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CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

US department stores are having a tough time, with both Macy’s and Nordstrom reporting first-quarter

sales declines. A string of reasons have been put forward to explain the fall in business, from the weather to consumers spending less on clothing and accessories. However, one factor that is emerging as more of a long-term threat than these cyclical causes is Amazon. Nordstrom, which saw a 64% fall in first-quarter net

profit, outlined that Amazon had a lot to do with the disappointing performance of its brick-and-mortar stores.

In addition, Morgan Stanley recently released a report stating that Amazon will account for 19% of US apparel sales by 2020, up from 6.7% last year, and that more consumers will begin to buy high-end fashion from the online giant. Where does all this leave beauty? If Amazon continues to take a greater share

of high-end fashion, will the same thing happen in high-end beauty? If Amazon continues to hit traditional retail as hard, will there be even more closures of department stores? And will shifts in the retail environment put prestige brands under more pressure to sell directly to Amazon? These questions will no doubt take on more importance for the industry, as just like fashion, beauty is unlikely to remain immune to the Amazon effect.

The Amazon effect The buzz 2News roundup

Netwatch 7 Social media monitor

Interview 8Estée Lauder svp general manager international Justin Boxford

Insight 10 Travel retail pop-up stores

Show review 13 TFWA Asia Pacific

Store visit 17 Natura, Brazil

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry May 26 - June 8, 2016 #131

News headlines daily on www.bwconfidential.com @BWCbeautynews

Meet the BW Confidential

team at:

l Cosmetic Business, Munich, June 8-9l MakeUp in Paris, June 9-10l World Perfumery Congress, Florida, June 13-15l Alternative Fragrance & Beauty, Paris, June 16-18


www.bwconfidential.com - May 26 - June 8, 2016 #131 - CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

News roundup

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Strategy

French group L’Oréal has invested in UK-based Founders Factory, a digital incubator, becoming its exclusive partner for investments in beauty tech start-ups worldwide.The two partners will invest and scale five early-stage start-ups and co-create two new

companies from scratch each year, according to L’Oréal. Founders Factory’s in-house team will support and advise participating start-ups, and work with L’Oréal to create and launch new services and products.

US-based beauty group Coty is to trim 6-8% of its portfolio following its merger with P&G Beauty Brands. The bulk of divestments and discontinuation of brands will be in the fragrance category. Despite the divestments, Coty chairman and interim ceo Bart Becht said that the group will continue to look for more acquisitions. Through the deal to acquire the P&G brands, Coty will become a $9.2bn company

and rank number-three in the beauty market globally after L’Oréal and Estée Lauder Companies, according to the group. It will become the number-one group in fragrance, number-three in color and the number-two in the hair salon business. The company said it will see savings of around $780m annually after the next four years.

Synergies are set to result in one-off costs of around $1.2bn over the same period.

Spanish group Puig has taken a minority stake in fragrance brand Eric Buterbaugh Florals (EB Florals), a move that reinforces its presence in the niche perfumery market. EB Florals was created by floral designer Eric Buterbaugh and perfume expert Fabrice

Croisé in 2015 with a concept based on floral scents. The brand markets a collection of eight unisex fragrances and six candles. The line has been sold only at the brand’s flagship boutique in West Hollywood, US and online. However, this month it will launch in Saks Fifth Avenue in Beverly Hills, San Francisco, Las Vegas, Houston and Toronto and at Bergdorf Goodman in New York. Puig’s investment in the brand is part of its strategy to build its niche fragrance business—it acquired niche brands Penhaligon’s and L’Artisan Parfumeur last year. Puig is aiming for a 12% share of the global selective perfumery market by 2020.

Estée Lauder Companies (ELC) is to introduce a cost-cutting program aimed at boosting productivity and profitability, which it calls Leading Beauty Forward. The program is expected to result in 900 to 1,200 job losses globally, around 2.5% of its workforce. ELC says the program, slated to begin during its fiscal 2016 fourth quarter and n n n

Stay informed with our daily news headlines on www.bwconfidential.com

n L’Oréal invests in Founders Factory

n Coty to trim portfolio

n Arden to acquire Christina Aguilera fragrance license

n Sephora teams up with Manor to open first Swiss store

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n n n completed through fiscal 2021, will free up resources for investment in its brands. The initiative will center on restructuring and investment in new products, social media

communications and advertising. The company expects restructuring and other charges of between $600m and $700m before taxes. Once fully implemented the program is expected to result in annual net benefits of between $200m and $300m before tax.

