Super Prestige Running Out of Steam.
Wednesday, March 31st, 2010The cosmetic industry is collectively holding its breath, as other manufacturers scan their profiles to dump underperforming brands. If L’Oreal, the world’s largest cosmetics marketer, is making tough financial decisions, competitors say they may have to do the same.
According to WWD, Shu Umeura had a $20 million retail business in 100 doors. Dow Jones said these stores included Saks Fifth Avenue, Barneys, Neiman Marcus and Nordstrom. This means that an average door did $200,000 at retail or about $120,000 net. With expenses associated for beauty advisors, warehousing and cost of goods, Shu was losing probably in the excess of $5 million.
Store traffic in prestige is off considerably, and there is little indication that this pattern will change in the foreseeable future. Small brands such as Cle de Peau and others could be affected as well. Moreover, Sephora is gaining share of makeup artist business at the expense of department stores.
The problem with this scenario is what fate will be dealt to the overall luxury goods business, which includes fashion accessories, skincare products and other groundfloor department store categories.
Moreover, companies such as L’Oreal, Procter & Gamble as well as Estee Lauder Companies are battling for market share in developing nations where there are more opportunities for sales growth and margin improvements.
Dorothy Foster in the upcoming issue of The Informationist sees a Darwinian effect underway as some chains are growing while others failed or are failing. These commerce patterns naturally affect vendors, as has been the case in high-end beauty.