L’Oreal reaps the benefit of higher digital spend
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L’Oreal reaps the benefit of higher digital spend

We’ve written about L’Oreal’s particularly forward-looking management recently, and the benefits it’s bringing the company regarding a host of Millennial-centric concerns like environmentalism, diversity, and digital presence. Now, we’d like to focus on the last of those – because when it comes to getting younger consumers interested in luxury products, L’Oreal is currently a great example of how to do it right!

An example of L’Oreal’s innovative approach to digital:

L’Oreal is using social media to engage with customers on a scale never before seen in a luxury company. Arguably, this has been waiting to happen – where better for a cosmetics company to capture attention than social media platforms, the creation of which gave us the first ‘selfies’? But regardless how inevitable it is, L’Oreal got there first – and that matters!

The company is creating tons of original content for Facebook and Instagram; exploring Snapchat (for its Maybelline brand) and WeChat (for its Chinese customers); partnering with beauty and fashion bloggers and vloggers; investing in interesting digital startups; and developing its own apps and other digital properties. It is, in other words, a digital standout in the market.

L’Oreal’s consolidated sales between 2009 and 2015

loreal graph

Source: Statistica

This is the result of a concerted effort to prioritise its online presence – in 2013, the company set aside 15% of its marketing budget for digital channels. In 2016, this had doubled to 30%. It will probably be higher in 2017, because the importance of digital channels will only increase as younger customers continue to attain purchasing power.

The question investors should be asking is: when will the competition catch up?

Dominion holds L’Oreal in its Global Trends Luxury Fund.

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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.