Market Analysis of the Beauty Tech Industry: Estée Lauder's Strategy

This report provides a comprehensive market analysis of the beauty tech industry, examining the impact of the COVID-19 pandemic on sales and consumer behavior, and highlighting the rise of e-commerce and the adoption of technologies like AI and AR. It explores ethical issues within the industry, such as misleading advertising, child labor, and excessive packaging, while also detailing current market trends like the growing popularity of natural and organic products. The report focuses on Estée Lauder, providing a company background, and analyzing its social commerce and digital marketing strategies, including its expansion through social media, mobile commerce, and technology development. The analysis includes Estée Lauder's response to the changing market, increased investments in e-commerce, and the use of virtual try-on solutions to enhance the consumer experience. Overall, the report offers insights into the beauty tech landscape and Estée Lauder's position within it.

Executive Summary
Table of Contents
1.0 Market Analysis
The COVID-19 outbreak has rattled the global beauty industry (which includes skin care,
makeup, hair care, perfumes, and personal care). Sales in the first fiscal period of 2019 were
dismal, and as a consequence, numerous beauty companies have shut-down. A difficult year for
the beauty industry in 2020 where overseas sales of beauty products decreased 33%, while store
sales in the beauty sector overall dropped 15%. This category includes skincare products,
cosmetic products, hair products, fragrances, and personal hygiene products. However, the global
cosmetics business is estimated to reach a value of USD 277.67 billion by 2020. As a corollary
of the epidemic, consumption for beauty products has decreased worldwide, resulting in a global
impact on COVID-19 that is unprecedented. The analysis indicates that the global market will
decrease by -10.57% less in 2020 than it did on an annual average basis between 2017 and 2019.
Although, the beauty industries have responded positively to the crisis, shifting manufacturing to
hand sanitizers and cleaning chemicals and offering first responders complimentary beauty
treatments. Long-term viability is also a critical responsibility for industry leaders. The global
beauty industry generates $500 billion in yearly sales and directly and indirectly supports
millions of jobs. Priority must be given to protecting people's lives, but making a living must
also be considered. The rise of beauty tutorials on YouTube, where celebrities with millions of
followers demonstrate complex makeup looks, as well as an Instagram-driven "selfie culture,"
have all contributed to a surge in cosmetics and other beauty product sales in recent years and
even more after the outbreak of COVID-19 when people fully got depended on online. China,
the United States, Japan, Brazil, and Germany are currently now the world's tor four beauty giant
nations in 2020. In comparison to traditional retail stores, the COVID-19 has resulted in an
upsurge in online sales of beauty products. Estée Lauder, like other beauty tech titans, has

enhanced its e-commerce store's operating system and leveraged Artificial Intelligence (AI) and
Augmented Reality (AR) technologies to make revolutionary changes.
One of the wonders of AI and AR technology is that it enables users to accomplish things that
are otherwise impossible. Estée Lauder, one of the world's largest cosmetics companies, is
embracing emerging technologies such as artificial intelligence and augmented reality in order to
provide clients a more personalized and customized approach to beauty. Estée Lauder has used
YouCam virtual try-on solutions to introduce clients to "30 Lipstick Shades in 30 Seconds."
Lipstick aficionados may now try on any of Estée Lauder's Pure Color Envy lipstick hues online
using the brand's Virtual Artist Tool. As businesses invest in research and development, even if
the technology is still in its infancy (particularly on websites, as opposed to applications and
social platforms), the experience will become more realistic. According to Gould (2017),
consumers are eager to use augmented reality to evaluate products. This demonstrates that the
"try-before-you-buy" experience has evolved to address legitimate customer concerns. When it
comes to interactions with augmented reality content, e-commerce platform Shopify discovered
that 94 percent more sales were generated when augmented reality content was not present.
Along with sales figures, the three most critical indicators to track and improve are Basket Size,
Conversion Rate, and AOV.
1.1 Issues in beauty tech industry
While beauty is a lucrative industry for many individuals and economies, it has come under
scrutiny for certain unethical practises (Gould 2017). Recent criticisms of the beauty industry
include misleading advertising, child labour, toxic chemicals, animal testing, and excessive
packaging. There is a disparity in the amount of attention paid to each of these topics, resulting
in a confusing situation. There are some general and ethical issues that beauty industry is facing
constantly provided by Gould (2017). Such as:
 Traceability, Transparency and Sustainability
The first three concerns to solve are traceability, transparency and sustainability. There are three
components to this massive challenge for the beauty and cosmetics business. Due to growing
public awareness about concerns such as plastics, animal testing, water pollution, palm oil, and

