Estee Lauder looks online for new markets
The makeup manufacturer's e-sales have tripled in the past 5 years, and the company expects the growth to continue.
In the past fiscal year, the company launched e-commerce and mobile sites in six new markets, bringing the total to fifteen.
For the current year, it plans to add six more markets into its fold. Dennis McEniry, the president of Estee Lauder Companies Online, told analysts on the company's recent year-end earnings call that the company registered strong double-digit growth in sales from every region addressed by their brand sites as illustrated by a 24% overall growth in 2012. In the U.S. alone, the online sales grew by 20% year on year. Online sales grew 34% in the U.K., 55% in Germany and 40% in China.
We currently have a price estimate of $64 for Estee Lauder, which is 6% above its current market price.
E-commerce to help reach previously unexplored markets
The company reported that online sales have tripled in the last five years and that the big brands constitute more than half of sales. Skin care is the top-selling category, followed by make-up; fragrances contribute the least to online sales. The company expects to leverage growth in emerging markets like China, India and South Africa better through e- and m-commerce.
We expect the growing online presence to bring in more business for the company as its products become increasingly accessible to locations where it currently does not have physical presence. This is inline with their observation that almost two-thirds of online sales in China came from cities where they have no brick-and-mortar stores.
In addition, the growth in disposable incomes across emerging economies should help Estee Lauder gain more of the global market share for its products. The company's portals will also let shoppers receive advice from beauty advisers via live chat, email or telephone. These services are being adapted for the mobile platform while being progressively rolled out in other markets. This is expected to boost brand and company loyalty, bringing in further sales, especially in the already established markets.
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Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
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