Hetal mehta is always on the hunt for that perfect foundation. The 37-year-old banking professional from Mumbai is particular about the colour and texture of the foundation she uses and is more than willing to spend even upwards of Rs 3,000 on a premium brand. And she did just that on a recent shopping trip. “It [a Chanel] makes me feel good,” she says, adding that though she is no expert on ingredients or quality, the fact that she is using a luxury brand makes her “happy”. Mehta is successful, well-travelled and has the disposable income to spend on high-end cosmetic brands. She is the ideal Indian customer that the dozens of international premium and luxury beauty brands in India are wooing. From Estee Lauder to Christian Dior, Chloé to Bebe, the luxury cosmetics market in the country has never been so crowded. And all signs point to a beauty boom.
Untapped Beauty Potential
Currently, India is ranked 14th in terms of consumption of beauty products globally. The country is on track to move to the sixth place by 2025, thanks to the rise of a middle class with high purchasing power that is set to double over the next decade, according to a recent report by Altios International, which specialises in global business development.
“Huge growth is possible in India,” says Vikram Vijay Kant, country manager of beauty retailer Sephora, a French chain of cosmetics stores, which entered the Indian market three years ago. (It is owned by luxury goods conglomerate LVMH.) Arvind Lifestyle Brands manages Sephora’s current portfolio of three stores in Delhi and one in Pune.
Kant argues that high-end cosmetics brands have not even tapped five percent of the working women in India. “The potential customers could be as high as 25-30 percent of working women,” he says.
A 2014 Ernst & Young report confirms this trend. The beauty industry is expected to double in 10-15 years with China, US, Brazil, India and Japan forecast to become the top markets, says the report, which throws up some interesting facts. By 2020, it is estimated that more than half of the high-end consumers will hail from tropical zones with hot and humid climates.
Here’s another prediction: Over 60 percent of the world’s population will be living in major urban areas and will be affected by pollution. Hence, the demand for good-quality cosmetics will be high.
It’s not surprising then that the still-underpenetrated Indian market has been attracting interest not only from traditional European and American houses, but also Japanese companies such as skincare luxury brand Shiseido. In 2014, it decided to have a direct entry in India, set up its fully owned subsidiary Shiseido India Pvt Ltd and launched its skincare brand Za. Before setting up its own subsidiary in India, Shiseido was present in the country for nearly 13 years in the luxury segment through its local distributor Baccarose.
“India is an enormous, unaddressed market. The country is skewed towards services; demographics are favourable,” says Salman Bukhari, marketing director at Shiseido India. “Our biggest markets are Japan and China followed by India. One can’t be an Asian biggie without a presence here.” Shiseido will now bring more make-up lines for India and will increase its stock keeping units from 15 to 42 next year. These will include skincare, make-up, foundation and blushers, among others.
It’s not the only premium brand to adopt this strategy of introducing more products to the Indian consumer. Natural beauty product luxury company L’Occitane, with products inspired by the South of France, has more than 30 face-care products, and will be adding four more in November. Apart from a bath and body care range and a new fragrance portfolio, it will be launching products for the face and hair in 2016. “Unless you innovate, you can’t exist,” says Mitsu Dhawan, head-marketing, L’Occitane India. The company entered India in December 2009, with its first store in Khan Market, Delhi, and prices its products in the Rs 2,000-5,000 range. It is currently present in Mumbai, Delhi, Kolkata, Chandigarh, Pune and Hyderabad.
Sephora, too, has plans to introduce new lines in India. Globally, the multi-brands outlet firm offers products from as many as 300 companies, including its own. “The biggest challenge is that it takes six to 12 months to get a product registered here. By the time we launch a product globally and bring it into India, the range is already several months old,” says Kant.
But before these new lines can take off, companies say they need to educate Indian customers on the benefits of different skincare lines.
In India, skincare has typically been associated with vanishing creams, cold creams and skin whitening products. The bigger hurdle that luxury brands face is that consumers are not aware of the potential that different ranges offer, the problems they can solve (from tackling pigmentation to minimising fine lines), and the importance of good ingredients.
According to experts, the need to create more awareness is more of a challenge than keeping rational price points. Free samples have emerged as the best tool to address this. For Shiseido, 40 percent conversions happen through sampling. Several other firms like Sephora have realised that it makes sense to spoil the customer with free samples. It offers products from about 80 brands through its own outlets in Delhi and Pune. It will open an outlet in Mumbai before the end of this year. “We have a mix of products; the focus is not on very high-end or low-end brands. The low-end products are good for giving experience and recruiting clients into buying a brand product. The idea is to make the customer experience and graduate to more premium brands,” says Kant.
