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EXCLUSIVE INTERVIEW with Dr Wolfgang Baier, Group CEO, LUXASIA

Back in 2020, we interviewed Dr Wolfgang Baier, Group CEO of LUXASIA right before the COVID-19 pandemic started. From the great consumer behavior shift to navigating lockdowns and restrictions, beauty brands and retailers have been rocked by the pandemic. However they have bounced back proving once again their resilience.

Retail in Asia had the pleasure to interview Dr Baier again to discuss how the world of beauty keeps its edge, LUXASIA’s omnichannel strategy and future plans as well as the market trends to be aware of as we head into 2022.

SEE ALSO: EXCLUSIVE INTERVIEW with Luxasia

RiA: During our last interview in early 2020, you said “In beauty, retail is still king but online is catching up”. Meanwhile the pandemic accelerated the digital transformation and the implementation of omnichannel strategies. Can you elaborate on this shift?

Wolfgang: Because of COVID-19, we have all seen the dramatic “decade in days” digital & ecommerce acceleration. Yet, we reaffirm our stand that retail is absolutely necessary for the omnichannel consumer experience, even in the steady-state of life after the pandemic.

In 2020, we have all seen how the pandemic caused retail footfall to completely flatline. During the strictest phases of the various lockdowns around our region, shops were forced to cease operations for months on end. Retailers, brands, and consumers alike were left with no choice but to sell and shop online. In fact, the need was so pronounced that even the Baby Boomers had to migrate to online commerce, and discovered both the joy and convenience of doing so. This has become a new norm in consumer shopping.

The amplification of the online “share-of-life” and digital consumption could bode well for FMCGs and retailers, conditional on companies’ ability to capture, engage, and retain consumers. An increased online-savviness will smoothen repeat purchases, enhance the ROI for digital marketing efforts, and even encourage consumers to get their “first purchase” online (this is more likely if the item unit price is not too high). Through their own direct-to-consumer channels, margins will likely be higher in the mid- to long-term.

If a company does not have sufficient digital & online commerce competencies, they will find themselves in a very tough spot; most likely even be “out of the game”. They will not only miss out on online sales, they will surely lose the attention, mind-share, and wallet-share of their consumers.

That said, the pandemic did not eliminate the need for physical retail. Humans are social, visual, and experience-driven. Especially in the tactile and sensorial beauty industry, in-person interactions and the physical sampling of beauty products will never be completely replaced by the digital. The future is not binary – neither just digital nor just physical. The future is omnichannel – the seamless blend of both the online and offline consumer experience that brands must delight consumers with (or risk going out of business).

This seamless blend was always how we saw the world, even in late 2016 when we started our five-year omnichannel transformation.

RiA: What are the best selling beauty product categories for each of the APAC markets you are operating in?

Wolfgang: In Southeast Asia, due to the pandemic, skincare has been enjoying strong growth and will continue to do so. Within this category, anti-ageing and hydration products are seen to be very popular among our consumers. Fragrances are also another category that has seen an upward trend as more consumers seek personalization and use fragrances to curate their individual identity. Home fragrances like candles and diffusers are particularly popular in Thailand and Singapore, where we are seeing strong growth as consumers embrace the use of home scents to enhance their lifestyle at home.

In China, Hong Kong and Taiwan, skincare is by far the best-selling category across all three markets. Consumers are especially focused on products that support anti-ageing and hydration treatment at home. We also find that cosmetics providing dual benefits (e.g. both hydration and coverage) are very popular products. In Taiwan, we see strong sales for serums within the skincare category for its versatility to easily fit into any skincare regimen and provide an extra boost to improve skin health.

Source: LUXASIA

In India, skincare is a thriving beauty category that has remained resilient during the pandemic. We see consumers in this category looking for skincare products that are clean, safe and therapeutic with strong emphasis on the use of natural ingredients. They look for products that enhance the quality of their skin and overall well being. In Australia and New Zealand, the best-selling category is skincare followed by fragrances which saw a boom during the pandemic.

In the emerging markets consisting of Cambodia, Myanmar and Sri Lanka, we generally observe that skincare is a strong growth category across the three markets. Although their beauty markets are still largely developing, the high internet penetration and increasing mobile usage have largely seen consumers be more aware of beauty trends overseas. This same group of consumers are also more affluent and would be more likely to pay a premium to diversify their personal care and beauty routine.

RiA: Can you share more information about your customer profile for each market?

