MAC: All Things to All People…Even If That Maybe Isn’t The Best Idea Right Now

MACUpfront disclaimer #1: MAC is one of the best beauty brands of all time.

Now that that’s firmly out of the way, let’s commit a little heresy and posit that maybe, just maybe – and this is solely one industry-watcher’s opinion, Makeup Artist Cosmetics, founded in Toronto in 1984 by two guys both named Frank (Toskan and Angelo), snatched up by the Estée Lauder Companies in 1998 for a cool $60 million, has lost sight of its North Star.

How do you know a colossal cosmetics company, one that cut its teeth with professional makeup artists and deployed 6’7” drag superstar RuPaul as its very first spokesperson, may be veering off track? When it announces its hot new collaboration with…Brooke Shields.

Upfront disclaimer #2. Brooke Shields is incredibly beautiful and an American institution. [Read more...]

For Moroccanoil, Imitation Is the Most Litigious Form of Flattery

DanaWood1In all likelihood, only Novak Djokovic logs more court time than the corporate counsels of beauty brands in possession of a true rarity; an original idea. Breaking ground in a new category of product? Be prepared to spend your days fending off a slew of increasingly shameless copycats.

Flashback to 2006: An obscure “hair oil” – created not by an A-list coiffeur, but by under-the-radar Montreal salon owner Carmen Tal – starts trickling into the public consciousness. It’s derived from the nuts of argan trees, which are indigenous to Morocco, and is laced with hair-soothing fatty acids. Sure, argan oil is good for other stuff, like preventing heart attacks. But who cares about that when it can deliver livelier, lusher locks? [Read more...]

Q/A with William P. Lauder

William_Lauder-1We sat down with William P. Lauder, Chairman of The Estée Lauder Companies, the $10 billion global beauty juggernaut, and talked about the evolving retail landscape, the importance of knowing your consumer and the opportunities and challenges of globalization.

Robin: William, we’re living in what we believe is the biggest transformation of the industry in the history of retailing, and therefore in wholesaling and branding as well. Some CEOs are saying it feels like the Wild West. Others feel like they are living in the chaos of technology that is far ahead of our capabilities to totally understand and use it.

And here is The Estée Lauder Companies, the undisputed leader in their space, right in the middle of it all. You served as CEO from 2004-2009, when you transitioned to your current role as Executive Chairman. During these ten years, the business has nearly doubled. So, I know you’re really smart, but is there also a bit of luck working here as well?

William: When I first joined this company in 1986, I perceived that my mission was to gain the experience to do what we needed to help the company be at the forefront of prestige aspirational beauty around the world. In 1996, more than half of our business was in North America. Now more than half our business is outside of North America. Emerging markets like China and Russia were very important, and we had a low share of market in those countries as well as in Europe, the UK and elsewhere. So, we saw a greater global opportunity where the pie was expanding, as opposed to our huge share of the US pie, which was static. [Read more...]

Innovation and Prosperity: A Primer on Private Brand Fragrance Development

shutterstock_115177768Why aren’t more retailers getting into the private brand fragrance game?

In the fashion retail marketplace, developing your own private fragrance brand, especially for specialty apparel chains, is a powerful way to take share from larger multi-brand stores. The single brand strategy resonates so well with consumers today, from Millennials to Baby Boomers, at all levels of the marketplace — from mainstream to luxury. Multi-brand retailers can use private or exclusive brand fragrance to enhance their businesses. These proprietary brands reinforce uniqueness; can be used as promotional tools, gifts-with-purchase, or other innovative marketing techniques.

For retailers who have the will and the vision, the development of private brand fragrance products represent an opportunity for significant financial gains combined with the strategic leverage of merchandising exclusive, compelling products. This is a wonderful opportunity to showcase the creativity, imagination and innovation of your company – – just what is necessary today to differentiate yourself and be successful in the retail space. While nothing is ever guaranteed (and especially not in retail), the development of private brand fragrances can potentially lead to tens of millions of retail profits. [Read more...]

The British are Coming, The British are Coming

RR_MarigayMarigay McKee’s Revolution?