Elizabeth Arden is to acquire the Christina Aguilera fragrance license from Procter & Gamble. The Christina Aguilera fragrance business includes seven brands and is the number-one celebrity fragrance brand in Europe, according to Elizabeth Arden. Christina Aguilera fragrances and the Dolce & Gabbana fragrance brand were not

included in P&G’s sale of its specialty beauty business to Coty. The deal is expected to close in the first quarter of fiscal 2017. In other news, Elizabeth Arden unveiled a new digital campaign called From the Desk of

Liz Arden. The campaign features fictional character Liz Arden, who will act as the brand’s digital voice and is inspired by the brand’s founder, Elizabeth Arden. Japan-based Kanebo Cosmetics is launching a new prestige brand called Kanebo, as it celebrates its 80th anniversary this fall. The Kanebo brand is based on the concept of Chrono Beauty, which it says centers on skincare, make-up and wellness. The range consists of 44 items across make-up and skincare (45 overseas). Prices range from ¥800 to ¥8,000 (US$7-$72). Model Arizona Muse is the face of the brand. Kanebo will launch in Japan in September.

L’Oréal-owned Biotherm Homme has teamed up with ex-footballer David Beckham to create a skincare line. The collection of skincare and grooming products will launch in 2017. The collaboration will also see Beckham become Biotherm Homme’s first global ambassador. Beckham’s first role as spokesperson for the brand will be for the Aquapower moisturizer, which will debut online in June.

Retail

LVMH-owned perfumery chain Sephora opened its first store in Switzerland through a shop-in-shop format at Swiss department-store operator Manor in Geneva in May. The Sephora shop-in-shop is a new concept that will serve as a blueprint for future openings in other regions, according to Manor.The shop-in-shop will stock 22 brands, of which 12 are exclusive, including Make Up

For Ever and Marc Jacobs beauty. Services include the Sephora Make Up Bar, Benefit Brow Bar and Gift Factory. Shoppers will be able to touch, test and experiment with the products. Sephora products will also be available on Manor’s website. Sephora plans to open an additional six stores in French-speaking Switzerland in 2016. The retailer could expand to German- and Italian-speaking areas of Switzerland in future.

Dufry has extended its contract with Guarulhos International Airport in São Paulo, Brazil for the operation of duty-free and duty-paid retail spaces until 2032. Dufry will also operate around 2,300 m2 (6,546ft2) of extra duty-paid retail space, including a Dufry Shopping megastore at terminal 2, and last minute shops. The new spaces, located at the airside and landside of terminal 2, are expected to open in 2016. n n n

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z News roundupn n n LVMH-owned Make Up For Ever has unveiled a new make-up bar concept at Sephora’s French flagship store on the Champs Elysées in Paris. Called Go Pro Make Up, the 25m2 (269ft2) bar aims to enable consumers to discover color trends and learn how to create looks in a step-by-step process from professional make-up artists. The concept features a moving conveyor belt (similar to those found in sushi restaurants),

which is used to display 18 make-up boxes. Each make-up box is devoted to a trend or look and features a sketch of the look and the products to create it. Customers choose a box and then reproduce the look with the help of make-up artists and a how-to step-by step leaflet. Two make-up artists are stationed behind the bar to explain the techniques, while four assistants help customers seated around the bar to apply make-up. The service is free and without appointment, although customers can buy a personalized

version of the make-up box following the session. The bar will also hold masterclasses on trends or professional techniques once a week by

Make Up For Ever’s international make-up artists. Go Pro Make Up is currently only at Sephora’s Paris flagship store. However, the brand

indicates that the concept will be rolled out internationally and that there is strong interest from markets such as China and the US.

Intertrade-owned Avery Perfume Gallery is to launch its fragrance retail concept in French department store Printemps’ Paris Haussmann location this summer. Avery Perfume Gallery is to open a space of around 25m2 (269ft2) in the department store’s La Belle Parfumerie. It will stock 10 niche fragrance brands, two of which are exclusive to Printemps: Avery and The Fragrance Kitchen.

Perfumery chain Marionnaud presented a check for €100,000 to the CEW France (Cosmetic Executive Women) association in May. The donation will go towards dispensing beauty treatments and advice to patients suffering from cancer in French hospitals. The €100,000 was raised from the sale of 35,000 soft toys dressed by Repetto in Marionnaud stores during the Christmas season. Marionnaud has partnered with CEW since 2002 and announced that it has renewed its partnership for another five years.

Data

Sales of prestige beauty products in the US grew 4% in the first quarter of 2016 to $3.7bn, compared to the same period in 2015, according to The NPD Group. The market was largely boosted by online, which accounted for 14% of dollar sales in the first quarter, a 2% increase. n n n

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n n n Make-up sales for the period were up 9% to $1.7bn, while online make-up sales rose 30%. Facial make-up sales grew 12%, due to a strong performance from primers and concealers. Skincare sales increased 1% to $1.3bn, with online sales up 21%. Fragrance sales rose 1% in the quarter, standing at $686.9m, with online fragrance sales increasing 25%.

