Sephora’s parent company LVMH announced this week the purchase of Southeast Asian cosmetics retailer Luxola. Luxola is based in Singapore but sells products in Hong Kong, Australia, New Zealand, India, Malaysia, Brunei, India, the Philippines, and United Arab Emirates. Newly acquired Luxola will give Sephora a foothold in the APAC beauty market, where few global brands have found success.
Shoppers in APAC countries are more open to buying beauty products online or on mobile than their western counterparts. Store-based Beauty sales in China have steadily declined since 2007 while online sales have soared. Sixty-seven percent of Chinese online shoppers purchase Beauty and Personal care products online, buying an average of 32 products per year. Yet, few brands are using digital resources to forge a path in the market. For example, 61% of Beauty brands in L2’s Digital IQ Index: Beauty China are categorized as Challenged or Feeble vs. just 33% in the U.S. In L2’s Korea Beauty Index, local brands dominated the top ranks, leaving global players L’Oréal Groupe, Estée Lauder Companies, and Johnson & Johnson to consistently lose market share.
An exception is Sephora, who has been able to export its loyalty program and become one of the digitally savvy players in China. Ranked 3rd and Genius in L2’s Digital IQ Index: Beauty China, Sephora has enabled loyalty point redemption across online, offline and mobile channels. It grants cross-border loyalty benefits to gold status member. The Sephora site is device-responsive, especially important since 49% of Beauty brand term searches on Baidu happen on a mobile device.
LVMH is not the first brand U.S. conglomerate to acquire a local player in APAC to expand its footprint in the region. In 2013, for example, L’Oréal purchased Magic Holdings International to leverage its strong sales network in China’s second-tier cites but was still forced to reduce Garnier and Revlon operations to bare bones Tmall shops. However, a Sephora/Luxola partnership would have a better chance of producing results, as both brands have strong mobile presence and use of content to drive commerce.