First of all, along with many industry luminaries, I extend a warm welcome to Marigay McKee to this side of the pond, and especially to New York City: the most intensely competitive city in the most ferociously competitive country on the planet; massively over-stored; stuffed and web-sited; and with the most complex distribution and marketing infrastructure in the world. And I’m sorry to start off with such a negative tidbit, but as people get to know me they understand I tend to remind them of the darker side of things. Usually my observations are followed by: “so good luck!.” And in Ms. McKee’s case, it’s augmented by: “particularly since she is coming from the role of chief merchant of one privately-owned store to president of 41 publicly-owned stores, with a lot of underperforming doors.” [Read more...]

Sex Sells

L Brands Deep Dive

I recently attended L Brands half-day investor meeting, where management presented its long-term strategy. While the absolute priority remains growing the North American business, in fact doubling it, L Brands hopes to sustain significant international growth. Finally, Les Wexner who has a place in the halls of retailing as one of the best specialty retail operators, has succumbed to the lure of international markets. vs_under

What positions L Brand apart from its competitive specialty apparel retail set is that it’s not in the apparel business and it’s not in the fashion business. L Brands competes in lingerie and beauty, two product categories that are staples (non-discretionary relatively low price points; and high emotional content (based on fabulous storytelling) for Victoria’s Secret (“VS”), Pink, La Senza and Bath & Body Works.

To quote Les Wexner’s opening comment “I think our year will be good, perhaps very good, unless Washington completely mucks everything up.” Unfortunately, as each day passes the likelihood of a muck-up is more and more real. That said, Les and his team control the controllables with a tight rein on all points of brand interaction with the consumer and employs a partnership/franchise model with a small number of world-class partners to expand beyond North America. This translates into L Brands retaining control or “owning” assortment, pricing, promotions, store design and real estate approval, while franchise partners make the capital investments, and supply the local real estate and retail selling organization skill sets. [Read more...]

The ‘Do Nothing’ Avon Board…Too Little, Too Late — Dividend in Jeopardy

Rarely has a new CEO jumped into a big-time, high-profile turnaround situation such as Avon Inc. presents. And if history is any guide, the ‘Do Nothing’ Avon Board of Directors will not be of any help.

Sherilyn S. McCoy who took over the CEO slot on April 23rd must hit the ground running. And not only must she put out short-term fires, she also has to develop a long-term strategic plan — on the run. Simultaneously, she must learn a new (for her) direct-sell business model. Plus she has to deal with SEC probes of bribery charges in China; insider trading accusations; and a myriad of operational malfunctions. In fact, many are questioning her first major judgment call concerning Avon, and that is accepting the job in the first place.

McCoy, who was formerly Vice Chairman of Johnson and Johnson, was passed over for the CEO job at the $65 billion pharmaceutical giant in February. McCoy gets high marks for  reinvigorating the pharmaceutical division at J&J facing patent expirations on major drugs. She did not have as much luck when she took over J&J’s consumer business that was hit hard by manufacturing problems leading to the recall of products ranging from Tylenol to baby lotions.

Andrea Jung, former CEO and current Executive Chairman, who has controlled the ‘Do Nothing’ Board for over a decade gets the blame for Avon Products’ current sorry state of affairs, and she deserves more than her fair share. But the real culprit is the Board of Directors. Inexperience cannot be the explanation. The majority of the Board has had some experience with the direct selling model, as six of them have been members for 10 or so years. How deeply they understand the model is another question.

By the time the ‘Do Nothing’ Board acted, the company was already spiraling out of control. Unless Avon’s McCoy turns out to be Houdini, and can pull a rabbit out of a hat, it may well be too late to save the 125-year-old direct-selling beauty company. [Read more...]

Dear Reader

Robin Lewis“Value 101” from Professor Lewis: Value, like beauty, is in the eye of the beholder, defined differently and individually in every case. It is imperative to match the value created to the targeted buyer’s definition of value, both real and perceived, or the buyer will not purchase.

The conundrum that exists on both sides is… that the seller has a tendency to overestimate the value while the buyer underestimates. So, agreement between sellers and buyers as to fair value, and the total satisfaction of each, is seldom reached upon first engagement.

