As vaccination programs across the globe begin to bite into the spread of Covid-19, retail businesses are starting to think about how they’re going to welcome back customers who have saved cash during the last year’s crisis.
One of the sectors looking for a new path out of the crisis is the cosmetics industry. While some sectors – like medicine, household cleaners and soap, and vitamins and supplements all saw increases in purchases during the pandemic, according to JP Morgan, the world cut back on cosmetics.
There are several reasons for this: as nationwide lockdowns have disrupted normal life, many people have been spending less time in front of others, and when they do, masks have made it impracticle to spend the same amount of time on facial cosmetics. Another reason is that the cosmetics industry traditionally relies on tangible, in-person sales. This is why staffed cosmetics counters are a staple of many department stores.
L’Oreal is one of the largest cosmetics companies in the world, and Lubomira Rochet – who made Insider’s list of 100 people transforming business in Europe last year – has been tasked with navigating the firm through the pandemic. Rochet is the firm’s chief digital officer, and based on widespread industry trends, the last 12 months should have been a sure-fire path to decreased profits for the company. Yet L’Oreal’s full-year financial results for 2020, published in late February, saw things staying steady.
“L’Oréal has traversed this crisis in the best possible condition and has even grown stronger,” Jean-Paul Agon, the company’s chairman and CEO, said when revealing the results. The reason? L’Oreal’s forward-looking bet on e-commerce sales. “Thanks to its strength in digital and e-commerce, which has again increased considerably during the crisis, L’Oréal has been able to maintain a close relationship with all its consumers and compensate to a large extent for the closure of points of sale,” added Agon. In all, e-commerce sales rose at L’Oreal by 62% in 2020, and accounted for one dollar in every four spent with the company.
The bumper results are the payoff for a decade of work. “The matter of fact is L’Oreal started its transformation 10 years ago which served us well when covid hit, because we were ready,” Rochet told Insider in mid-2020. The digitialization of the operating model for the company was crucial to making sure the firm managed to weather the crisis, but it was also one that Rochet had seen as a key area long before that.
“We spent a lot adapting our marketing to the digital age,” Rochet said. “Investing new formats and platforms from YouTube to TikTok to Instagram to WeChat, and really completely changing our formats for faster and more interactive formats. That has been quite a journey.”
But it’s the way that people tend to buy their makeup that has seen the most significant transformation. “We have invested in technology such as AR or VR to give [customers] an extra experience when they shop our products,” said Rochet. “Those are things like virtual make-up or hair colour try-ons. It’s about teleconsultations that were big during covid. Those are service we propose to our consumers to enrich the experience.”
Like many things, the coronavirus pandemic simply accelerated existing trends that had been in train for years. Rochet points to the rise of livestreaming sales in China as an example of how the pandemic has amplified what was already there, making it more important and significant for consumers battling the challenges of coronavirus.
And as stores and businesses begin to reopen, Rochet feels L’Oreal is in a position of power. “We’re moving to an interesting moment where more people in a low-touch economy don’t want to touch products in the store,” she explained. “They don’t want physical testers. So we’re introducing services like virtual make-up try on, through a QR code people can experience the colours and the looks, but virtually.”
It’s something her CEO and chairman also agrees with. Setting out 2020’s financial results, Agon looked forward to 2021 with positivity. “Driven by the strength of its strategic choices and a determined dynamic across the year, L’Oréal has adapted to this unprecedented context and terrible pandemic with speed and agility, accelerated all of its transformations and will emerge stronger,” he said.
“At the beginning of this new year, which remains marked by uncertainty regarding the evolution of the pandemic, but also by consumer’s appetite for beauty that remains intact across the world, we are confident in our capacity to outperform the market again this year and, subject to the evolution of the sanitary crisis, achieve a year of growth in sales and profits.”
At cosmetics giant L’Oréal, e-commerce has grown 65% during the pandemic to represent 25% of revenue, its chief digital officer Lubomira Rochet said during a marketing roundtable conversation recently convened by Business Insider.
Further, e-commerce made up for more than 50% of its losses in brick-and-mortar during the pandemic and is expected to account for 50% of its sales by 2023.
L’Oréal leveraged the growth in online sales by spending more on platforms like Amazon that are performance-driven; in SEO to drive people to its own websites; and on ad formats like YouTube for Action.
