Estee Lauder eyes big Asian expansion as mainland China sales roar

Cosmetics firm says it plans to open more stores across regionas best growth in world comes from mainland market

PUBLISHED : Wednesday, 13 March, 2013, 12:00am
UPDATED : Wednesday, 13 March, 2013, 4:41am

Estee Lauder, one of the world's largest cosmetics firms, plans to hire thousands more staff over the next seven years in Asia as it opens many more stores across the region.

The New York-listed company's global chairman, William Lauder, said that by 2020, the firm plans to hire several thousand more staff in Asia, where he believes it can achieve annual sales growth of 8 per cent.

The company has 38,500 staff worldwide.

"Hong Kong and mainland China are very important markets to us," Lauder told the South China Morning Post, adding the mainland market was showing the strongest growth of any around the world.

"Chinese shoppers are not only buying in China, but they shop in Hong Kong, Paris, London and at airports whenever they travel. Chinese customers like shopping," Lauder said.

Estee Lauder, which makes and sells skin-care products, cosmetics and perfume in more than 150 markets worldwide under its own brand, also owns a portfolio of 30 other cosmetics brands, including Clinique, Origins, MAC, Bobbi Brown, La Mer, Aveda, Sean John and Missoni.

The company derives 42 per cent of its sales from the United States, 37 per cent from Europe, Middle East and Africa and 21 per cent from the Asia-Pacific region.

Lauder said western Europe was the major challenge for the group, as the economic downturn in the region had led women to cut spending on cosmetics. Spain and Italy, the countries hit hardest by the euro-zone debt crisis, saw poor sales last year.

"Sales of skin-care and cosmetic products do go up and down with the economic cycle," he said. However, in bad times, "people may not spend several thousand dollars for a handbag, but they can still afford to buy a lipstick. Women need to make sure they look beautiful, even amid an economic downturn".

The company sells products at stores in 66 cities across the mainland. Lauder said more stores would be opened on the mainland, particularly in second and third-tier cities. Lauder also wants to expand in Southeast Asian markets such as Vietnam.

He said online sales were a small portion of the firm's total sales. Shops and beauty salons remain the major sales channels for beauty products.

"People may go to the internet to get product information, but they like to go to stores to test the products on their skin and to get advice from the sales staff before they buy the product," Lauder said. "We found the most frequently clicked item on our website is shop locations."

Men's products represent just 5 per cent of the firm's sales. Lauder said male skin-care and perfume products would see stable growth.

He said the ageing population would also boost demand for skin-care and cosmetic products. The United Nations estimates that by 2050 the number of people in China over 65 will have tripled. The British fund house Schroders has predicted that the trend towards an ageing population will benefit industries including cosmetics and skin care, as people look for ways to make themselves appear younger.