Hermès unveiled its first cosmetic products recently. Rouge Hermès lipsticks will be available on the market in March. The first collection has 24 shades that are taken from 75,000 silk and 900 leather shades used by the brand. The original price is $67 each, and the replacement is $42. The three special editions launched seasonally are priced at $72 [1]. Beginning with lipsticks, Hermès plans to launch further products, including foundations, eyeshadows, etc. every six months in the future, and a new skincare product series is also being prepared [2].
Sustainable development and naturalness are still a hot trend in the cosmetic and fashion industry
Sustainability is increasingly shaping the purchasing preferences of consumers and the product development cycles of manufacturers. According to survey data from the National Retail Federation and the IBM Institute for Business Value, 72% of respondents are willing to pay a premium for brands that are sustainable or environmentally responsible [1]. Hermès is attempting to align itself with these trends. Its lipstick package is stitched with varnished wooden blocks of different colors. The cream inside can be refilled after use. The replacement is priced at $42, which is significantly cheaper than the brand's original price of $67.
Besides this, Hermès lipstick packaging material is the same as that used in its handbags. Using material with a higher value and longer life cycle is part of Hermès' strategy to position itself as a champion of sustainable fashion. The chemical composition of the lipstick also aligns with current trends towards “clean label”. The main ingredients, French-beeswax and mulberry extract, are the commercial offshoots of R&D conducted in-house at Hermès laboratory in Normandy.
Hermès’ new collection of lipsticks
From perfume to lipsticks, the entry of top luxury brands is making the competition in the cosmetic industry more intense
Hermès is a late entrant into the sector, but its strong brand recognition and premium positioning have provided it with a great start.
In December 2019, Prada, an Italian luxury brand, announced that it would cooperate with L'Oreal Group to develop cosmetics products. This cooperation will begin in 2021.
In May 2019, Gucci's first lipstick collection was released.
In May 2018, Italian luxury brand Valentino and L'Oreal reached a long-term global license agreement for perfumes and luxury beauty products.
In early 2018, French luxury footwear brand Christian Louboutin announced the signing of a global beauty licensing agreement with Spanish beauty giant Puig to target the high-end market. On December 2, the same year, Christian Louboutin Beauty opened its first official flagship store in China on Tmall.
The market response proves that entering the cosmetic industry is a good decision. According to a previous report by Beijing Commercial Daily, in June 2019, a Gucci lipstick priced at $ 38 hit a sales record of 1 million pieces in the first month of its launch. According to the Gucci makeup authorized manufacturer Coty Group, in the fiscal year 2020, Gucci's global retail sales are expected to reach $ 1 billion, and the sales target in the Chinese market is 600 million yuan [3].
Chanel has been a huge winner in the "lipstick economy." Perfume and beauty have become the most profitable and stable business. In 2018, Chanel's sales rose 10.5% year-on-year to $ 11.1 billion, or about 9.8 billion euros. During the period, beauty business accounted for one-third of total sales, and e-commerce sales of perfume and beauty products increased by 50% [4].
The entry of brands such as Hermès and Prada will likely mean a new category of ultra-premium products in the cosmetics sector. Their higher-end positioning, pricing, product ideas, and marketing will set these brands apart from the current high-end beauty market.
Gucci’s lipsticks
Are multichannel distribution and e-commerce a good choice for luxury beauty products?
Interestingly, Hermès Beauty will only be sold at the brand’s retail stores. According to a report by Bloomberg, the French design house decided to forgo traditional beauty retailers such as Sephora and e-commerce platforms in order to reduce the risk of diluting the brand's image and detract from its luxury positioning.
After stopping the failed cooperation with the Spanish perfume and fashion family company Puig, Prada has reached an agreement with L'Oreal Group. L'Oreal will create, develop, and sell high-end beauty products for Prada, helping the brand reach young consumers. Also, in April 2019, its cooperation with Oracle was announced. Prada and MiuMiu officially entered the Chinese e-commerce platform Temple Library since June 2019 [1]. Unlike Hermès, Prada is determined to embrace digitalization.
Italian luxury brand Valentino also abandoned Spanish perfume giant Puig. In May 2018, the group reached a long-term global perfume and luxury beauty product license agreement with L'Oreal [1]. Valentino and Prada have similar expectations for the L'Oreal Group, which has outstanding digital capabilities. Both these brands are hoping L’Oreal will help them capture the hearts of Gen X and Gen Z consumers.
Also, thanks to the successful operation of L'Oreal, Armani and YSL Beauty successfully entered the one billion yuan club in China (defined as sales in excess of 1 billion RMB in a single fiscal year). This success can be majorly attributed to the digital-first strategy.
It is a challenge for brands to balance maintaining the brand image and lowering the threshold to reach consumers. The Hermès strategy is based on the exclusivity of its sales channels which feeds into its luxury positioning. Other brands are choosing the multichannel distribution route to maximize profits.At present, the latter strategy seems better. Beauty products as entry-level luxury goods can be a marketing strategy for brands to reach more consumers, secure customer loyalty, and generate follow-on sales in other product lines. Chanel has set an excellent example for other players. It makes great profits by selling beauty products across multiple channels while maintaining a higher degree of exclusivity for its higher-priced luxury products.
Hermès’ share price increased after news of its new ventures was released, so it’s safe enough to assume that forecasters are predicting this move to go down well amongst Chinese consumers. Let’s wait and see…
Disclaimer: All images used in this article are from the internet.