People

LVMH Fragrance Brands president Alain Lorenzo is to step down from his role. He will be replaced by Romain Spitzer, currently managing director Europe of Parfums Christian Dior. Lorenzo was president of Parfums Givenchy for 20 years. Spitzer becomes president of Parfums Givenchy and will also manage shared services of LVMH Fragrance Brands.

Trade shows

This year’s edition of the MakeUp in Paris trade show is to put the focus on digital and how new technology is impacting the industry. For the event, the show’s organizers have created a new area called Digital Beauty, where visitors can find digital solutions specifically for beauty and make-up. The area will house around 10 companies in the fields of product development, retail, consumer relations and digital strategy consulting. In addition, the show will host a series of conferences on digital and beauty. The

conferences will focus on themes such as e-commerce’s share of the global beauty market, as well as roundtables on how new technology will change the consumer experience, which will cover make-up apps, packaging, point-of-sale materials and personalization. MakeUp in Paris will take place in Paris from June 9-10.

Launches

France-based Interparfums is to launch a new women’s scent for Lanvin called Modern Princess, which it describes as a new chapter in the brand’s fragrance story. “The brand’s offer has been romantic, but we wanted to change the tone and begin a new type of story that is a bit different,” explains Interparfums ceo Philippe Benacin. The fragrance is fronted by model Steffy Argelich and the campaign includes TV and cinema spots, as well as print advertising. The floral scent was composed by Christophe Renaud from Firmenich. Modern Princess will launch in July in France, Belgium, Japan and Russia, and globally in 2017. It retails at €45 (30ml EdT), €67 (60ml EdT) and €89 (90ml EdT).

US-based Coty launched a new fragrance collection for men and women for its Bottega Veneta brand called Parco Palladiano. The collection is inspired by the gardens of villas in Italy’s Veneto region, created in the 16th century by the Renaissance architect Andrea Palladio. The collection is comprised of six scents, with each named after a single Roman numeral (I-VI). Parco Palladiano was created by perfumers Daniela Andrier of Givaudan, Alexis Dadier of IFF and Michel Almairac of Robertet. Each scent retails at €265 for 100ml EdP. Parco Palladiano launched exclusively in Bottega Veneta boutiques in May. n

US prestige beauty sales by category first quarter 2016Category Sales

$bn% change Q1 2016/

Q1 2015 (total measured market)

% change Q1 2016/Q1 2015 (online only)

Make-up 1.7 +9 +30Skincare 1.3 +1 +21Fragrance 0.69 +1 +25

Source: The NPD Group/US Prestige Beauty Total Measured Market

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BW Confidential reports on what’s being said about beauty on social networks

Social media monitor

Guerlain’s My Supertips collection of five travel-sized products has been praised for its colorful, eye-catching presentation and marketing. Critics however, say that the 15ml formats are too small for some products, such as a balm, and too expensive.

News of Rihanna’s beauty range with LVMH-owned Kendo, Fenty Beauty, has generated much discussion on the beauty blogs. As a result of the deal, many bloggers are asking whether LVMH has ambitions to expand into the lower-priced beauty category.

Mina, a Spanish cosmetics brand, has been described as one of the most exciting new lines to launch recently. Accessibly priced, the brand is also liked for its interesting strategy of not selling online to encourage consumers to visit its store, which has opened in London’s Covent Garden.

Hair removal devices continue to be a popular topic of discussion and are driving a new trend, according to bloggers. Innovations like Philips Lumea IPL, which uses intense pulsed light, have been particularly popular.

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Estée Lauder svp general manager international Justin Boxford discusses renewed growth in Japan, the role of department stores and the impact of Chinese tourism on the beauty market there

Japan’s growth drivers

How is the Japanese beauty market performing and what is the outlook for the coming year? Japan remains one of the most important beauty markets for us globally. Beauty is growing extremely fast again in Japan and this has been the case now for a good two years. Department stores specifically are growing very fast. The economy has played a huge role [in the renewed growth]. The currency devaluation has meant that the Chinese have come in a very big way, and the Chinese impact has been tremendous. With Estée Lauder being the leading brand in China, we’re a very desired brand as they come to some of the great department stores in Japan.A big trend that we are seeing in Japan, but also across Asia and the world, is this shift

to make-up and specifically lips. Lipsticks are exploding, not only for Estée Lauder, but as a category generally. Our Pure Color Crystal Lipstick is the number-one lipstick in Japanese department stores. We are also seeing growth in young consumers coming to some of our big channels

and buying lipsticks and color in a very big way. Part of that make-up success and why young people are coming to the stores is because service is becoming more important. For inbound tourists coming in, it’s a great attraction to see the service that is being delivered by beauty advisors.