It’s also been spending more on virtual try-on technology, social commerce, and personalization. Its try-on technology ModiFace can now be found across 15 other sites and apps, including Amazon, YouTube, and Google Search. L’Oréal also invested this month in the social commerce platform Replika Software, which lets influencers, makeup artists and a hairstylists using its products to sell them directly to people online.
“L’Oréal brands have all embraced the trend of social commerce and have experimented with different models – influencers, e-beauty advisors, as well as consumers – with very promising results,” Rochet said. “We want to crack this new e-commerce channel that has a very strong potential in beauty and build a solid ecosystem of advocates and social sellers around our brands.”
The rise of e-commerce during the pandemic has also made marketing more conversational, with L’Oréal having a 40% rise in interactions with consumers across channels like Facebook Messenger and WeChat to pass 60 million interactions this year. That increase has given L’Oréal more data on which to base business decisions.
“We were able to track category shifts like hair color sales growing 300% and make-up falling 30% by managing data and insights not every quarter, but literally everyday,” Rochet said. “Having our finger on the pulse of consumers is important also so that we can talk to them in the right tone.”
Despite e-commerce’s growth, Rochet said brick-and-mortar wasn’t going away.
“There may be some disruption, but the Boots and the Carrefours in Europe are embracing omnichannel commerce and emerging as an alternative to Amazon,” she said.
Business Insider selected the top people transforming marketing across North America, Europe, and Asia Pacific earlier this year.
Five of them — Instagram VP of product Vishal Shah; L’Oréal chief digital officer Lubomira Rochet; Eight Inc. founder Tim Kobe; Vuulr CEO Ian McKee; and Alkemy CEO and founder Duccio Vitali — gathered together for a virtual roundtable.
The execs discussed trends in remote work, marketing, design, and more.
Business Insider selected top people from North America, Europe, and Asia Pacific that have been transforming the industry this year, and brought five of them together to discuss the state of marketing.
From North America, we had Instagram’s VP of product Vishal Shah. From the Asia Pacific region, we had Tim Kobe, founder of design firm Eight Inc. and Ian McKee, CEO and founder of online content marketplace Vuulr. From Europe, we had Duccio Vitali, CEO of Italian business-transformation company Alkemy; and Lubomira Rochet, L’Oréal’s global chief digital officer.
They discussed the seismic shifts they’ve seen in the industry and how they’re selling their products in this new world and adapting to a new work environment.
All that and more below, in the transcript from Business Insider’s Marketing Transformers roundtable.
Transcript has been edited for clarity and length:
Business Insider: What has been the biggest way the pandemic has changed marketing overall?
Rochet: What has really struck me is the rise of conversations we are having with consumers. People are more connected with and having more conversations with each other, but also with our brands, experts and beauty advisors. And so, marketing has evolved from being very visual to very conversational. This is something that we’ve seen first-hand, with a 40% rise in conversations we’re having with consumers across channels like Facebook Messenger and WeChat, surpassing 60 million interactions for this year, which is huge.
Shah: It’s always been important for marketing to be timely, but it’s taken on a whole new meaning with the pandemic and other issues this year like the Black Lives Matter movement. Brands must meet people where they are, and people expect the brands they engage with to be more human and more vocal about what they stand for and against. People are relating to the brands that are thoughtful, vulnerable and representative of the communities they serve – and I don’t think that will fade.
Kobe: Technology has had the most significant impact on marketing. The older generation may remember a pre- and a post-iPhone world. But what we’re seeing, particularly with the younger generation, is that technology like oxygen for them, and something that they just always expect to have and work. And so what’s happening is that what we used to think of as separate channels are converging into a single channel where I [as a consumer] need to be able to connect with the companies I’m interested in however I choose, whether in a virtual space or physical space.
McKee: The consumer has never thought there to be a difference between the offline world and the online world. It is just a strange artifact of how businesses think. The pandemic has forced businesses to realize that false dichotomy, and that as a brand, you need to think about an integrated online and offline experience. But it’s also led to the death of functional shopping, meaning the grudge stuff that you have to do like go to the supermarket to pick up eggs or toilet rolls and other necessities. The pandemic has forced us all to do that online and made us realize that when we go out, we want an experience. And if we walk into an outlet that doesn’t give us an experience that delights us, then we’ll just look for a digital alternative that’s cheaper, quicker, and better.