worker exploitation, beauty and cosmetic firms are being compelled to provide transparency and,
in many cases, to examine and modify their products (and this is by no means a complete list).
Customers want to be able to track the sources of products and feel certain that the goods they
purchase align with their beliefs. Industry practices that are not sustainable, particularly in terms
of environmental sustainability, have sparked growing public concern. Cosmetics manufacturers
have long been chastised for exposing their goods to animal testing, using dubious raw materials,
and damaging the environment throughout the production process.
 Misleading false advertisement
False promises and deceptive advertising are other well-known instances of unethical behavior in
the beauty industry. According to a recent study, in three categories: subjective, scientific and
performance, more claims are classified as misleading than truthful This is concerning, but not
totally unexpected for the majority of individuals. According to many sources, people often say
the beauty product doesn’t work as they show in advertisement and most of the time gives false
promises.
 Child Labor
Another ethical issue is child labor. Even more startling is the fact that child labor was used to
get the components of the beauty products from mines. The primary issue here is the use of mica,
a widespread ingredient in cosmetics and other aesthetic products. Mica is sourced from India at
a 25% rate, with an estimated 20,000 children employed in the mines (Bengtsen & Paddison,
2016). Despite the issue, companies like Estée Lauder have used mica from India for almost a
decade. Even for firms renowned for their ethical practices, such as Lush, the struggle to
eradicate child labor from their supply chain continues.
 Excessive packaging & ingredients
The safety of product components and the environmental impact of packaging are two of the
industry's most egregious unethical practises. Only 10% of the over 10,000 compounds often
found in cosmetics are recognised to be safe (Devereaux, 2016). While almost 1,400 components
have been banned in the United Kingdom, just 11 have been fully banned in the United States.
According to the FDA, lead has been discovered in famous cosmetic brands such as L'Oreal,

Maybelline, and NARS lipsticks (Devereaux, 2016). Additionally, the majority of products are
packaged in dense plastics and other materials that are difficult to recycle, adding to the strain on
landfills and thereby harming the environment.
1.2 Current market trend in beauty tech industry
After the Covid-19 pandemic and with the revolution of technology in beauty industries the
market trend has turned a rapid shift. The current market trend provided by Roberts (2021) in
beauty tech industry is listed below:
 Rising the popularity of natural/organic beauty products
Customers are more interested than ever before with efficacy and ingredients. They are
concerned what they are putting on their body and face over the price. Consumers are preferring
plant-based, cruelty free, natural and organic products rather than chemical-based products. To
win the struggle for product quality, marketers must advertise using the keywords natural,
organic, environment-friendly or clean. The following graph shows the rise of natural beauty
products over years:
Figure: Global market value for natural cosmetics (2018- 2027) (Roberts, 2021)

 E-commerce is upsurging
Online shopping is growing in popularity. When retaile stores were forced to close for months,
many consumers turned to online shopping. Several beauty brands also focused on e-commerce
than retail store because starting an online cosmetics business is less expensive than operating a
retail store. Enhancing online store with AI, AR and R&D is giving the industries a huge
advantage as consumer can try on many makeup products in seconds.
 Skincare product is booming
Dermo cosmetics is a relatively new phenomenon. Indeed, facial skincare accounts for 19% of
the beauty industry. Exfoliants and moisturizers have performed admirably. As industry
buzzwords, collagen, vitamin C, and CDB-infused skincare products have grown in popularity.
2.0 Company Background- Estée Lauder
Estée Lauder and her husband Joseph founded Estée Lauder in 1946 in New York City. Since
then, Estée Lauder has grown to prominence in the global beauty business. The Estée Lauder
Companies is a global leader in skin care, cosmetics, perfumes, and hair care. The company's
products are sold in over 120 countries and territories under well-known brand names such as
Estee Lauder, Aramis, Clinique, and Prescriptives, as well as MAC and La Mer, Bobbi Brown,
and Tommy Hilfiger and Jane (Howerton 2002). Estée Lauder generated 15.9 billion dollars in
revenue in 2019, making it one of the world's most successful beauty firms (Ridder 2020). On
the other hand, online marketplaces have become increasingly important for cosmetic companies
seeking to remain relevant in the twenty-first century and attract a younger population of beauty
enthusiasts. Taking a look at the most popular beauty brands on Instagram demonstrates that the
Estée Lauder brands face significant competition. MAC Cosmetics, La Mer, and Origins are all
owned by Estée Lauder, as are Clinique, Too Faced, and Origins.
Estée Lauder's sales has increased significantly in recent years, hitting $14.86 billion in 2019, up
from $10.8 billion in 2015 (Ridder 2020). Sales in Asia/Pacific, on the other hand, have grown
considerably since 2010. The Americas, Europe, the Middle East, and Africa account for the

