Jul 22 2018
Consumers are increasingly moving toward more convenient and cost-effective forms of shopping. With online retailers such as Amazon coming to Australia, many companies are reconsidering their approach to product innovation and advertising. Shifting trends in consumer spending habits have seen a marked change in the way companies approach both promotional marketing and product innovation, with many focusing more on product quality than strictly pricepoint.
The marketing shift has been prominent in the personal-care sector, with companies such as Procter & Gamble Australia Pty Ltd and L’Oreal Australia Pty Limited as key examples. The new approach to advertising has led to far greater emphasis on product quality and less concern for cost-benefit promotions. Procter & Gamble’s global parent recently overhauled its digital advertising division, downsizing significantly in a bid to address concerns about brand safety and ad fraud. The company’s primary focus will be streamlining the business by increasing the effectiveness of its in-store, director-to-consumer and sampling advertisement programs, and consolidating its portfolio by divesting brands such as Nice ‘N Easy, Max Factor and CoverGirl. The shift has allowed Procter & Gamble to focus more on product quality and innovation. However, due to high competition from other in-store and online wholesalers, Procter & Gamble Australia’s company revenue only rose by 0.2% in 2016-17, to $468.6 million. Procter & Gamble is refining its presence within certain downstream markets, such as supermarkets and pharmacies, in order to capitalise on broader shopper demographics and convenience purchasers. The introduction of products such as Hair Recipe, a premium ‘superfood inspired’ hair product collection, reflects the drive to offer goods appealing to current consumer trends and reclaim lost market share from competitors.
L’Oreal Australia’s parent company, L’Oreal SA, has taken a different approach. The company has invested more resources into bolstering its current digital and online advertising platforms, including the recent acquisition of Canada-based augmented reality beauty company, Modiface. Apps created by Modiface allow users to customise superimposed make-up looks, and also provide links to purchasable products. L’Oreal SA currently dedicates over 35% of its total marketing spend on digital strategies, with the intent to transform the company’s online media presence to compete with online personal-care and beauty wholesalers. The company has also invested in social media marketing through collaborations with various beauty influencers on YouTube, which has increased the company’s reach to the growing millennial consumer base.
L’Oreal has increased investment in sustainable product development – from material sourcing, health and reutilisation, to renewable energy practices. This reflects the company’s drive to adapt to consumer concerns. L’Oreal has embraced consumer interest in product sustainability and quality, expanding research in areas such as dandruff eliminating hair-care products. L’Oreal’s drive to adapt to consumer demand, whilst remaining affordable to most, has led to the company’s solid performance. L’Oreal Australia’s wholesale-specific revenue is expected to grow at an annualised rate of 6.9% over five years through December 2018, to $565 million. This compares well against the Cosmetics and Toiletries Wholesaling industry, which is expected to rise at an annualised 2.7% over the same period. Investing in key market growth areas, such as online advertising and retailing, gives L’Oreal a chance to maintain operations as a major player across all business segments in Australia and internationally.
The Cosmetics and Toiletries Wholesaling industry’s profitability has been constrained over the past five years, due to rising downstream supply-chain pressure from online retailers, which offer cheaper analogous branded products. In order to stay relevant within such a competitive industry, it’s imperative that companies innovate not only marketing strategies to suit current consumer trends, but also consistently develop product quality for consumers.