Vitali: I heard somewhere that COVID-19 is the PR agent for digital transformation, meaning that it’s just putting the line on a process that is mandatory for all companies. To that extent, I would say that the worst mistake that a company could make right now is to use the digital lever just to plug a hole and respond only tactically to the current situation. We have been approached by many companies that are requesting to set up an e-commerce platform because, of course, the stores were closed. That’s not the right approach, and Italy, in particular, is lagging behind. It is an opportunity for all companies to really transform their business using digital and the data technology.
McKee: During every period of accelerated change, Darwin’s Law becomes crystal clear. The organizations that have been slow to adapt and have been resisting digital, this is the time that they can make room for that kind of digital transformation.
Business Insider: What are brands that are on the forefront of digital and technology that others can learn from?
McKee: Netflix. In the entertainment, film and TV content industry, there’s a lot of weeping and wailing and gnashing of teeth going on at the moment by the cinema chain organizers shocked by WarnerMedia’s announcement that they’re going to go straight to home theater distribution. They’re in trouble because they failed to innovate. The chains of cinema owners should have been the ones holding the crown because they were in the business of providing entertainment, they have the relationships with the sources, the movie studios, and the audience, but they resisted digital and streaming and saw it as the enemy and tried to hold it back. And that meant that when the time came, they were left completely unprepared to be able to execute within digital.
Kobe: When we worked on the Apple store, companies called us and said ‘Hey, can you do a retail space, and give us a white room with some wood tables and we’ll have the same success as Apple?” Clearly, they were looking at it purely from a tactical perspective, as opposed to trying to understand whether or not they related to what the brand stood for. You have to start with trying to create value and what are the human outcomes that you’re looking to achieve. And Netflix has done that quite well.
Vitali: The companies doing the best are the ones that have used digital to transform their business model, to create and to provide incremental value, so the typical Google, Facebook, Amazon, or Netflix. It’s more complicated for traditional companies, because they have legacy systems, and the harder it is to change. But Nike is a good example among them.
Business Insider: How has the pandemic changed the priorities at your company? What are areas you’re now focusing on – internally or for your clients – that you weren’t before the pandemic?
Kobe: Our priorities actually haven’t changed. We are still focused on designing for human outcomes. That’s the first level of the proposition. And we believe that’s the best way to create value.
Shah: With much of the world sheltering in place, we saw an explosion in short, entertaining videos. We’ve also seen an incredible amount of shopping move online, with more and more people buying online and young people looking to their favorite creators for recommendations on what to buy. We doubled down on our focus in these areas – introducing Reels and more tools for people to shop, including from the creators they love. We even re-designed the Instagram home screen with a Reels Tab and a Shop Tab to make it easier for people to get to these surfaces in one tap.
Rochet: TikTok and live-streaming are good examples of new priorities for us. TikTok has become absolutely unavoidable, and it’s resonating so much with the new generation. For brands, it’s a new way of engaging. The whole idea of challenges, for example, it’s a really smart way of crowdsourcing your marketing, which is so powerful when you think about it. It’s completely rewriting the playbook again.
E-commerce has also been a little bit of a lifesaver. During the pandemic, it’s compensated for more than 50% of our losses in brick-and-mortar.
Business Insider: With many of us working remotely, what about that shift do you think will change for the long term?
McKee: The pandemic has everyone questioning whether we really need to slip into the office nine to five. We will probably end up as a business that works remotely or works from home for a good part of the month. If I could wave my magic wand and get out of my tenancy agreement, I’d give up my full-time office and look for a shared working environment where instead of having one desk for a month, I’d like to have 20 desks for two days a week or two days in a month for the whole company. There are going to be some interesting changes in how we think about office working.
Rochet: 100% remote working over a long time is very painful, and this is something we are all starting to realize. It may be productive, but it’s not conducive to creativity and it starts to take a toll on your mental health. So I think we will go toward a more hybrid model. The pandemic has also changed the whole concept of leadership, and companies really need to empower employees to make their own decisions.
