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Beauty groups count the cost of coronavirus

Kevin Rozario

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Beauty groups count the cost of coronavirus

The number of cases of Covid-19 outside mainland China continue to climb. Last week—for the first time—there were more cases confirmed outside of the country than since the crisis began, which has seen beauty groups reassess their forecasts.

As of March 5, the market with the most reported cases of Covid-19 excluding China was South Korea with just over 6,000*. The country also happens to be the world’s biggest duty-free market for luxury beauty and all major players are being affected—particularly since Chinese New Year when travel bans began. 

Shiseido’s strong +47% year-on-year growth in China (January 1-23), for example, flipped to a contraction of -55% the week following (January 24-30). With many international flights out of China cancelled last month, not to mention consumers having their movements restricted, other beauty giants like L’Oréal and Estée Lauder Companies have been hit both in travel retail and on the China market, although it appears that online sales in the country have held up in some cases.  

Addressing analysts in February, Estée Lauder Companies President and CEO Fabrizio Freda said that Covid-19 “will have an impact in the short term, but the definition of short-term is what is unknown today. After this period there will be a recovery as people gradually go back to their normal habits. We assume two quarters to be affected by the impact and we expect a normalization in fiscal 2021.”

As far as China’s e-commerce sales were concerned, he added: “The online channel is very strong in the country, but in the short term it is having the same issues as brick-and-mortar.” The reference was to staffing issues at distribution centers as well as practical problems in making home deliveries.

L’Oréal CEO Jean-Paul Agon had a different take on China’s online sales when he spoke to the 2020 Consumer Analyst Group of New York. “The Chinese e-commerce system is very advanced and we have a strong position there, which will help us during this coronavirus period. Sales of beauty products via e-commerce, even in February, were very good, and stronger than last year.”

Prestige brands generally are having to trade on reduced store footprints, much-reduced Chinese footfall, or both.

An informed retail source in Beijing told Luxe Packaging Insight that China “seems to have controlled Covid-19 and people are not as fearful as before.” While factories are not yet back to full production, there is a sense that the worst is over. That may be true in China, but in Europe these fears may just be beginning. 

*Source: John Hopkins University

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