majority of their sales. Estée Lauder's skincare and cosmetics categories account for about 80%
of net sales, while fragrance and hair care account for the remaining 20%. Estée Lauder's
dominance is demonstrated by the fact that, despite strong competition from new firms entering
the market on a regular basis, they continue to dominate more than 20% of the worldwide market
for cosmetic goods.
Numerous Estée Lauder products, including MAC Cosmetics and Clinique, have been identified
by recent research as the most popular and often purchased cosmetics by American women.
Given that MAC Cosmetics and Too Faced are two of the most popular cosmetics brands among
both middle-class and upper-class teenagers, the company clearly caters to a wide range of
demographics.
3.0 Current social commerce and digital marketing strategies
According to Nicky De Simone, regional director of enterprise marketing and transformation at
Estée Lauder Companies, Covid-19 has made it more difficult for beauty businesses to deliver
personalized care and interact with consumers (Chitrakon 2021). Therefore, Estée Lauder has
come up with different and new social commerce and digital marketing strategy focusing more
on online platform (Chitrakon 2021). The following are the current social commerce and digital
marketing strategies of Estée Lauder:
 Expanding Marketing via social media and mobile commerce
Instead of relying on campaign-specific websites, digital marketers’ team of Estée Lauder are
turning to social media. Estée Lauder has launched several marketing campaigns on social media
sites like Facebook, Twitter, and YouTube to attract new customers and enlighten existing ones.
According to an Ad Age survey cited by Bloomberg, Jenner Kendall has 30 million Instagram
followers. She's the new face. Comme mobile phones and tablets are frequently used for Internet
access, Estée Lauder has built an m-commerce presence. The Clinique "Forecast" smartphone
app suggests skin care based on weather.
 Technology Development

Estée Lauder has increased their budget for technology development such as: Artificial
Intelligence (AI), Augmented Reality (AR), R&D etc. for good virtual experience. For instance,
how-to videos, ratings and reviews, and mobile phone and tablet applications are all methods
Estée Lauder innovate to better suit their consumers' online purchasing preferences.
Additionally, Estée Lauder assist their e-commerce and mobile commerce partners with digital
and social marketing activities that contribute to the development of brand equity and "High-
Touch" consumer interaction, enabling us to continue providing superior products and services to
our consumers.
 Increasing E-commerce & M-commerce investment
The emergence of millennials has been a significant influence in the change of beauty business
model of Estée Lauder. Due to their excellent technical abilities, those born between 1980 and
2000 are sometimes referred to as "digital natives" (Estée Lauder 2021). For the millennials, the
physical, online, and mobile worlds should all function in unison to accomplish their purchases.
Therefore, Estée Lauder has decided to increase the investment on e-commerce and m-commerce
sector and even hiring more IT consultant to provide good online platform to the consumer.
 Expanding business on various online platform
Estée Lauder is increasing their business on other E-commerce platform. For example, Lazmall,
Shopeemall, Amazon, Tmall etc. big e-commerce plaform has official Estée Lauder’s stores.
Besides, they have opened flagship stores of their other brands such as, they opened flagship
store of Clinique on Tmall and Clinique gained over 100,000 new clients in its first year after
opening its flagship store on Tmall's Chinese-language shopping platform. Later, they opened
flagship sotres of Origin, Bobby Brown and other brand on Tmall.
 New Hashtag Trend on social media
Estée Lauder is developing hashtag trend through many campaigns to identify their unique
products which ultimately helping them to grow in various social media platforms such as-
TikTok, Instagram, Facebook, Twitter etc. Their current hashtag trend is #FuturistFoundation for
newly launched foundation #supremeskingoals for skincare product #CaptiveTheWorld for
newly introduced lipstick line etc.

 Putting their customer on limelight
According to Papandrea (2021) more than 40% of all material linked to the Estée Lauder
Companies' brands is posted on their social media accounts is provided by their consumer. They
are engaging their consumer through social media. Customer recommendations, opinions and
pain concerns are naturally being shared on social media by consumers (Papandrea 2021). It
occurs on a daily basis and (Chitrakon 2021) explains that they are attempting to motivate people
to go even farther in their efforts.
4.0 Critical Analysis
This is when a strategy is developed by researching the organization and the environment of the
business in which the organization operates. In order to increase an organization's capacity to
deploy and redeploy its resources wisely, it is necessary to have a theoretically informed grasp of
its operating environment and an understanding of how the organization interacts with its
environment (Koehn 2014). To make sound strategic decisions, executives must consider three
key elements: It's critical for companies to have a clear understanding of their long-term goals
and expectations from shareholders. However, things beyond a company's control may cause it
to alter its goals, which would be in contradiction with the shareholders. As a result, management
must be adept at balancing the expectations of shareholders with the organization's goals. A
company's available resources for achieving its goals. The firm's plans can be pursued based on
the resources' strengths and deficiencies. These, however, are subject to change based on the
current situation. Encompassing all that surrounds the organization and everything it does It's
tough for managers to predict what the future holds because the environment is so uncertain.
This determinant affects the strategy that can be employed. It is called strategic analysis when all
three of the aforementioned criteria are taken into account.
Strategic analysis gives a clear picture of the primary impacts on an organization's present and
future well-being, as well as the opportunities provided by the environment and the
organization's competencies.
Strategic analysis is critical for preparing an organization for change by offering significant
insights and a clear framework. It's critical for spotting patterns and trends within the company.