Vitali: The relationship between companies and their employees will change deeply and permanently. But the point is, how do you motivate, how do you engage people? I don’t think it will be a fully remote model, because talent needs to work together in order to create alchemy. But of course you don’t need to have people in the office all the time. The more you have a strong corporate culture or shared values, the more you will be in a good position.
Kobe: We’ve discovered that remote working has a good side and a bad side. There’s clearly a reason why we punish criminals by putting them in solitary confinement. The idea of separating one another from each other actually has a toll. And we’ve seen a psychological toll across teams who were used to working together, and actually thrived off the human contact. Remote work has functionally enabled us to engage, but socially not so much.
We’re going to see the whole notion of work having a pretty radical transformation in the near future. What happens to our social order when we have autonomous vehicles, for example, which displaces a force of people who made their livelihood as taxi drivers? Or people in factories who are being in some way impacted by that change in technology? All this has a huge negative social impact if we’re not designing for it and planning for it.
Business Insider: What’s the one thing that your company has learned during the pandemic – internally, from customers, or peers – that has changed the way you’ll do business in the future?
Vitali: We’re about 650 people, so big enough to have a lot of costs, and not big enough to be totally solid. I remember when we started doing initial scenario planning back in March, it was almost impossible because there were too many scenarios and so planning was not meaningful per se, because everything was so uncertain. So one of the lessons is that it’s more and more important to be able to lead under uncertainty and without clear direction. It’s much more important to have speed, reactivity and the right people motivated than the right strategy today.
Shah: The pandemic changed the world overnight, and we knew that we couldn’t be too precious about work that was in motion but no longer as relevant. We pivoted our priorities – and even made some of the biggest changes to Instagram like the new home screen to adapt to where we saw the world heading. A more nimble mindset helped us move more quickly.
Rochet: We used to gather data, trends and consumer insights every quarter. And during the pandemic, it was daily. We were able to track category shifts like hair color sales growing 300% and make-up falling 30% by managing data and insights not every quarter, but literally every day. The pandemic has also been an emotional rollercoaster, so having our finger on the pulse of consumers is important also so that we can talk to them in the right tone.
Business Insider: Consumer habits have undergone a sea change. Which changes in consumer habits do you think will have the biggest implications for marketing long term?
Rochet: E-commerce is here to stay. It’s now 25% of our revenue, and it’s not a bubble at all. The growth rates have been very steady. Even after the lockdowns ended, e-commerce has continued to grow at 65% for us. The shopping experience itself is changing. It’s less about detailed product pages, more about helping you find the right product, digital try-ons, richer content and personalization. In a matter of years, e-commerce will represent maybe half of our business. And that means our content and media will be shifting too towards more e-commerce media and performance media.
Shah: The acceleration of online shopping will reshape how we think about brick-and-mortar experiences and open up new opportunities to reach people in creative ways. And the importance of creators in the shopping journey cannot be overlooked – their influence on shopping decisions is rising as more people move online and brands will need to factor that into their marketing strategies.
Business Insider: Have you noticed any specific trends in your geographic region versus other areas that you think could eventually spread elsewhere?
Shah: Values-based shopping. Not “value-based” as a reflection of price point, but as a reflection of the things a brand represents. This could be a variety of things: A social issue, the importance of the underlying materials used in creating a product, or a founder’s backstory. We are already seeing this with the surge of support for minority-owned businesses, and I see this growing dramatically over time.
Rochet: Click-and-collect has always been strong in Europe, and has really gained traction in America over the pandemic. Live-streaming and social commerce coming from China is really gaining traction in Europe. And QR codes are spreading everywhere. We’ve redeemed 1 billion QR codes in Europe during the pandemic, which is huge.
Business Insider: What’s one thing everyone says about the way pandemic is changing business that you believe is wrong?
Shah: A lot of people are talking about the long-term risk to small businesses, but I think that’s underestimating the types of businesses who are embracing the future: moving online, finding customers all over the globe, and most importantly, proudly showcasing their unique point of view. The next generation of consumers care about a brand’s values, their founding story, what they stand for, and what they believe in – and are willing to pay a premium to support the brands that connect with them at this level.
Rochet: I don’t think that the disappearance of brick-and-mortar is going to happen. There may be some disruption, but the Boots and the Carrefours in Europe are embracing omnichannel commerce and emerging as an alternative to Amazon.