Wolfgang: In many of our markets, especially Southeast Asia, Australia, and New Zealand, our consumers are typically from upper-middle to high-income households and are predominantly females. Due to border closures worldwide, many luxury skincare consumers have turned to shopping locally for their skincare needs. They are also very loyal to the premium brands and are return buyers. With the high internet and mobile penetration as well as the ease of information access, consumers are willing to spend time to research the beauty product’s ingredients and formulations and educate themselves on the product thoroughly.

Following the eCommerce boom during the pandemic, many consumers in the region are highly influenced by KOLs on social media (e.g. Instagram and TikTok) and peer reviews when considering their purchases. However, they are not going to be loyal to brands and love to try other brands to curate their beauty regimen. With the pandemic, they are becoming highly intentional in their purchases and would only buy products that value-add to their quality of life. For instance, in Malaysia, we observe that consumers have been moderating their lipstick purchases and are more likely to spend on personal self and home products like scented candles.

In India and a good number of our emerging markets, consumers are generally still affluent, young urban females who are digitally savvy. Although digital commerce is rising, most consumers still rely on physical retail to have access to beauty products. Generally speaking, affluent local consumers are very loyal to luxury brands as they see it as an extension of identity and a status symbol. They are also more willing to spend more on beauty, especially those of established international brands. We observe that consumers are increasingly conscious that the formulations and ingredients used in their skincare products are cruelty-free and sustainable. Like everywhere else, consumers here are savvy across all social media platforms and keep abreast with the latest trends.

In North Asia, the main consumption group is still females who are young and digitally savvy. They are increasingly concerned about the products they use and will spend time to educate themselves on all aspects of the brand e.g. ingredients, efficacy per dollar spent. Comparatively, they are much more influenced by KOLs, friends, and social media for their beauty consumption but exhibit low loyalty to the brands. In China, we find the largest percentage of male beauty consumers but are inherently focused on grooming. However, their beauty wallet-share tends to be lesser than their female counterparts.

Source: LUXASIA

RiA: Have you noticed a shift in beauty consumption during the pandemic?

Wolfgang: These are observations from the peaks of the pandemic from early 2020 right up to end 2021.

Home scented products – candles, diffusers, and home sprays are becoming a necessity for many consumers. Times have been particularly tough, and consumers desire touches of luxury to lift up their mood and enhance their everyday moments. As more people are working from home, they want to enhance the smell of their homes. Many consumers are investing in different fragrances for their workday and their leisure time. We see a strong trend of repeat purchases across other scents for their use and to share with their loved ones and friends.

With hygiene being a top-of-mind concern, and with people staying at home more often these days, we also saw an increase in hair care, bath, and body categories. As people are staying and working from home more, they are creating personal rituals to make everyday moments more enjoyable. Many of the bath and body products are the creations of luxury, niche, and cult brands – designed to clean effectively with a thoroughly immersive sensorial experience. With many consumers being unable to travel and spend, they tend to channel some of this spending towards the finer things in life. Our consumers enjoy luxurious bath experiences with unique fragrances, accompanied by applying body lotions/creams as a follow-up.

Generally, consumers have adapted their use of cosmetics and make-up to work better with mask-wearing. Face masks tend to trap humidity and the constant pressing and rubbing of the mask fabric on the skin increases the incidence of clogged pores and sebum build-up. As such, people are investing more into effective make-up removers or toners, deep-cleansing facial wash, as well as detoxifying facial products such as non-clogging creams and sebum-clearing facial masks. We have also seen our consumers move from beauty products with rich formulations to those with lighter formulations to prevent mask-induced acne from clogged pores. Beauty-lovers have migrated to foundations and cheek make-up of lighter coverage and formulations, especially those non-comedogenic ones. Consistent with the rest of the beauty industry, we also saw a dip in sales of lip products.

Given how mask-use obscures some portions of the face while giving prominence to the eyes, eye make-up has out-performed other make-up categories. Specifically, eyeliners, mascara and brow products have come out as clear winners because they are known to make the eyes come alive.

We also do see an uptick in multi-functional cosmetics, as well as hybrid cosmetic-skincare products. These products provide more than one benefit, e.g. sun protection, moisturising, with some tint for coverage. Consumers have adapted to wearing less product while at home and enjoy the convenience of reducing steps in their regime.

RiA: Men’s cosmetics have taken off in Asia and the region is now leading the way. What’s your take on male cosmetics in the APAC market?

