Estee Lauder Casts Its Net Wider
Estee Lauder Cos., the long reigning queen of prestige cosmetics, may become the 800-pound gorilla of the beauty Web world.
On Wednesday, the company purchased Gloss.com, one of the three leading beauty sites, as part of its plan to expand its presence on the Web. Lauder, which accounts for more than half of the cosmetics sold in U.S. department stores, also announced it will enter joint e-partnerships with department stores.
With its e-strategy, Lauder could once again redefine the beauty business just as it did with how cosmetics are sold in department stores. Other large cosmetics companies, such as Lanco^me and Chanel, may have to get aggressive with their own online sales. This in turn could lead to a shakeout in the fledgling beauty.com world, not unlike the dot.com world in general.
More than a dozen beauty sites, most of which launched in November, have been struggling to make themselves the one site consumers want to visit. Most offer news, information, even personal advice, in addition to selling various hard-to-find cosmetics brands.
“[The Lauder purchase] is going to catapult Gloss to the top of their category because they have the brands that half of the consumers are already buying,” said Mike May, senior analyst for Jupiter Communications, a New York-based Internet research company. “It really puts the backs of the other beauty e-tailers against the wall.”
What’s going to happen, he said, is that “the site that has access to the best brands will win.”
Consumers may benefit from the Lauder e-strategy because it may spur competition among the cosmetics giants and thus make available a wide range of all prestige brands online. But prices are not likely to change.
All is not glum for Web competitors who believe that some cosmetics companies will not want to be on a site controlled by Lauder or any industry giant. Mariam Naficy and Varsha Rao, founder of the Web’s No. 1 beauty retailer, Eve.com, are excited at the prospect of picking up niche brands that might not want to line Lauder’s coffers.
“We’re sort of the Switzerland of the beauty online world,” said Naficy, adding that they will not be beholden to any one company. Eve.com has more than 175 brands and can treat each of them the same. And Eve.com is funded by Idealab, the Pasadena-based incubator behind other start-ups such as EToys and CarsDirect.com.
Lauder has been slow and cautious about getting on the Web. Its first site, Clinique.com, went online in 1995 but didn’t offer purchases until 1998. Since then, only Origins and Bobbi Brown essentials have launched Web sites.
“We have obviously examined the opportunities with the Internet for some time,” said Fred H. Langhammer, president and chief executive officer of Estee Lauder Cos. “This gives us tremendous opportunity for building customer relationships in a highly efficient manner.”
Analysts said that Lauder didn’t need a customer base or brand access. What it needed was a management team that knew how to run a successful Web site.
And Langhammer said they found it in Gloss.com founders: chief executive Sarah Kugelman, a veteran of Banana Republic, Bath & Body Works and L’Oreal; Vice President Deanna Kangas, formerly of Bijan Fragrances, where she launched the Michael Jordan cologne and Bath & Body Works; and Vice President Michael Hananel, also a veteran of Bijan, where he oversaw new packaging.
Throughout Lauder’s history, much of its success has been dependent on customer relationships and what is called “brand protection.” The company carefully monitors how its brands are marketed both in the U.S. and abroad, in department stores and now on the Net.
“Our brands have an emotional connection to our customers,” said Chief Executive Langhammer.
It’s a connection that the company can’t afford to lose as more and more women shop online. “By 2002, Jupiter projects over half of everything that’s bought online in the U.S. will be bought by women,” said analyst May.
Existing Lauder sites have more than 1 million registered users already. Early next year, Lauder expects to launch a main Web site, https://www.esteelauder.com, and all existing sites will be linked to it. In addition, Lauder brands will be sold on Gloss.com, along with some other niche, prestige brands.
The new e-marketing tie-ins with department stores are designed to protect Lauder’s bread-and-butter department store sales.
Few companies, analyst May said, control such a large part of their market as Lauder does. “Lauder’s size is a double-edged sword,” he said. “If it controls the leading retailers on the Internet, there may be some antitrust implications.”
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Barbara Thomas can be reached at barbara.thomas@latimes.com.
