In Sectors

Hermès taps into cosmetics

hermes-thailand-store

Hermès plans to launch skincare and cosmetics ranges in 2020. The collections are being developed in-house but will be manufactured by third-party suppliers, mainly in France and Italy.

SEE ALSO : Le petit h by Hermès lands in HK

This is a new challenge for the brand, which saw sales grow 10.4 percent in 2018 to reach nearly €6 billion. “Obviously, we hope to have the biggest scope possible. We are trying to do it humbly and cautiously, because it’s a big market that’s already full of strong players, and therefore we have to find our place in it,” Hermès chief executive Axel Dumas said on Wednesday.

In fact, most top luxury brands already offer skincare and makeup ranges. Kering chief executive François Henri Pinault announced in February that the conglomerate’s crown jewel, Gucci, is also preparing to enter the fray.

Like Gucci, Hermès already competes in the fragrance segment; its perfume business grew 9 percent in 2018, thanks to the success of Terre d’Hermès, a woody scent, and the floral Twilly d’Hermès. Fragrances made up 5 percent of the company’s overall sales in 2018, or €315 million.

“It’s quite exciting: It’s a new activity, with all the risks that involves, so we will deploy it progressively, initially in our own stores mainly, in a limited distribution so that we can learn,” Dumas said of the brand’s entry into makeup and skincare.

To become a great global beauty brand, Hermès needs three axes, Dumas said: skincare, makeup and fragrance. For its skincare and cosmetics products, Hermès plans to use plastic-free packaging, BoF has learned.

“Beauty is a great product category because it allows a low price point without diluting the brand perception. It’s also a category in which you can recruit new customers, it creates digital engagement and permits to sustain additional communication investment which are beneficial for the overall brand equity of the maison,” said luxury analyst Mario Ortelli.

Analyst Luca Solca offered a similar take: “Beauty allows brands to offer affordable products to consumers, and therefore to have a large and profitable business. Hermès in particular is seeing that its other affordable products, i.e. silk, are under pressure because consumers are wearing fewer ties and silk scarves. And so, why not?”

Many of Hermès’s rivals outsource their beauty businesses to giants in that industry. Yves Saint Laurent’s beauty business, which is licensed to L’Oréal, generates sales of over €1 billion annually.

Meanwhile, Gucci’s beauty license with Coty — currently limited to fragrances — brings in less than €400 million in annual revenue. At a press conference in February, Kering’s Pinault said he was disappointed by the performance of this business, though he excluded the possibility of severing Kering’s long-term contract with Coty. One might expect that Gucci’s forthcoming skincare and makeup lines will boost sales.

SEE ALSO : Hermès’ marketing strategy revealed

In a series of major strategy shifts, Burberry ended its longtime license with Interparfums and took its beauty business in-house in 2013, only to ink a deal with Coty in 2017.

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