Nov 18, 2019: Elisabeth King reports on this week’s business news

L'Oréal and Estée Lauder both pull in more than AUD$209 million on record-breaking Singles' Day; China to overtake US as world's largest single beauty market; younger Australians fuelling Cyber Weekend sales; and Pitt Street Mall – World's seventh most expensive retail street.

L'Oréal and Estée Lauder both pull in more than AUD$209 million on record-breaking Singles' Day
Another Year, another record-breaking Singles' Day for Alibaba, the Chinese e-commerce giant. The world's biggest one day shopping festival posted sales of AUD$43 billion and 1.3 billion delivery orders. Only 15 companies passed the one billion RMB (AUD$209 million) mark, including L'Oréal, Estée Lauder, Bose, Apple, H&M and Uniqlo. The four most popular categories were: food supplements, makeup, nappies and face wash.

Once again, Australia punched above its weight to rank number four among countries selling into China for the big day, after Japan, the US and South Korea. Now the biggest online event of the year for Chemist Warehouse, the pharmacy chain racked up AUD$21 million in sales in just over three hours. Last year, it took seven hours to reach the same sales figure. The company opened its first bricks-and-mortar store in China last month and also credits its strong performance to its store front on Kaola, the online marketplace recently acquired by Alibaba.

More than 200,000 brands took part this year and purchases by smartphone increased to 43 per cent. Over one million new products were launched for the event, including a limited edition lipstick by M.A.C which sold 60,000 units.

China to overtake US as world's largest single beauty market
The growth in the Chinese beauty market has been staggering. A new report from JP Morgan, the US investment bank and financial services titan, reports that beauty sales in China increased by 12.9 per cent in 2018. The US beauty market spiked by a more modest 4.6 per cent and China is predicted to become the world's largest single beauty market by 2023.

The Chinese beauty market is currently worth US$60 billion, with luxury products accounting for a third of revenues. In spite of a slowing economy, L'Oréal believes that beauty sales in China are on track to double over the next decade. While JP Morgan reveals that if travel retail and purchases abroad are added to domestic sales, China represents over 25 per cent of global luxury beauty sales.

Only three companies account for 36 per cent of the Chinese luxury skincare market – L’Oréal (17%), Estée Lauder (12%) and Shiseido (6%). Andre Teixeira, JP Morgan senior analyst, says that the middle class population in China is expected to grow ninefold over the next decade, contradicting the effects of economic slowdown, to offer major opportunities for Western and Asian prestige beauty brands.

The JP Morgan report points out that the strong buying power of many younger consumers in China comes courtesy of the "bank of mum and dad" or their grandparents. E-commerce has also been a strong driver and major players such as Alibaba represent more than a third of premium cosmetics sales in China. Estée Lauder alone grew over 40 per cent in China in the year to June 2019, backing up a 67 per cent surge in the previous 12 months.

Younger Australians fuelling Cyber Weekend sales
Cyber Weekend, as the four day online shopping extravaganza including Black Friday and Cyber Monday has been dubbed, has become a huge contributor to end-of-year sales. A hefty 24 per cent of Australians bought something online on Black Friday last year and 17 per cent followed suit on Cyber Monday, says IPSOS, the global market research and consultancy firm. This year's long weekend blowout promises to be even more successful reveals a survey by Couriers Please.

Over two-thirds (66%) of respondents who have previously purchased something on Cyber Monday intend to increase their spending this year. While 75 per cent agree that the sales and discounts get better with each year, says the postal delivery service.

There's still plenty of room for growth as only one-in-3 Australian consumers have purchased something on either day of the long weekend. The under-30s are the most enthusiastic with over half of the respondents (58%) pressing the Buy Now key, followed by 32 per cent of those aged 40-plus, 25 per cent for the over-50s and 10 per cent of people aged 60 or over.

The younger generations also spend more. Of those aged 18 to 29 who have shopped on Black Friday or Cyber Monday, 72 per cent reported they had spent more in 2017 and 2018. With Black Friday and Cyber Monday scheduled for November 28th and December 2nd, respectively, – a week later than last year– Couriers Please expects even higher sales this year because of the close proximity to the Christmas period. Almost 15 per cent of annual e-commerce sales in Australia take place over the five weeks between November 11th and December 15th, says IPSOS.

Pitt Street Mall – World's seventh most expensive retail street
There was little change in the annual rankings of the world's top 10 elite shopping streets, compiled by Cushman & Wakefield, the global commercial real estate services company. Seoul's Myeongdong move up to 8th position to displace the ritzy Bahnhofstrasse in Zurich was the only upward and downward movement.

In spite of the recent unrest, Causeway Bay in Hong Kong retained its number one ranking with rents of $42,145 per month to mid-year. The usual suspects – 5th Avenue in New York, New Bond Street in London and the Champs-Elysees in Paris – filled the next three slots, followed by the Via Montenapoleone in Milan and Ginza in Tokyo in the 5th and 6th positions.

The biggest rental increase of the year in the top 10 – 17.9 per cent – was achieved by Pitt Street Mall in Sydney. Securing the 7th position for another year, average rentals rose to $16,500 per month. Rents in Sydney's retail core have reached new highs as retailers focus on evolving the customer experience and trialing new store formats to attract shoppers, noted Matt Hudson, National Director, Head of Retail Leasing Australia for Cushman & Wakefield. "For example, we recently saw Aesop introduce an amphitheatre for customers within their new global flagship store which set a new record for retail rents on Pitt Street Mall".

Snippets from the Wires

  • Elizabeth Arden, travel retail, e-commerce and the expansion of its business in China were the highlights of Q3 2019 for Revlon. The iconic company is still seeking a potential sale, but weakness in the North American market dragged down its performance for the period. Third quarter revenues dipped 8.9 per cent to US596.9 million, by contrast to US$655.4 million in the same period in 2018.
  • The US prestige beauty market edged 1 per cent higher to US$4.2 billion in Q3 2019. Makeup remains the leading sector but sales declined 7 per cent to US$1.7 billion. Skincare closed the gap with increased revenues of US$1.4 billion – up 7 per cent. Prestige haircare enjoyed double digit growth of 17 per cent to reach US$207.7 million, while fragrance revenues jumped 3 per cent to US$817.4 million.
  • Targeting Gen Z consumers through TikTok, the Chinese social media video app, has paid off for e.l.f Cosmetics. Net sales soared 11 per cent for the budget player to reach US$68 million in Q2.
  • We recently reported that Ipsy had reached annualised sales of US$500 million. The US beauty subscription service has launched an own-brand collection of makeup brushes. Called Complex Culture, the 8 SKU lineup is vegan and cruelty-free.