L’Oreal Bets On Online Sales To Grow Beyond Metros

Samarpita Mukherjee-Sharma, a freelance editor and writer, doesn't find her choice of cosmetics easily in Bhopal. She orders everything from face creams to kaajal online.

“Deliveries are quick and hassle-free, and let's not forget the wonderful discounts online shopping gives,” Mukherjee-Sharma, 37, said. And she has much more to choose from.

L'Oreal, the maker of Maybelline eyeliner and Garnier shampoo, is betting on consumers like Sharma who buy online to expand its reach in India, the second most populous nation with two-thirds of its people below 35 years in age. While online retail is booming in Asia's third-largest economy, women still prefer to buy lotions and cosmetics from brick-and-mortar stores that contribute 94 percent of sales, according Euromonitor. Online retail contributes a mere 1.2 percent. L'Oreal has managed to pace ahead of the market with 10 percent of its Rs 2,800-crore revenue coming from the e-commerce channel.

Barring a small percentage in metros, for most Indian women makeup doesn't go beyond nail enamels, kaajal and lipsticks. An Indian buys beauty and personal care products worth $7 a year, said a June report by Indian Beauty & Hygiene Association. That compares with $33 in China, $237 in the U.S. and the global average of $54. Rising literacy and incomes, and easy availability online mean women in smaller cities have now started experimenting with everything from eyeshadows and mascaras to concealers and foundations. The beauty and personal care market comprising lotions to cosmetics is expected to grow 25 percent to $10 billion by 2021.

India's beauty market is growing at 12 percent, Letellier said. That's thrice the global pace. He expects India to jump from being the twelfth-largest beauty market in the world to feature among the top six by 2025.

L'Oreal India, which entered the domestic market over two decades ago, is ranked fourth in the beauty and personal care market led by Hindustan Unilever Ltd. with brands like Lakme, Elle, Dove and Tresemme, according to Euromonitor International. L'Oreal is ranked second in skin care, the research firm said. It drives more than two-thirds of its sales directly from consumers and about a quarter from salons.

The French major is banking on online sales as bigger brands are still not that easily available outside metros and large cities. The company recently started offering products on Nykka.com, an online retailer of beauty and wellness products. It also sells through Flipkart, Amazon, and Paytm.

“In 2012, online revenue was zero; in 2017, it's 10 percent, and for some categories above 20 percent. We grew more than 100 percent,” Letellier said. “It's going to be exponential.”

Aspirations among the young in smaller cities are high and brands like MAC and Sephora have still not reached these markets, said Pradeep Srinivasan, research analyst at Euromonitor International. As a result, he said, beauty and personal care industry witnesses strong online sales from these markets.

L'Oreal India's advertising spends are the highest compared with rivals, according to CLSA. It targets a $1 billion revenue by 2020, the brokerage said in a report titled “Wish you were listed: L'Oréal India.” Five years ago, L'Oreal India didn't spend on digital marketing. That now accounts for 20 percent of its marketing expenditure.

Yet, L'Oreal India is up against HUL. While India's largest consumer products maker sells online as well through multiple online channels, it has a deep distribution network across the country including supermarkets, pharmacies to kirana stores. HUL didn't respond to BloombergQuint's emailed queries on its online sales citing silent period ahead of earnings.

“Internet retailing in India is still quite niche for beauty and personal care products,” said Srinivasan. A few categories that sell more online are lotions, deodorants, fragrances and male grooming products.

For Sharma, cosmetics fall in that group. “It's difficult to find everything under one roof in a physical store,” she said.