And by now, you’re falling asleep in my class. So how about this: the competitive path of least resistance – winning a sale by slashing price – has become “the road to hell, paved with good intentions.” This road is lined with so many sale signs, coupons, daily, weekly and monthly deals, outlet stores, booming off-price stores, and one new website after another with a better deal, that you can’t see the sun.

Blurred value, confused consumers hooked on finding the biggest discount, and retailers fighting hundreds of equal competitors to win the purchase, with “sales” accelerating downward as their weapon of choice, is a major characteristic of the madness in today’s marketplace. [Read more...]

The Coty/Avon Dance: A Train Wreck About To Happen

Avon’s sudden hiring of Sherilyn S. McCoy as CEO – almost certainly intended to thwart any takeover attempt by Coty – indicates that the smaller suitor will have a fight on its hands to acquire the giant direct sales company.

Coty would be better off letting this one get away. Its $10 billion offer for Avon is the biggest and most recent effort in its aggressive quest to become one of the world’s major beauty companies – in other words, to play with the big boys. The company has spent over $2 billion on acquisitions in the past two years, including $400 million for TJ Holdings, a Chinese skin care company, and a reported $1 billion for the skin care company Philosophy.  They also picked up nail color maker OPI and Russian brand Dr. Scheller Cosmetics.  Some industry leaders think they have seriously overpaid.  Are they about to do it again?

Avon is a disaster, but Coty (not to mention many on Wall Street) is focused on its worldwide network of 6.5 million sales reps and its big presence in Brazil.  Add some internationally known products to Avon’s product mix and the reps will sell them like crazy. The thought process taking place around that? Synergy, synergy, synergy.  The old school synergistic proponents are drooling.  But drool rarely translates into sales. It can, however, translate into paying too much for an acquisition.

There are questions about the distribution network Coty is so hot to get.  Some believe Avon has drifted off into the Amway multi-level marketing or pyramid model, which counts as revenues the products and promotional materials newly hired sales reps are induced to buy. So, why not hire more reps? A growing share of the company’s revenue, this might in fact be a strategy to offset declining consumer demand.  Avon is losing nearly half of their reps every year. This forces them to troll for and spend most of its advertising dollars for new reps instead of doing heavy consumer marketing to keep the Avon brand brightly lit. In the meantime, traditional Avon sales are slumping.

Coty obviously has access to a mother lode of money, so funding the deal will not be a problem. The banks reportedly still think Avon is a viable company and, if well-managed, can be fixed. The timing is right for Coty and a godsend for Avon.

It’s documented that Coty and Avon have been talking for a while. First it was going to be Avon owning Coty in a stock deal. Now’s it’s Coty owning Avon in a cash deal.

It looks like Coty announced its $23.25 a share offer for Avon to tease out any interest from a giant like Proctor and Gamble, or some large Brazilian company.

If not, then Avon will have to very seriously consider Coty’s offer.  Time is not on Avon’s side. As new CEO Sherilyn McCoy takes over from lame duck CEO Andrea Jung, she walks into a nightmare of bribery accusations in China and other developing markets, slumping sales, a weak senior executive lineup and massive legal fees that are bleeding company profits.

Given all of Avon’s current problems, a thorough due diligence of the company could be very interesting indeed. Imagine what could be lurking in the many closets of such a big, loosely-managed company with so many divisions!

Stay tuned.  As one industry observer said, “They are dancing on the porch now. However, Avon has had other suitors dancing on its porch before, and thus far hasn’t let anyone inside the house. ” Coty’s drive to become an industry giant could become a giant handicap if it results in the purchase of a very expensive, unfixable company.

Time to blow the train whistle long and loud. Hope it’s heard in the Coty executive suite.

Dear Reader

Robin LewisIt is no small irony that the same technologies that have disrupted and threaten to steal enormous share of market from brick and mortar retailers are now being used by these retailers not only to expand their business into e-commerce, but to potentially gain competitive advantage over the pure e-players by using these… tools to create awesome real world shopping experiences.

And sure enough, if those realworld experiences are compelling, they could very well steal more share from the pure e-commerce sites simply by being on two distribution platforms. Look at Apple, and witness the overwhelming real world experience Steve Jobs created. If you don’t know the productivity numbers by now, averaging $5600 a square foot, you’ve been living on Mars.

