.However, Socialbakers data shows that shopping-related content is rapidly growing on

social media. Instagram’s Shopping feature gives businesses an immersive storefront for people to discover and explore products, comments Landesmann.

Hidden likes and quality contentLooking ahead, video content consumption is set to grow, while technology, like predictive AI, is becoming an integral element in how brands understand what sort of content resonates with users, says Meredith. Instagram is continually evolving too and Artemyeva believes the hidden ‘likes’ feature Instagram has been testing will impact content. “If Instagram moves forward with having likes off, the focus will shift to quality content and branding only, [...] brands will be able to stay ‘on brand’ and provide a better look and feel, and even be more creative with content.” Landesmann also foresees Instagram evolving into more of a social-commerce platform,

while at the same time, the power of communities will continue to drive engagement. “Brands like Summer Fridays use Instagram to transform customers into an engaged community of brand advocates. Lush Cosmetics is able to drive high levels of engagement with UGC, [and] serving users with content created by other users is really paying off for the brand on Instagram,” he says. n

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www.bwconfidential.com N°40 October-December 2019

InterviewAS Watson Group group md Dominic Lai

Market watch: EuropeThe state of retail in Europe’s big five markets

Travel retail specialThe impact of digital on the channel’s business models


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BEAUTY

Comment Positioned for growth Inside 2 Retail insights Travel retail 3 Tech bytes Netwatch 4 Trending Companies to watch

6 Interview The Body Shop head of global travel retail Alexandru Mihaila

7 Zoom in on Estée Lauder Companies

10 In case you missed it

INSIGHT

There has been a string of negative geo-political and economic news in recent months. Analysts warn that a recession is looming, worries over the impact of the US-China

trade dispute continue to deepen, South Korea and Japan are busy with their own trade war, economic news from Germany is bleak, the prospect of a no-deal Brexit looks to be nearing a reality, US retail data is far from rosy, the political and economic crisis has taken a turn for the worse in Argentina, protests in Hong Kong are set to deal a blow to the economy in the region…and the list goes on. However, despite this cocktail of turmoil and tension, the beauty industry is showing

itself to be resistant. Estée Lauder Companies reported a 9% increase in sales in its fiscal fourth quarter ending June 30. It added that even factoring in the litany of geo-political and economic uncertainty, it still expects to report sales growth of between 7% and 8% for fiscal 2020—at the high end of its targets—and forecasts that the global prestige beauty industry will grow at a rate of 6% to 7% in the next fiscal year. L’Oréal may have seen its second-quarter sales come in slightly below analysts’ expectations, primarily due to a tough market in the US and the slowdown in make-up, but like-for-like sales still rose by 6.8%. And the group underlined that it reported its strongest first half like-for-like growth in more than a decade, with sales up 7.3% to €14.81bn. LVMH too, said sales at its perfumes and cosmetics division rose 10% on an organic basis for the second quarter of the year. The industry’s major players add that the China slowdown and trade battle with the

US has so far had no impact on their business and that the market there continues to see strong double-digit growth. Indeed, most say that China and Chinese travelers will continue to fuel the market, and that this growth is sustainable given an expanding middle class with higher disposable incomes. By extension this means that beauty’s other two key drivers—skincare and travel retail—are also likely to see continued growth. The market’s prospects could be a lot worse.

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BW Confidential 17 rue Louis Rouquier, 92300 Levallois-Perret, France [email protected] Tel: +33 (0) 1 74 63 49 61 www.bwconfidential.com ISSN: 2104-3302 Publisher: Nicolas Grob [email protected] Editorial Director: Oonagh Phillips [email protected] Journalist & Copy Editor: Katie Nichol [email protected] Journalist: Monica Defrances [email protected] Contributors: Sophie Douez, Alex Wynne, Renata Ashcar, Mayu Saini, Corinne Blanché, Naomi Marcoulet, Tina Milton, Courtney Traub Subscriptions 1 year: Beauty Insight (20 issues) + Print Magazine (4 issues) + This Week in Beauty + Daily News + Beauty World Guide + Beauty & Travel Retail Special Edition: €549/US$769 [email protected] Advertising [email protected] BW Confidential is published by Noon Media 513 746 297 RCS Nanterre Copyright © 2019. All rights reserved. Reproduction in whole or in part without permission is strictly prohibited.

The next issue of BW Confidential’s Beauty Insight out on January 14, 2020 • The latest retail and tech news • Interview • Travel retail data • Beauty trends • Social media insights

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