Luxury brands are also realising that they need to have multi- or omni-channel retailing (including brick and mortar and online stores, smartphone apps and telephone sales) to reach as many customers as possible. Shiseido claims that it is seeing a 40 percent month-on-month growth in sales in its ecommerce initiative. Sephora also has big ecommerce plans for India. In July, it acquired Singapore-based ecommerce startup Luxola, with plans to use this Southeast Asian skincare and cosmetics e-store to enhance its presence in relevant markets, including India.
Homegrown luxury brand Forest Essentials, which also has an online presence and takes pride in using natural ingredients, holds its own among international competitors. Samrath Bedi, executive director, Forest Essentials, feels that Indian consumers are some of the most discerning in the world given their beauty heritage. “This sensitivity has been further accelerated by factors like globalisation and a greater awareness of the need for wellness,” says Bedi. He believes that customers want to invest in the long-term benefits of fresh and seasonal ingredients. “They are more value conscious than price conscious; if they find value and results from the product, they will make a purchase, regardless of the price, especially when it comes to their own skin,” he says.
It is currently in the process of introducing products in the pre-teen to teenage category, which are ready to launch at the start of 2016.
What’s common to all premium brands is the need to remain relevant to the Indian consumer.
Customer is queen… and king
Before launching directly in India, Shiseido embarked on what it calls one of its biggest studies, to understand the beauty habits of Indians. It met 16,000 women in 18 cities over a period of five months. It picked about six brands and allowed the customers to test them.
The study threw up several surprises: In India, 60 to 65 percent of customers buy beauty products through traditional trade channels like kirana stores. Friends, beauty advisors and advertisements, in that order, are the top three influencers. Also, North Indians seem to want results faster and don’t seem to have a problem with using products that have a chemical base. South Indians, on the other hand, prefer natural ingredients. “Beauty expense is right now about eight percent of the wallet share. By 2025, it will be 15 percent,” says Bukhari.
Most noticeable among Indian users is the strong demand for anti-ageing and skin lightening creams. Based on customer preferences, Shiseido launched three ranges in India, including Za True White (which has seven products), Za Perfect Solution with five products and Za Total Hydration Range with eight products.
Skin whitening is something that cannot be overlooked in the Indian market. And such products occupy 5-10 percent of shelf space for most brands. Skin whitening claims can increasingly be seen on facial cleansers and moisturisers, with promises to remove dark spots, sun tans, and of course, brighten the skin. The demand is so great that even deodorants have joined the bandwagon.
Sephora admits that whitening masks and creams sell the fastest in India. Shiseido’s most-sold products include True White Day Cream and True White Cleansing Foam and Restoring Collagen Cream (Perfect Solution).
All the companies, however, say they are not claiming that their products can change the complexion (shade) of a person. “Whitening is not a bad word,” says Bukhari, adding that beauty is about making people feel beautiful. “Total White is about pigmentation. The sun is merciless here and people have no regime for beauty. What we are saying is that getting an even tone is possible. We don’t promise a seven-day miracle. We are saying that on regular usage, it diminishes pigmentation.” Kant of Sephora says the power of whitening products is psychological. “These products take off the tan and make the skin clearer. They don’t make the skin naturally fairer.”
L’Occitane’s fastest growing product range is Immortelle, which, as its name suggests, is an anti-ageing range with prices ranging from Rs 3,000 to Rs 15,000.
The desire to be fair afflicts both men and women. And brands are fast realising the business opportunity that lies in offering exclusive ranges to men. L’Occitane recently launched a new range called Cedrat exclusively for men. “It totally surpassed our expectations. It contributed 20 percent (to the sales) within a month of its launch,” says Dhawan, adding that male customers want products made specifically for them and are no longer content with buying mass-market brands or sharing products like shower gels, creams and shampoos with women.
Experts say that growing urbanisation will further add to the demand. “Positive future growth will be driven by longer-term urbanisation, a reduced drag on the wholesale market and an increasing shift toward younger, male customers,” writes Ernst & Young’s Paul Wood in the 2014 report.
Add to that the promise of fair skin and eternal youth, and the luxury beauty industry is sitting pretty in more ways than one.