If Chinese consumers are now a key part of growth in Japan, does that mean you have to skew your offer in the country to two different cultures? It is only in select stores that we are seeing the big impact of the Chinese on the market. Today, this is very much a Japanese-dominated business. [But] when you look at incremental building pillars, the Chinese play a big role in that extra growth, which is happening across some select stores, specifically in Tokyo and areas such as Ginza. The brands that are doing very well are those that make sure they have the right assortment for the Chinese consumer. We want to make sure that we have all the leading lines, such as Advanced Night

Repair, and Nutritious, which does very well for us in China and in China-driven doors. We’re hiring Mandarin-speaking beauty advisors and we make sure we tailor our tools and have them in Chinese, such as brochures, iPads and point-of-sale merchandising; this is relatively new. That’s where the Japanese high standard of service comes in as well. The two-minute touch-up after every single service is a great way to engage with tourists so that when they go back to their country they purchase the brand there as well. n n n

Estée Lauder svp general manager international Justin Boxford

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”Estée Lauder svp general manager international Justin Boxford

The perfumery-style stores are a big business driver for mass brands. [The question for us is] how do we reach those consumers? That’s where the retailer [e-commerce] sites are so important to try and recruit those new consumers



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w Estée Lauder svp general manager international Justin Boxfordn n n What is happening in the regions outside of the big tourist centers in terms of Japanese consumers and how they shop? Chinese tourists travel outside of Tokyo as well, so there are a number of cities and tourist doors where we are seeing a big influx of Chinese tourists. But the retailer e-commerce sites play a big role, and the key department stores are doing a fantastic job in leveraging their sites; this is growing very fast. We find that where there isn’t a big, key store for the Japanese consumer, they are buying our brands on these retailer sites in a big way. The e-commerce business for us, and specifically for our branded site, has seen a tremendous acceleration over the past three years. The ability to leverage what’s happening in the digital social space to drive traffic to our online site or key department-store retailer sites has been a very big building block for Estée Lauder.

Department stores have always been key for prestige beauty brands in Japan, is this still the case? As it relates to Japan today, department stores are not the biggest channel for beauty; mass has played a big role in Japan. The perfumery-style stores are a big business driver for mass brands. [The question for us is] how do we reach those consumers? That’s where the retailer [e-commerce] sites are so important to try and recruit those new consumers. The department stores are also experimenting and developing their own versions of specialty-multi open-sell environments. Isetan has a number of concept stores, a specialty multi-open-sell environment that is very make-up driven. The idea is to get more young consumers into that store and create a new shopping experience. We’re supporting them as much as we can. They are leveraging their dot-com sites in a very big way, and obviously they are trying to [push] make-up as much as possible to recruit new Japanese consumers into these stores. However, because of what’s happening with the inbound tourist business, skincare is also beginning to grow quite fast in department stores again.

What will be the main challenges for the market over the next year?One of the challenges is that mass and masstige brands still play a very big role in Japan. Specifically, the Japanese brands, especially in skincare, are extremely important and remain strong in Japan. For international brands such as Estée Lauder, our ability to recruit from these mass brands is the big opportunity. We look very carefully at usage habits of Japanese women, how they use skincare, what is in their regimen, what products they want to use and we try to meet those needs. We’re developing products specifically for Japanese women.

Has the popularity of Korean beauty brands globally impacted the Japanese market?Certainly Korean brands in Asia are playing a very big role and specifically in China. However, in Japan it’s the Japanese brands that are our biggest challenge. Korean brands have had less traction and less impact in Japan versus other markets in Asia. The influx of Chinese inbound tourists has increased dramatically over the past 12 months and we find that when they go to Japan they want to buy brands from that country. It’s been a big growth driver for Japanese brands and that’s also given a lot of growth to the Japanese brands in China as well. n

s Estée Lauder claims its Pure Color Crystal Lipstick is the number-one lipstick in Japanese department stores

“

”Estée Lauder svp general manager international Justin Boxford

Because of what’s happening with the inbound tourist business, skincare is also beginning to grow quite fast in department stores again


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Pop-up shops are making their mark in global travel retail. Adoption of such concepts is increasing as these temporary retail havens present the chance to increase traffic,

create theater and generate a buzz, install services and drive incremental sales. They also generally add a unique element to the offer. But their function is often based on location.Head of global retail at Blackjack Promotions Lauren Walsh explains: “In-store space

for pop-ups is still fairly minimal—it’s probably one promotional space and it will be very much linked to sales. More pop-ups are emerging outside the traditional airport retail space because beauty brands are spending their marketing budget in a different way. They are looking much more at bringing their brands to life in multiple positions. The brands won’t be retailing from these spaces, they are about creating a brand experience and delivering theater. They are driven by the brand marketing team rather than the sales team, but they will be designed to capture passengers who didn’t have the intention to shop and driving them in-store.” For travel retailer Lagardère Travel Retail, pop-ups offer the chance to be opportunistic