As a result, it's critical while looking for and evaluating new chances for the business (Peng
2021). The organization can better comprehend its strategic position by providing information on
what's happening in the business environment and industry, as well as what competencies need
to be developed to be competitive. It discusses the company's long-term goals and short-term
strategies. Using strategic analysis, you can also come up with goals that are specific and
measurable, help you make better decisions, and provide your organization peace of mind by
preparing it for what may happen in the future.
4.1 SWOT Analysis
Strengths
The very name "Estée Lauder" is a source of strength in and of itself. The term is associated with
high standards of quality and elegance. The company also serves as a global licensee for other
well-known brands such as Donna Karen, Tommy Hilfiger, and others. The company, which
creates new products, redesigns current ones, and discovers and considers consumer preferences,
is a leader in each market segment in which it operates in the industry. It has a strong retail
network to support it. As a result, market penetration chances are increased, and a closer
relationship with target customers is established. It has a good management strategic vision, and
it is also seeing significant expansion. It also contains a number of innovative features, such as
the ability to conduct online purchasing.
Weaknesses
It is possible that concentration on a single largest customer will reduce the bargaining power of
the company. In addition, they have a weak cost structure in some sectors, which has resulted in
a drop in the performance of sales in some areas. Because of low liquidity levels, the company
may find itself exposed to the debt market, which could have a negative impact on its ability to
grow. The majority of the company's influence is held by the members of the family hierarchy.
The organizational structure of the corporation is difficult to identify from one another. In the
United States, sales of fragrances are notably low, as is the case elsewhere.
Opportunities

Estée Lauder's target market is the middle aged to elderly; hence the company creates items for
them. With a strong and significant presence in its segments, it might raise sales while also
improving growth. As a result of the numerous beauty pageants held in developing markets such
as India and China, the cosmetics industry is doing well. Younger and middle-aged women are
becoming more fashion-conscious, which is driving the growth of the cosmetics industry. Estée
Lauder has a strong foothold in these new markets as well. Luxurious things are also in demand.
Spending more money on these items increases overall. As a result, the demands and needs of
the wealthy are also taken into account when designing products.
Threats
Estée Lauder's sales have been harmed by the widespread selling of knockoffs. As a result, the
brand's uniqueness may be compromised for the corporation. As a result, the company's
reputation could be tarnished. As a result, customers may be unsatisfied with these products and
the company may lose customers to competitors selling real products that are safer for them.
Competition in the market would be boosted by the presence of numerous large companies, such
as Revlon and L'Oreal. Products that have excessive quantities of chemicals that are dangerous to
people may be subject to government rules and restrictions as a result of this. Consequently,
product development and launch costs could go up as a result of this trend.
4.2 Porter’s Five forces Analysis
Entry Barriers
Estée Lauder has a low risk of being threatened by new entrants since it has established a solid
market position and the barriers to entry are prohibitively high. Aside from that, they have easy
access to their distribution networks and thorough understanding of the market segments in
which they compete.
Substitutes
Estée Lauder also has a low percentage. Customers have developed a sense of devotion to some
brands. Estée Lauder also offers high-quality items that live up to the brand's reputation, so
competition from substitutes is minimal.

Suppliers' negotiating power
Estée Lauder is a massive brand, and the volume of goods it requires from suppliers around the
world is likewise enormous. As a result, suppliers would have little negotiating strength. For this
reason, suppliers would be eager to serve such a business; as a result, it is critical that the
businesses they supply offer something different from their competitors.
Buyer's negotiating power
Because there are so many prominent brands in this market category, purchasers have the option
of switching easily. However, because of the brand's client loyalty, it doesn't have to deal with
many of these issues because it gives its customers exactly what they want.
Rivalry in competition
Estée Lauder has a substantial market share. Avon, L'Oreal, Revlon, Max Factor, and P&G, are a
few of its main competitors. As a result, Estée Lauder must constantly innovate its products to
remain competitive. Because the corporation owns multiple brands, a wide price range and the
ability to differentiate their products without imposing significant switching costs on clients are
critical. 1976 saw the launch of Estée Lauder's men's brand. It was referred to as "men's skin
supplies". Men's lines were not offered by Avon, Max Factor, or Revlon.
5.0 Recommendations
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