As the head brand in the market, Estee Lauder is considered to be the most popular cosmetics by many white-collar workers. What exactly is Estee Lauder's logic?
1. Estee Lauder has raised prices again?
According to a report by Yicai, Estee Lauder once again reported the news of price increases.
The reporter received confirmation from the Estee Lauder Group that as part of the global price adjustment plan, from July 1, 2024, the Estee Lauder Group will increase the suggested retail prices of some products of some of its brands in China.
Estee Lauder said that the product pricing adjustment takes into account various factors, including raw material prices, production and operating costs, and transportation and storage costs. The Group regularly evaluates the suggested retail prices of its products and makes necessary adjustments to the suggested retail prices of some products as appropriate.
This is the second price increase for the Estee Lauder Companies this year. At the beginning of 2024, the prices of some of Estee Lauder's products have risen in a wave. At that time, the reporter learned about the sales of several brand counters as a consumer, such as Estee Lauder's main small brown bottle eye cream, the price was 565 yuan, and it was 550 yuan before the adjustment; The price of another 75ML collagen cream was 1080 yuan before the adjustment, and 1130 yuan after the adjustment, but the price of platinum cream did not increase.
Some consumers reported to reporters that some of Estee Lauder's high-end brands have risen "amazingly", such as a Tom Ford perfume he used before was 1,350 yuan when he bought it last year, and it has risen to 1,950 yuan this year.
The reporter learned from industry insiders that international brand price adjustments have become a routine operation in the past few years, and brands will make a wave of price adjustments in January and February. In addition to Estee Lauder, L'Oréal's brands such as Kiehl's, YSL Yves Saint Laurent and Armani also raised the prices of some products at the beginning of this year.
Second, who is used to raising prices when the performance is not good?
Estee Lauder's decision to raise prices again is like a prism, reflecting the complex dynamics and profound changes in the market environment within the cosmetics industry. In this process, the phenomenon of "price increase if the performance is not good" seems to become a puzzling business strategy, what should we make of this strange business strategy of Estee Lauder?
First of all, from an objective point of view, the rise in raw material prices and labor costs in recent years has become the underlying logic of price increases for cosmetics brands. With the recovery of the global economy and the pressure of inflation, the prices of various raw materials have generally risen, and the cosmetics industry, as an industry that is highly dependent on raw materials, is naturally difficult to stand alone. In addition, the rise in labor costs has also increased the operating costs of cosmetics brands. In order to maintain profit levels, brands have had to respond to these cost pressures by raising product prices. However, although the rise in raw material costs and labor costs provides an objective basis for cosmetics brands to increase prices, this is not the core logic of Estee Lauder's price increase. Because for an international brand like Estee Lauder, its brand premium ability and cost control ability are relatively strong, which is enough to cope with a certain degree of cost pressure.
Secondly, however, the rising costs are only superficial, and the deeper reason lies in the lack of performance growth of the brand itself. Against the backdrop of increasing global economic uncertainty and intensified market competition, international brands such as Estee Lauder are facing unprecedented challenges. With traditional markets saturated and new customers becoming more difficult, the stagnation of total sales makes it difficult for brands to grow by expanding their market share. In this context, directly increasing sales through price increase strategies has become an effective way to boost performance in the short term. Although this approach is simple and straightforward, it also exposes the shortcomings of the brand in terms of innovation and market expansion.
Third, in addition to the reasons for the sluggish performance growth, Estee Lauder's price increase has another important purpose: to widen the "value distance" with domestic brands, so as to maintain the value image of international brands at the consumer level. In recent years, as China's local domestic brands have become more and more expensive (high-end) in terms of product structure, international brands are facing increasing competitive pressure. In order to maintain their status and value image in the high-end market, international brands such as Estee Lauder need to continue to widen the "value distance" from domestic brands by raising prices. Specifically, international brands need to maintain their high-end, luxury brand image by raising prices. This strategy not only helps to strengthen the loyalty of existing consumers, but also attracts potential consumers who are looking for a high quality of life.
Fourth, while the short-term price increase strategy can temporarily boost profits, it is a double-edged sword. Consumer purchasing behavior is influenced by a variety of factors, among which price sensitivity is a key variable. In today's highly transparent information, consumers are more sensitive to brand price increases, and their acceptance of price changes is limited. Once the price increase is too large or too frequent, exceeding consumers' expectations and affordability, it may trigger consumer rebellion, leading to a decline in loyalty, or even a shift to more cost-effective competitors. Especially in the age of social media, consumer dissatisfaction can spread quickly, forming negative public opinion and causing damage to brand image. Therefore, how to find a balance between price increases and maintaining consumer satisfaction is a question that brands need to consider carefully.