and create new business prospects. “As our shops are very limited in size, any extra retail space is interesting. Our partners offer more and more pop-up concepts, which allow us to either answer a customer need we could not satisfy in our shop or to try new brands and offers,” says Lagardère Travel Retail fragrances and cosmetics category director Delphine Poultney.Dubai Duty Free (DDF) had two long-

term pop-up shops located in Concourse C at Dubai International airport with 23m2 (246ft2) space, and in Concourse B across a 41m2 (441ft2) space. Most suppliers are requesting pop-ups with DDF to allow a more personal shopping experience and visibility. “In Concourse C we highlighted Hermès Hermessence, CH Confidential, Guerlain Santal Royal and a Benefit Brow Bar, while in Concourse B we had Versace Eros and Hermessence. Additionally, there are short-term promotional areas like promo sites and circles, which are dedicated to new launches, exclusivities and existing lines,” states DDF vice president purchasing Saba Tahir.Fellow travel retailer Qatar Duty Free

(QDF) has hosted installations such as Bed of Roses Dior Les Parfums, which featured an avenue of 6,000 hand-planted n n n

Pop-up stores are on the rise in travel retail and are driving footfall and sales, while acting as a test bed for new opportunities



Pop stars

Travel retail pop-up stores

s Bulgari’s pop-up store at Zurich airport enabled the brand to combine fragrance and jewelry, which would be impossible in a perfumery


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n n n roses and 12 fragrance creations at Hamad International airport (HIA) last year. Both marketing and experiential pop-ups have been installed on the concourse and the peripheries of the South node, giving the category a much bigger footprint. At the beginning of the year, for example, a Carolina Herrera pop-up focused on gifting ideas for the brand in fragrance. They were installed all over the airport to try to create an “ongoing voyage of discovery”, according to the company.

Return on investmentThe key question however, is whether pop-up stores are worth the investment. Yes, in the right place and with the right offer is the answer, according to Poultney. “We are very vigilant when we do pop-ups, before anything they are retail outlets with a P&L, but they can also be an ideal tool for testing,” she remarks.Although suppliers need to invest in the furniture, rent and hire promoters to boost

sales, it seems to be worth the effort. “Versace was the first brand to be highlighted in the Concourse B pop-up store in May 2015,” says DDF’s Tahir. “The sales from this area alone represented 29% of total Concourse B Versace sales. Last October, we opened the Hermès pop-up store in Concourse C until December 31, and sold nearly 6,000 pieces of Hermès perfumes.”Brands are prepared to wait to see the return on investment, and realize the

short and long-term gains in brand awareness and sales. LVMH-owned Bulgari, for example, introduced its third pop-up store in a European hub at Zurich airport in the airside Center Level 2 in April, where it was operational until June 5. Its Temple of the Jeweller theme echoed many of Bulgari’s signature architectural elements, balancing tradition and innovation. Beauty and jewelry advisors welcomed passengers to the pop-up with an exhibition gallery that featured a n n n

“

”Lagardère Travel Retail fragrances & cosmetics category director Delphine Poultney

We are challenging [competing brands to work together for pop-ups], but we are not there yet. However, it would be interesting for both parties as the right association would create more interest and therefore more stop ratio and return on investment

s L’Oréal’s East Meets West pop-up implemented by QDF focused on the theme of Western and oriental fragrances for its brands


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n n n Divissima necklace from the Diva’s Dream collection. The pop-up was designed to take passengers on a global journey to discover the

Le Gemme collection, Eau Parfumée and Omnia Paraiba, the latter of which was accompanied by a painter to decorate the Omnia bottles. A combination of jewelery and watches with fragrances is not possible in a standard perfumery, but the pop-up presented the essence of the Bulgari spirit.Zurich’s pop-up followed the opening of outlets in Paris and Istanbul airports.

Bulgari’s investment in pop-ups was comparable to a media campaign, increasing brand awareness and generating high sell-out that is measurable for the duration of the pop-up, but also in the following months. In 2015, sell-out was tripled during the pop-up in Paris and a high positive trend was noted in the months after.

What’s next?The evolution of the pop-up concept will be interesting to chart. Some pop-ups have followed specific themes, such as the When East Meets West experience implemented by QDF last year in partnership with L’Oréal Travel Retail. This showcased oriental and Western fragrances from L’Oréal’s Lancôme, Giorgio Armani, Yves Saint Laurent, Ralph Lauren and Viktor & Rolf brands in the main atrium of the hub. The journey was built around an area of relaxation directly inspired by the shape of the Foundation of Doha Museum of Islamic Art, and offered a bottle engraving service to passengers.There are likely to be other opportunities for specific themes, or brands collaborating

in the same category. L’Oréal Travel Retail strategic development, global shopper and retail excellence director Stephan Glasser comments: “We can imagine other brand associations depending on the theme, such as men’s, make-up, Christmas and so forth. The main thing is to have a strong and clear concept with surprise, retailtainment and animation—in other words, provide an unforgettable experience.”Although Qatar Duty Free was not able to name the future collaborations in the

