"Mirror, mirror, on the wall, who's the fairest of them all?"- is no longer the question that beauty companies want answered, the answer of course being anyone who uses their products! It is rather how much harm will the coronavirus brekaout cause to their top and bottom lines as several beauty companies have started speaking out about how the coronavirus outbreak will affect their business.
The Procter & Gamble Company (NYSE: PG) reported that as many as 17,600 products could be affected by the coronavirus in China due to 387 suppliers in China that ship to the, globally more than 9,000 different materials. Each of these suppliers faces their own challenges in resuming operations. The consumer goods giant expects the outbreak to materially impact earnings for the January to March quarter in China but also for the overall company, given that this is their second-largest market.
MarketWatch has reported that the third quarter of The Estee Lauder Companies Inc (NYSE: EL) will be most impacted by the sales decline of luxury beauty products in China. The company updated its sales outlook for the second half of the year, saying it now predicts an increase of up to 1%, compared with the same period a year ago.
Postponed Beauty Shows
Major beauty industry trade shows are being postponed, including Cosmoprof Worldwide Bologna due to concerns they would further amplify the outbreak. Instead of March, the event will take place in June. Two other cosmetic trade shows, LuxePack and PCHi, which were both scheduled to take place in Shanghai have also been cancelled.
L'Oréal – Always Look On The Bright Side Of Life
L'Oréal (OTC: LRLCY) said the impact from the outbreak will be temporary, based on the cosmetics maker's experience with the outbreaks of SARS in 2003 and Middle East respiratory syndrome (MERS) in 2015. What is different about this outbreak, however, is L'Oréal's e-commerce sales of beauty products in China are stronger so far in February than they were this month last year. "This crisis will even strengthen the position of the e-commerce players in China," CEO Jean-Paul Agon told investors at an analyst conference.
According to Alibaba Group Holding Limited (NYSE: BABA), L'Oréal's products are among the most popular ones in February as women seem to be perfecting their makeup skills while at home – not even protective masks can get in the way of women using the magical power of lipsticks. But eyeshadows are the definite winners as eye palette sales skyrocketed.
E-Commerce Is The Winner- Even In The Beauty Industry
The beauty market has conquered e-commerce quite a while ago, no news there. Back in 2015, the beauty industry in the US accounted already for 8 percent of e-commerce sales, after which it only skyrocketed. With the rising power of beauty bloggers and influencers, along with consumers striving for digital experiences, it ended up being a Universe of its own. One that even Amazon.com, Inc. (NASDAQ: AMZN) benefits from as this is the most common place for European women to buy cosmetics from.
And even L'Oreal admits that ¾ of its online sales come from such retailers. But the barrier remains the ‘touch and feel' that online retailers struggle to incorporate into the consumer buying experience. But favourable pricing, along with experience offered by reviewers, social media and technology have sure went far ahead in minimising their barrier as this segment is only expected to further grow as consumers get even more comfortable with buying their cosmetics online. Passing the Coronavirus test already says plenty!
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