Luxury and Beauty: The Best Industry for the 21st Century

On Friday, June 21st I heard from Scott Galloway, Clinical Professor of Marketing at NYU-Stern, talking briefly about the Luxury industry and more specifically Beauty and how it may be the best consumer industry in the world. Why? Consider these two simple facts presented by Prof. Galloway:

  • Today, only 1/3 of the global population has disposable income.  The other 2/3 spends all of their money on basic housing and food with nothing left over.
  • 15 years from now, that number will double and 2/3 of the global population will have disposable income. That’s an additional 2.4 billion consumers worldwide.

The data indicates that as soon as people have that disposable income one of the first things they want to do is look better. Hence, the beauty products aisle or ‘HBA’ (Health and Beauty Aids) as they call it in the US, is booming. We are seeing the type of growth effect this is having on major luxury brand companies such as LVMH, where the majority of their sales and profit growth is now coming from their retail beauty brand Sephora.  Additionally we are seeing huge market cap numbers on luxury companies. Prof. Galloway shared this comparison of luxury company market caps compared to the world’s largest advertising and telecom companies:

  • Richemont brandsMichael Kors = $13 Billion (US luxury company)
  • WPP = $18 Billion (world’s largest advertising/communications company)
  • Estée Lauder = $25 Billion (US largest luxury company)
  • Deutsche Telekom = $38 Billion (world’s largest telecommunications company)
  • Richemont = $45 Billion (world’s largest luxury company)

I heard this talk in Shanghai where the beauty industry has seen in dramatic fashion how an increase in disposable income means rapid growth in the beauty industry. According to the China National Bureau of Statistics, China’s GDP per capita went from $949 to $4,434 over the first decade of the 21st century (2000 to 2010). During that same time frame the beauty industry in China went from $7 billion to $24 billion in revenue, more than tripling in 10 years.

As I shopped around Shanghai I saw firsthand how important the beauty industry is to the Chinese consumer.  Upon entering a Carrefour I saw this impressive display of beauty brands in a huge section dedicated to the category:

Carrefour Beauty

As I continued to walk around the mall I saw numerous stores, kiosks and advertising from all the major beauty brands.  One thing that struck me as interesting in terms of the advertising and associated positioning was that the American brands such as Estée Lauder and Kiehl’s seemed to be focused on functional benefits like “nutrition” and “rare earth” ingredients, while the French brands such as L’Oreal were focused on the emotional imagery of beauty.

Shanghai Estee Lauder Shanghai Kiehl's Shanghai L'oreal

Anecdotally for what it’s worth I spoke to a source with industry knowledge who told me the American brands were faring better than their French counterparts in China.  A victory for functional benefit advertising?

Regardless, it was fun to learn about the beauty industry both from an academic sense and in execution in the Chinese market.  Do you want to know more about how you can position your brand for beauty-like growth?  Contact me and let’s talk about how WGM might help you.

Williams Food Marketing | Minneapolis, MN, USA | hugh@williamsfoodmarketing.com
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