pipeline, the operator’s former senior vice president Keith Hunter (he recently left the company) told BW Confidential that there are plenty more partnerships to follow. “It is about trying to get the brands to think a bit differently. It’s not just a showcase space, it’s one where they can really interact,” says Hunter. “We believe this brings additional interest to the category while using it as a directional platform into the store. We have encouraged brands not just to focus on one sub-category and I think this year it won’t just be P&C in the traditional P&C spaces.”However, the possibility of competing brands from different beauty houses partnering

to establish a pop-up with products in the same category is a different matter. It can be difficult to find brand combinations that work without cannibalizing sales or luring the wrong mix of consumers, but it is something that travel retailers are pushing for. “We are challenging them, but we are not there yet,” notes Lagardère’s Poultney.

“However, it would be interesting for both parties as the right association would create more interest and therefore more stop ratio and return on investment.”Although pop-ups are set to flourish, there are some limitations to growth. DDF, for

example, would like to continue with pop-up areas, but due to space constraints it is left with short-term promo sites in Concourse B and D. Airports in particular may find space to be an inhibitor.“I think the number of pop-ups will increase, but not dramatically as the places within airports where pop-ups are allowed are limited (due to security issues or lack of locations),” concludes L’Oréal’s Glasser. n

”L’Oréal Travel Retail strategic development, global shopper and retail excellence director Stephan Glasser

We can imagine brand associations depending on the theme, such as men’s, make-up, Christmas and so forth. The main thing is to have a strong and clear concept with surprise, retailtainment and animation—in other words, provide an un-forgettable experience

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TFWA Asia Pacific Took place: Singapore, May 8-12Visitors: 2,905, +12% vs 2015Exhibitors: 310, +9% vs 2015 New exhibitors: 79

Despite the challenges in the travel-retail market, TFWA president Erik Juul-Mortensen said a spirit of optimism pervaded this year’s TFWA Asia Pacific show. Passenger

numbers in Asia are still encouraging: passenger growth in the region was 8% in 2015 and passenger numbers to Asia Pacific are forecast to exceed 550 million this year and reach 657 million in 2020, according to Pacific Asia Travel Association (PATA). Asia Pacific duty-free and travel-retail sales rose 2.6% to $25.2bn in 2015, according to Generation Research. However, in his opening address, Juul-Mortensen said that although duty free and travel

retail has enjoyed strong growth in Asia Pacific in recent years, the business is coming under pressure. Key challenges discussed at the show’s conferences included exchange rate volatility, continued consolidation, rising rents, the Chinese slowdown and the tough market in Hong Kong, and how to target digital-savvy consumers—especially millennials, who are set to change the travel-retail landscape, according to some industry players. There was also much talk about downtown shopping in the region. According to new

data from research company m1nd-set, the off-airport duty-free sector now accounts for 44.6% of duty-free sales in Asia Pacific. Fragrances and cosmetics have the largest share of this business, accounting for 40% of all sales. m1nd-set reports that shoppers like the convenience and good use of time of downtown duty free compared to an airport, factors that were cited by 43% of those surveyed by the company (the number-one reason for shopping downtown). The second and third reasons for choosing to shop downtown were the presence of leading brands, which appealed to 27%, and the wide choice, which appealed to 26%. However, only 25% of those surveyed cited attractive prices as an advantage.

Growth challengesAddressing the current challenges in travel retail is becoming more urgent given the lackluster performance of the channel in 2015. Last year for the first time since 2009 global duty-free and travel-retail sales declined. Preliminary figures from Generation Research show that sales fell 2.3% in 2015 to $62bn. This situation is however, more promising for beauty. Perfumes and cosmetics was the

only category to see growth in the channel last year, with sales up 2.3% to $19.5bn. Beauty and fragrance was also the fastest-growing category in Asia Pacific, where sales rose 18.3% to $9.5bn. As for the show itself, TFWA said attendance figures broke records once again,

testament to the long-term potential of the region, according to the association. Visitor numbers rose 12% to 2,905, while the number of exhibitors increased 9% to 310. n n n

BW Confidential reports on what was seen and heard at the TFWA Asia Pacific show, which took place in Singapore from May 8-12

Ups & down

TFWA Asia Pacific


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n n n Industry soundbites: the industry on travel retail & Asia “[In travel retail] there is an important evolution in distribution with downtown shops developing more. The issue is the risk of potential cannibalization in sales, hence the need for a strategic approach to openings, travel-retail strategies and the local market. Overall, business in Asia is doing well. The retail scene is improving a lot—just look

at what Heinemann has done in Sydney for example, with its great offer, modern layout and good traffic. This is supported by the consolidation of distribution; Dufry should be able to bring this to Asia. The slowdown is being felt strongly in Hong Kong and we don’t think [the market]

will take off again, although traffic should come back. It is a structural issue whereby tourists have lower purchasing power; we see it in the average shopping basket, which is declining. Also, the gap between Hong Kong and China in terms of pricing is getting smaller and this strongly affects the Hong Kong market. We keep investing and we support DFS, but we don’t anticipate the market to pick up this year or next. Beijing and Shanghai with the new terminal are doing well and traffic is good there, while tier-two cities are also developing well so we remain optimistic. There are big development projects in Hainan (Sanya, Haikou…), which shows there is demand.Digital is a big growth vector, especially in Korea where e-commerce is booming.

