France’s L’Oreal, a world leader in beauty, makeup, hair care and perfume, is working with startups across the globe. It has revamped its marketing for the digital age (it now commands a third of the total beauty traffic on Facebook and 12% of the total beauty website traffic worldwide) and has significantly grown its e-commerce business, generating around €3 billion last year, or about 11% of the company’s total revenues.
It’s also hired more than 2,000 digital experts, trained some 22,000 people in a digital upskilling program and restructured its marketing teams.
And that’s just the start. “We have completely transformed the company but we are still at the beginning of the journey,” says Jean-Paul Agon, L’Oreal’s CEO, a scheduled speaker at Viva Technology 2019.
Agon and Lubomira Rochet, the company’s chief digital officer, outlined the company’s digital strategy during a recent hour-long interview at the company’s headquarters, just outside of Paris.
L’Oreal, which reported sales of €26.9 billion in 2018, prides itself in being out front on technological innovations. It began its digital journey 10 years ago — ahead of most European corporates and its global competitors, says Agon.“We are at the end of the first phase,” says Rochet, who is also scheduled to speak at Viva Technology. “Digital is at the heart of everything: our marketing, sales, communications, supply chain and operations. Now we are entering a new phase focused on the new ways consumers are discovering, testing and buying beauty products and beauty brands.”
Personalization Is The New, New Thing
A drive to introduce new types of services and greater levels of customization and personalization in the beauty market are the reasons why L’Oreal acquired Canadian startup Modiface in 2018, says Rochet. Modiface has developed an augmented reality-based application that consumers can use for skin care assessment or to simulate the application of makeup, hairstyles or hair coloring. Since the acquisition more than 20 Modiface services have been developed and deployed by 11 of L’Oreal’s brands in 16 countries, creating increases in consumer engagement and conversion rates, she says. By equipping its websites, points of sales and apps, these services create more personalized relationships with consumers and allow more tailored recommendations and products, such as Le Teint Particulier by Lancome, a technology that precisely matches an individual’s unique skin tone to create customized foundation at the point of sale, says Rochet.
Relationships with partners such as the U.K.’s Founders Factory have helped L’Oreal identify and leverage other ways to more directly engage with consumers. Sampler — one of the startups L’Oreal has invested in at Founders Factory — digitizes the process of distributing product samples to consumers at scale, giving the company valuable insights into clients and their preferences.
Sampler’s engagement with L’Oreal illustrates the advantages for big companies of working with open innovation programs like London-based Founders Factory. Its accelerator arm invests in 35 startups per year, connects them with corporates, and helps them scale. On its own Sampler had landed a contract and successfully worked with one of L’Oreal’s brands but found it difficult and frustrating to try and scale across the group, says Marie Chevier, Sampler’s CEO. “It is one of the biggest challenges that large corporates have: how do we share best practice around innovation?” she says.
While searching for innovative startups that could interest L’Oreal, Founders Factory came across Sampler and connected them to L’Oreal’s headquarters, helping the Canadian startup land a meeting with Rochet and other members of the beauty company’s top management. Rochet was immediately sold on the idea. Today Sampler is being used in campaigns by L’Oreal brands in 18 countries.
L’Oreal is also engaging with startups through BOLD (Business Opportunities for L’Oreal Development), its new corporate venture capital fund. The fund plans to take minority stakes in startups with new business models in marketing, digital, retail, communication, supply chain and packaging.
L’Oreal’s relationships with Internet giants such as Google, Facebook, Amazon, Alibaba and Tencent, is another way for it to source startups, as are partnerships with a variety of investors, accelerators and incubators, including the Partech Africa Fund and Station F, a Paris startup campus.
L’Oreal’s program at Station F involves mentoring startups in areas such as digital marketing and logistics and gives the beauty product behemoth the opportunity to learn about new business models. Sillages Paris, the first startup to be admitted into the Station F program, allows people to choose ingredients online to create their personal fragrance. The perfumes are sent to people’s homes and can be returned for free if the customer is not satisfied.
“L’Oreal understands that beauty and fragrance are changing really, really fast,” says Sillages Paris CEO Maxime Garcia-Janin, a former L’Oreal employee.
The pace of change is prompting L’Oreal to test new technologies such as artificial intelligence, voice assistance and blockchain.
“You have to try many things because the game is permanently changing,” says Agon.
Test, Learn, Pilot, Scale
The company’s digital services factory acts as a kind of operating system for innovation, allowing L’Oreal to “test, pilot, learn and then scale,” says Rochet.
Change management is tricky because L’Oreal includes a flotilla of brands, businesses and divisions across many different countries.
The key has been a clear message from the top about the importance of digital while at the same time granting autonomy to division chiefs.
Rochet reports directly to Agon and has the same rank as all the top bosses from the luxury division, human resources and finance. “This helps a lot,” she says. “It sends a signal that digital is not optional, it is not icing on the cake, it is vital.”
Strategy is only 10% of the battle and it is not the hardest, she says. “The key piece of the transformation is change management and onboarding everybody — every brand general manager, country general manager and division manager is in charge, not me alone. We have to steer transformation together.”
It’s a long-term play.
“We think the beauty industry, like many industries, will become a tech industry,” says Agon. “We want to be the champion, the pioneer of the beauty tech world, so we will embrace any new development. We look at this as a marathon without a finish line. We are happy to keep running.”
Examples of Startups Working with L’Oreal
WHAT IT DOES: Augmented reality-based application that consumers can use for skin care assessment or to simulate the application of makeup, hairstyles or hair coloring. L’Oreal acquired the company in 2018.
WHAT IT DOES: Uses enterprise software to inject digital measurability into product sampling.
WHAT IT DOES: Allows consumers to choose ingredients online to create their customized fragrance.