So, the old dinosaur brick and mortar guys have the opportunity to compete with pure players on their own field, and can “one up” them by creating an experience consumers can’t get online. And, herein lies an enormous challenge for the pure plays. They too must learn, as Jobs knew, that they must operate in the real world. Even global juggernaut Amazon is planning its first physical space in Portland.

And, Steve Jobs arguably started what I’m calling in our feature story the “Jobsian Era.” Indeed, it is upon us. We are on the leading edge of an era in which we will witness the convergence of the art and science of retailing, in which the winners will gain preemptive distribution, operating on all distribution platforms, both physical and online, and in which they will be providing overwhelming, “mind-connecting” (neurological), experiences in all distribution points (as outlined in our book: The New Rules of Retail).

Wake up, pure-plays! The brick and mortar guys are now playing in your space, but also ahead of you in the real world. What an irony.

Also in this issue, and consistent with the convergence of art and science, is our Q&A with Disney Stores President Jim Fielding, who is in the middle of transforming that shopping experience into the “best 30 minutes of a child’s day.”

Other articles include: Kurt Salmon’s view on the tremendous investment opportunity to be had in the teen retail sector, Cotton Incorporated’s Lifestyle Monitor™ insight on how to measure the success of sustainability programs, Warren Shoulberg on how retailers in the home space, with the exception of a particular superstar from Sweden, have completely ignored the tremendous global opportunity, and David Merrefield’s take on why supermarkets have had little luck getting consumers to use self-checkout.

Finally, we would be remiss to not bid adieu to our columnist Dana Wood, who has just been named Beauty Director of Brides magazine. Our loss is Conde Nast’s gain. Congratulations, Dana – we will miss you!

As always, have a great read, and let us hear from you.

Forget Bentley. The new name in prestige is…Ford?

The Robin Report - The New Prestige is "Ford" not BentleyBefore he left the planet, when he wanted to make the point that he considered something seriously chi-chi, Andy Warhol would describe it as “up-there.” And, as I recently scrolled, ever so slowly, through the stunning Tom Ford Beauty website, I couldn’t help repeating the Pop Art God’s ultimate thumbs-up catchphrase: “This stuff is up-there,” I marveled to me, myself and I. “Truly, genuinely up-there.”

Of course, I already knew it was up-there; unless you’ve been living under a rock, it’s nearly impossible to miss the collective oohing and aahing over Ford’s niche-luxe scents, and, as of Fall 2011, his 132-sku cosmetics collection and tightly edited – but serious – range of skincare. Launched under the auspices of the Estée Lauder Cos. Inc., and the stewardship of group president John Demsey, the buzz has been deafening.

In great part, the hoopla over the newish beauty brand – his first Signature fragrance, Black Orchid, hit the market in 2006 – stems from the global obsession with Tom Ford himself. Yes, there are designers of equal fascination and rock star status (Karl Lagerfeld and Marc Jacobs topping that list), but none has controlled his image, nor fiercely guarded his commitment to luxury, in quite the way Ford has. [Read more...]

Dear Reader

Robin LewisThe fact that we’re living in arguably the most disruptive, game-changing period in the history of retailing should be quite obvious to all by now. Just as technology (including the Internet), globalization and unfettered competition have provided consumers with total power over all consumer-facing industries, those very same tools and dynamics must now be used by those industries (including retailers), to fundamentally transform their business models, or those businesses will simply disappear.

Jeffrey Bezos, founder and visionary leader of Amazon.com, the subject of this issue’s feature story, understood these global, game-changing dynamics earlier and better than anyone else, as evidenced by Amazon’s continuing warp-speed growth. The Internet is, indeed, nothing more than a “tool.” So, when I hear people say the Internet is changing the face of retailing, I disagree. Jeffrey Bezos has single-handedly changed and continues to change the face of retailing through his profoundly visionary use of the Internet as a tool. Furthermore, to define Amazon as a retailer is a misnomer. It is a vast, limitless marketplace within which any product or service under the sun can be bought, sold, auctioned off or traded. Its only limit is the limit of Bezos’s imagination, which in 18 short years has achieved Amazon.com’s $50 billion in annual sales and the number one share – 35% – of e-commerce sales. Staples is number two with roughly a 10% share. [Read more...]