The Chinese and the Koreans drive sales in Korea. The challenge is to create synergies between the downtown channel and e-commerce. Last year, many operators opened their websites (such as Changi, CDFG, Sunrise) and the e-commerce trend will intensify. We are structuring ourselves to establish a strong e-commerce approach with retailers. We work on website ergonomics, design and consumer experience. Lancôme is our test brand for digital with specific drive-to-store operations.”L’Oréal travel retail Asia Pacific strategic business development director Xavier Dubruil

“I often hear that travelers are price sensitive, but I believe they are above all service sensitive. Of course they compare prices, but we are among the most expensive brands on the market and we have been growing everywhere, even Geneva despite the strength of the Swiss franc. Last year we did not discount and were right not to. We are number-one in Dubai Duty Free today, so I think we have the right strategy.” La Prairie vice-president global travel retail Laurent Marteau

“The slowdown is a reality, but we look to the long term, and this is short term as we believe that China has huge potential. In six months or one year [the Chinese] will travel again. I am positive, even if 2016 is a volatile year. In China’s domestic market we continue to grow and to open counters—we have more than 200 counters there. Asia is essential for us, as it represents 35% of our global business.”Ferragamo Parfums ceo Luciano Bertinelli

“The [Chinese travel-retail] landscape is changing: Sunrise is taking a new direction in fragrances: they are going more into generic merchandising, a bit like CDFG. This gives them more flexibility if they wish to change brands; this is not easy for [brands] as they can easily be taken out from the selection. On the other hand, it n n n

TFWA Asia Pacific


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TFWA Asia Pacificn n n Industry soundbites: the industry on travel retail & Asia

enables strong-performing brands to improve their position faster. Business in travel retail in China is flat for fragrance, and better in skincare. Chinese travelers are changing destinations, the winners being Japan and Thailand, as

well as Korea. For Japan it will still depend on the yen, this is why many operators have opened downtown shops (such as Lotte, Shilla). In travel retail, 25% of the business worldwide is done by the Chinese.”Interparfums Asia Pacific managing director Renaud Boisson

“Chinese travelers who used to come in groups now travel more as individuals. They are more educated, they know the brands and know what they want. Tier-two to tier-three consumers travel more today and behave like previous tier-one travelers: they are looking for experiences, open to fragrances and willing to try them.”Coty marketing director travel retail Markus Stauss

“Except for Hong Kong and China, we are performing well—we are flat, which is not too bad considering the situation. In South Korea and Japan it used to be complicated for small brands to enter these markets, but this is beginning to change, especially in South Korea. There is a new retail environment with new perfumeries and distributors developing distribution and retailing for example. I don’t know how it will evolve, but there are definitely changes happening and the potential is there.”Angelini Beauty international sales manager Carlos Dogliani

Heard in showShiseido Travel Retail revealed the revamp of its Aupres brand. Aupres was developed exclusively for the Chinese market in 1994. Aupres’ rebranding includes a new logo and tagline “beauty starts from beautiful bare

skin”, as well as new visuals for its 2016 ad campaign fronted by its brand ambassador, Chinese actress Sun Li. Aupres will also launch a new product assortment in 2017, which will be led by the brand’s star product Eternal Essence.In addition, the Aupres stores have been revamped as part of the rebranding. Counters

now have an expanded and open design, are equipped with diagnostic tools, while BAs have new uniforms featuring the brand’s new light pink logo. Shiseido launched the Aupres brand in travel retail in 2014, a move that is part of its

strategy to diversify its portfolio in the channel. It is also putting a strong push behind Asian brand Anessa in travel retail. “Anessa and Aupres [are] two Asian brands that are doing well in China—a key market for us—and have strong appeal for the growing segment of second-, third- and fourth-tier Chinese travelers, “ comments Shiseido travel retail vice president marketing Elisabeth Jouguelet. The group also unveiled a string of new products and travel-retail exclusives from

Shiseido, Clé de Peau Beauté (pictured) and Anessa. The launches include two new products in Shiseido’s LiftDynamic collection: Bio-Performance LiftDynamic Cream (50ml) and Bio-Performance LiftDynamic Eye Treatment (15ml). The complete LiftDynamic collection will be available as an exclusive travel-retail set. Clé de Peau Beauté will relaunch its Intensive Eye Contour Cream (15ml). n n n


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TFWA Asia Pacific

n n n The product will also be available as part of three exclusive travel-retail sets. Shiseido says that its focus on developing its travel-retail exclusives is due to consumers becoming increasingly focused on value. The group says that Asia Pacific is the biggest contributor to its travel-retail sales, and skincare is its strongest axis accounting for 55% of its business.