Wolfgang: Men’s cosmetics is an interesting category that is indeed generating a lot of buzz. We opine that the observed growth in men’s cosmetics growth in Asia is mostly led by China, Japan and Korea, fueled by the vibrant entertainment and social media scenes of the lands. However, in terms of absolute sales and receptivity across its entire male target audience, the category is still nascent and not considered mainstream yet. There is latent potential but it is yet to be fully developed by brands, retailers, and industry players collectively. We are monitoring developments on this front closely across all our markets and stand ready to take advantage of this at the opportune moment.

RiA: LUXASIA launched escentials 15 year ago in Singapore. Last year you opened a store in Kuala Lumpur, Malaysia and you are targeting to have eight to ten stores in the region by 2024. Can you elaborate on this retail concept and your expansion plan?

Wolfgang: escentials is LUXASIA’s very own omni-retail concept for luxury niche brands that integrates luxury retail, engaging online & social commerce, creative consumer events, and novel pop-ups into a seamless omnichannel offering for discerning beauty-lovers. To date, we have four stores in Singapore and Malaysia combined and we have partnered with more than 70 of the finest and rarest beauty brands in the world like Maison Francis Kurkdjian, Penhaligon’s, Diptyque, and Byredo.

escentials was one of our best-performing units coming out of the pandemic peak. escentials has experienced an annual growth of at least 20 percent to 25 percent and we want to accelerate that. Our very own escentials online commerce site which we operate allows us the agility to pivot and ramp up eCommerce swiftly, powered by targeted consumer marketing. All in all, we managed to achieve a 60-40 online-offline sales split when we ended 2020 profitably.

Source: LUXASIA

On our future plans for escentials, we are aiming to open stores in Ho Chi Minh City in Vietnam and in Bangkok, Thailand this year. We also hope to add another three to four stores across Malaysia within the next three years. By 2024, we hope to have 8 to 10 stores in the region. Concurrently, we will strengthen escentials’ online commerce and social media / social commerce presence, including partnering retailers on their .com sites. There are also plans to bring the retail concept to Indonesia and the Philippines, as well as beyond the region, possibly into Taiwan and India. However, timing & market-readiness remain key for these tactical market openings.

RiA: What are some of the emerging trends or market shifts beauty companies should be aware of as we head into 2022?

Wolfgang: We expect increased omnichannel marketing and innovations in social commerce and eCommerce in the beauty industry. The metaverse as well as AR and VR are going to be more commonplace features in delivering a holistic omnichannel consumer experience.

As the world adjusts towards a new normal, we foresee continued strong growth in the demand for products that enhance one’s experience at home, such as home fragrances, diffusers, candles, as well as hair, bath, and body products.

Conscious consumption is expected to continue strongly this year as many consumers are more ethically minded and will see a continued focus on consuming sustainable beauty brands that are good for their skin and the environment.

Consumers are demanding transparency of the production lifecycle of the beauty products and this will be critical to engage and retain the younger generation. In the same vein, we expect to see consumers pursue a simplified beauty regimen that would focus on boosting their skin health and overall wellbeing.

Personalisation has been a big trend, and we expect to see this trend shift towards the adoption of ‘fragrance wardrobes’ to curate their own personal collection of scents or layering scents upon each other and find their unique fit. This ‘wardrobe’ would eventually span across their entire beauty regimen from shower oils, body lotion and finish off with a fragrance

As mentioned previously, we also expect to see interesting developments in the realm of male beauty and grooming, with the uptake in China, Japan, and Korea outstripping the rest of the region.

RiA: What’s next for LUXASIA, given the recent conclusion of your five-year transformation journey?

Wolfgang: We have just completed an intense but extremely rewarding five-year transformation journey. We have accumulated more than 1.6 million unique marketable consumers, with more than two million validated preferences. While we continue expanding the quantity of data, we will double down on the depth of consumer preferences and gain a deeper understanding of each consumer to extract even more insights on a granular level.

Our eCommerce enabler business, which we built from scratch, has brought more than 80 brands online across Asia Pacific. It achieved an exponential 40X growth in four years, with zero customer churn. It has built and operated 300 online brand stores and is growing.

SEE ALSO: EXCLUSIVE INTERVIEW with sustainability ratings platform Good On You

At this juncture, we are on the brink of launching a more agile shorter-term strategy for the next three years. While we pursue continued growth and omnichannel penetration in each incumbent market, we have resolved to continually groom our talents through learning & development, inclusivity, mindfulness, and mental well-being. On top of this, we aim to lead the domain of sustainability in the omni-distribution platform space through interesting partnerships with brands and vendors. Last but not least, we aspire to drive and shape the social commerce ecosystem in luxury beauty and hopefully pioneer some milestone projects in the relevant domains of the metaverse.