The world's largest beauty company sees China as its digital 'laboratory'

A L'Oreal booth at the China International Import Expo on November 5, 2018 in Shanghai, China.
China News Service | Visual China Group | Getty Images

China is "a great laboratory" for beauty giant L'Oreal in terms of how it tries out new technology, according to its chief digital officer.

It is the "most digitalized" country in the world, Lubomira Rochet told CNBC's Julianna Tatelbaum.

"I think that the usage we see, the habits, the consumption patterns out there are really phenomenal, like 90% of every sale is done on mobile, and the (way) people (shop), there is no difference between on and offline, it's a continuum of experiences," she said.

E-commerce makes up 40% of L'Oreal's sales in China, up from about 2% in 2012, Rochet said, and that compares to 13.2% for the business globally. "The magnitude of the change has been tremendous," Rochet added.

It's a market where many consumers buy via messaging apps such as WeChat, so L'Oreal has integrated technology to let people "try on" lipsticks by pointing their smartphone camera at themselves. The L'Oreal-owned Giorgio Armani make-up brand became the first luxury line to use the technology on WeChat in July.

"It has seen a massive digitalization, so everything we see coming from China we think will spread out. And it's a great laboratory for us, China, you know in order to be able to take those best practices and be able to spread them in other countries," Rochet added.

Personalization isn't limited to ad messages at L'Oreal, it's about the product itself too

L'Oreal, which owns brands ranging from mass market Garnier and Maybelline to luxury labels such as Lancome and Kiehl's, had revenues of 26.9 billion euros ($29.4 billion) in 2018.

It does not break out sales in China, but its Asia-Pacific division had revenues of 7.4 billion euros in 2018, up 24.1% on the previous year, on a like-for-like basis. That compares to sales of 7.2 billion euros in North America, up just 2.7% on the previous year.

Tech has also allowed L'Oreal to reach new customers in smaller Chinese conurbations, known as tier three, four and five cities, and its presence on e-commerce sites such as southeast Asian companies Lazada (owned by Alibaba) and Shopee has meant finding new shoppers throughout the region. "They have been great recruitment engines for us, and really allowed our brands to be discovered much (more) widely than they used to," Rochet said.

Like many companies, L'Oreal is working on a digital transformation, and Rochet is tasked with growing its online sales, as well as managing all of the company's regional and divisional marketers, overseeing its marketing investments, digital talent and open innovation. She reports to L'Oreal Chair and Chief Executive Jean-Paul Agon.

"Digital is the single biggest driving force in marketing transformation," she said, adding that digital marketing techniques are in a state of "permanent revolution."

Many of L'Oreal's consumers have moved online but with a similar expectation to how they experience its brands in real life. For example if someone goes to a high-end make-up hall at a department store, they may get advice from a beauty advisor, a professional who can recommend relevant products. This is the kind of service L'Oreal is aiming to replicate digitally with the acquisition of virtual reality company ModiFace in 2018, whose technology lets people "try on" make-up online.

How L'Oreal's augmented reality acquisition helps with online brand experience

ModiFace technology is being rolled out to all the company's brands, on its apps, websites and at point of sale, and in June, L'Oreal also made it available to people shopping on Amazon in the U.S. and Japan, meaning people will be able to "try on" lipsticks from non-L'Oreal brands. ModiFace is also the tech behind the Giorgio Armani make-up try on with WeChat, and it also launched a "BeautyCam" app on Shopee in July. "All those services will be a big part of our marketing strategy moving ahead," Rochet said.

Before someone actually buys a product, they will have gone through a number of steps, such as seeing an ad on TV, searching for a face cream ingredient online or asking friends for advice. Marketers call this process the "customer journey," and it's one they are pretty obsessed about understanding.

In researching beauty products, people will have made contact with 32 different "touchpoints," before buying, Rochet said, which might include in-store research and reading Amazon reviews. L'Oreal has built an internal "cockpit" to understand the return on investment of digital campaigns, and has 50,000 data sources, which might include YouTube viewing numbers or Instagram engagement statistics.

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