Beauty group AmorePacific is focusing on growing its travel-retail business outside its home market of Korea. Some 75% of AmorePacific’s travel-retail business is currently done in Korea, but the company is aiming for international sales in the channel to reach 50% in the next two years. “Our strategic vision is to be less dependent on the Korean market, where 79% of the group’s turnover is currently done and where we have a 42% market share,” AmorePacific senior vice president new growth business unit, global travel retail division Nicolas Piquereau told BW Confidential. “In a move to expand internationally, firstly the focus will be to put in place a dedicated travel-retail team, which will be key for further development,” he adds. The company will first focus on Chinese travelers, the Middle East and move into the US (West coast) at the end of 2017. It will concentrate on Europe in 2018 and Latin America and Russia in 2019. Five of the group’s 27 brands will be a priority for travel retail: Sulwhasoo, La Neige, Hera, IOPE and Innisfree.

Anglo-Dutch group Unilever plans to launch Nexxus New York Salon Care in travel retail. For travel retail, Nexxus is offering eight different haircare regimens, four of which are only available in the US. Unilever says Nexxus will fill an untapped niche for premium haircare in travel retail and will complement its Toni & Guy haircare offer in the channel.

Iluminage Beauty, a joint venture between Unilever and technology company Syneron Medical, showcased its range of intelligent textiles with skincare benefits. The textiles are woven with copper infused fibers and the result is said to renew cells, minimize wrinkles and reduce dark spots. The range includes a pillow case ($60) and an eye mask ($35), which launched last year, and socks ($35) and gloves ($45), which go on sale this month. The company said that when the pillows and masks launched in Korea through TV shopping some 12,000 pieces were sold in one hour.

French brand Clarins is to launch a new skincare range for Asia in August. Treatment Essences consists of three anti-aging lotions, with each one targeting a different age group (for 25+ year olds, 35+ year olds and 45+ year olds). The products are priced at $46, $55 and $72.

France-based INCC Parfums is to launch a Cologne for the Mercedes Benz brand in September. The company will also launch a men’s fragrance for the Monaco brand in January 2017. The women’s Monaco fragrance launched this spring.

Qiriness is to launch Temps Sublime, a new anti-aging line at the end of August. It will also unveil a hand and foot mask in September.

Moroccanoil has just opened Asia Pacific travel-retail. The brand is now sold in DFS Hong Kong Causeway Bay, Galleria, Hong Kong airport and DFS in Korea. Moroccanoil will launch a four-sku suncare range with pure argan oil in Europe in May. It will also introduce full-size hero haircare products in travel retail. n


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Natura l Opened: April

l Location: Morumbi Mall in São Paulo

l Size: 68m2 (739ft2) l Special features:

store sells all lines, opportunity to test and experiment

with products, sustainable materials used

Brazilian brand Natura has opened its first store in its home market, part of an ambitious strategy to move into brick-and-mortar retail. The 68m2 (739ft2)

store in the Morumbi Mall in São Paulo opened at the end of April. The idea of the store, which stocks all the brand’s lines, is to give customers

the opportunity to test products. This is seen as key, given that in the past consumers could only buy the direct-seller’s products from its catalogues. The brand made a point of incorporating consumer feedback in the design

of the store. The company set up two models of stores at its headquarters and invited about 500 consumers to come, buy and tell them about their experiences. “Physical stores will contribute to generating experimentation and knowledge of our brand, with a positive effect for all channels. Someone who bought in the store today can buy with a sales representative on another occasion,” says Natura president Roberto Lima.The store boasts a clean design and uses sustainable materials and those of

Brazilian origin. The company is looking to have four stores in the initial phase of the retail

concept’s roll out, but it is thought that the concept will be widely expanded.The move towards brick-and-mortar retail is part of Natura’s strategy to

diversify its distribution and become less reliant on direct sales. Natura has implemented other initiatives as part of its multi-channel strategy

this year, such as the introduction of the Sou brand in pharmacies and the launch of the mobile application Natura Sempre Presente. The company is also working on digitalizing its direct sales channel with new

payment methods and the development of apps for sales representatives. n

Natura dips its toes into brick-and-mortar in Brazil

The retail route





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s The store aims to give consumers the opportunity to test the brand’s products

s The boutique stocks all the brand’s product lines

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