According to SMU Professor of Marketing Kapil Tuli, it is about differentiating by informing, entertaining, and saving time and effort for customers
When L'Oréal, the world largest cosmetics maker by sales, announced its first quarter sales numbers in April, there were some expected rough numbers: COVID-19 had wiped eight percent off the global cosmetics market although L'Oréal had “outperform[ed] the market with sales at -4.8% like-for-like”.
But the proportion of the company’s revenues attributed to e-commerce was heading in the opposite direction. Q1 e-commerce sales had soared by 52.6 percent year-on-year, translating to a nearly 20 percent share of total sales. In its latest Q3 report, those numbers stood at 61.6 and 23.7.
“The crisis has profoundly accelerated the digital transformation of the beauty sector,” L'Oréal’s chief digital officer Lubomira Rochet told the Financial Times following the Q1 report. “In ecommerce, we achieved in eight weeks what it would have otherwise taken us three years to do.”
While impressive, L'Oréal might not have surfed the waves of COVID-19 lockdowns quite so well without Modiface, the augmented reality (AR) beauty company it acquired in March 2018, and whose technology L'Oréal has deployed in its stable of brands from Garnier to Lancôme and retail partners such as Macy’s, WeChat, and Amazon.
“All kinds of cosmetics, from lipsticks to eyeliners, can be tried on with a high definition [mobile phone] camera on you as a consumer,” explains Kapil Tuli, Lee Kong Chian Professor of Marketing at Singapore Management University’s Lee Kong Chian School of Business (LKCSB).
The Value Wheel
Giving consumers the ability to try on something as personal as makeup from home, without breaking COVID-19 lockdown restrictions, is obviously a useful business advantage. To Prof. Tuli, L'Oréal’s success can be explained within the context of what he calls The Value Wheel:
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Prof. Tuli asserts that the blue wedges are non-negotiable requirements that companies must meet. While ‘product quality’, ‘service quality’ and ‘price’ are readily understood, ‘anxiety’ is a new factor in COVID-19 times.
“The new emerging thing is, ‘What are you doing to curb the anxiety of your customers?” he explained at a recent SMU-X Community of Practice webinar, “Retailing in a COVID-19 World: Adapt, survive and grow”. “If you can’t compete on these four or a subset of these four blue wedges, you can’t survive as a business.
“The way a lot of companies are differentiating themselves has been to look at the three factors in the red wedges. I call them the key differentiators: ‘How are you saving them time and effort in interacting with you? Are you providing entertainment as a value-add? Lastly, how are you providing information to help me make my decision as a consumer?’”
He points out that L'Oréal did not raise prices all this while, and product quality remained the same, but the ability to try on different make-up options “without actually travelling to the store saves consumers time and effort”. To some, the ability to do so on an app is also immensely entertaining and possibly lowers anxiety, such as by assessing how one looks with an unfamiliar colour of makeup without the physical act of applying it.
Making digital happen (on a budget)
While holding up L'Oréal as a case study of a company that has adapted and delivered value, Prof. Tuli acknowledges that its multimillion-dollar marketing budget is beyond the capability of small and medium enterprises (SMEs). To that, he gave the example of Pompanoosuc Mills, a manufacturer of premium furniture in the northeastern U.S. state of Vermont that had done little to no digital marketing heretofore.
When COVID-19 social distancing restrictions closed the company’s eight showrooms in the region, the company’s founder laid off almost all his staff and got remaining showroom managers to take iPhone videos of their stores, which were then posted on the company website as an online shopping guide. The company managed to sell US$210,000 worth of discounted furniture in three weeks, including a sale concluded on Facebook Messenger.
“We don’t have the budget to entertain the customer, so we won’t do that,” the professor explains the company’s approach in the context of The Value Wheel, referring to Pompanoosuc’s decision to inform potential customers of its price cuts. “Also, time and effort was saved because of the pictures that had been uploaded so they didn’t have to come in, and it also observed safety protocols.”
Pompanoosuc also sought and received help from federal agencies, which Prof. Tuli points out as leveraging all available help in surviving the transition to an online business. In addition to looking at The Value Wheel, he advises:
“Do not re-invent the wheel. Digital takes time and money, leverage the platforms that exist. As an SME you cannot afford to develop new technologies or promote a website from scratch easily. Take a hands-on approach and experiment with a phone, lights, and camera. Talk to young people.
“But the most important point is, the true value of digital is only realised if the analogue parts of the operation is aligned. Digital for the sake of digital never works. Until your processes and your people and logistics are aligned behind the scenes, digital will never work.”
Prof. Kapil Tuli was the main speaker at the SMU-X Community of Practice (COP) webinar, “Retailing in a COVID-19 World: Adapt, survive and grow” that was held on 30 October 2020. Prof. Tuli is the director of the SMU Retail Centre of Excellence, the knowledge partner for COP.
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Last updated on 30 Nov 2020 .
