Accelerated by COVID‑19, L’Oreal’s digital shift helped stem sales losses and positions company well for future if it can effectively secure online assets

Summary

L’Oreal, the largest cosmetics company in the world, has seen a huge increase in digital engagement and online sales during the COVID-19 shutdowns, and expects these trends to stick and even increase in the coming years. Echoing other companies that have seen a similar acceleration due to the pandemic on their digital initiatives, Chief Digital Officer Lubomira Rochet remarked: “In ecommerce, we achieved in eight weeks what it would have otherwise taken us three years to do.”

The company’s e-commerce sales increased 53 percent in 1Q20 vs 1Q19, and accounted for 20 percent of total revenues, while overall sales fell 4.8 percent vs 1Q19. L’Oreal is now reassessing its digital transformation strategy and envisions a future where 50 percent of business is e-commerce, and 80 percent of consumer interactions happening online.

Report

Analysis

Consumer company business models have been upended since the lockdowns because the way people shop for things has changed. L’Oreal’s digital engagement has involved more than just an increase in online sales. There has also been a huge increase in usage of their ModiFace ‘virtual try-on’ feature for make-up and hair coloring, as well as one-on-one video consultations via video chat. These types of brand engagement can lead to further sales—both online and offline—and as a result increase the value of, and L’Oreal’s dependence on, its digital assets.

As with Lion (see story below), cosmetics is not an industry that is typically thought of as ‘digital’. But as L’Oreal plans for digital engagement to replace in store engagement and account for as much as 80 percent of consumer interactions, its dependence on the security of these digital assets will make prioritizing good cyber governance ever more important to protecting and growing the company’s value in the coming years.

After a steep drop in its share price in March as the lockdowns took hold (-21% from January to March), L’Oreal has almost regained market losses YTD. The company survived the first wave of disruption in part because it was able to realize some of the financial gains from an ambitious digital transformation strategy. If L’Oreal successfully executes on this strategy moving forward, including securing its digital assets, it will likely set itself up to grab more market share in an increasingly digitized sector.

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Denis Bolshakov

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