Luxury Briefing: Why altering sales strategies based on current market conditions is ‘a mistake’

July 26, 2024 Mary

Sephora is seeing double-digit revenue growth, and luxury conglomerates are experiencing comparatively greater boosts in Japan. But, “brands shouldn’t be scared” and chase sales in such thriving channels and markets, according to experts. This week’s executive conversations and luxury earnings prove that the brands best known for quality service and exclusivity are staying the course, reporting positive results and setting themselves up for further success.

“Specialty-multi [retail] is a no-go,” said Margot Humbert, U.S. gm at Biologique Recherche. “We’re not interested in selling in Sephora.”

That’s despite that, during Sephora owner LVMH’s second-quarter earnings call, on Tuesday, CFO Jean-Jacques Guiony reported the retailer had seen record revenue and profit during the first half of the year. In addition, it’s experienced significant market share gains in the U.S., Canada and France, among other regions.

Instead, the 54-year-old luxury skin-care brand, best known for its P50 face lotion, is growing its awareness and serving its existing customer base, in part, by rolling out stores. Its latest, located on Boston’s Newbury Street, opened this month. By early 2025, Houston and New York locations will open, bringing the U.S. footprint to four stores. An L.A. location opened in 2022.

For future stores, Humbert said the company is eying Miami and other “classic flagship cities where you would imagine a luxury branch,” as well as cities with large Biologique Recherche customer bases. But it’s taking an opportunity-based approach to real estate, waiting to invest until prime spaces become available.

Biologique Recherche is largely built on a network of 380 spa partners, which drive 80% of its business. The channel will continue to grow and be “the backbone” of Biologique Recherche, Humbert said. In 1992, the company opened its own spa, on Paris’s Champs-Élysées, which Humbert called the “pinnacle” representation of the brand.

Bringing the popular experience offered in Paris is the main goal of the new stores. As such, the company is not taking any shortcuts in their buildouts, which has translated to a “very, very high cost per square foot,” Humbert said.

“We want our clients to be able to discover the brand environment, universe, protocols, methodology, diagnostics and everything that comes with the brand,” she said. “We want to offer a unique experience and be a brand that follows you through your skin-care journey.”

Maintaining a luxury and ‘expertise’ profile has been a goal from day one, Humbert said. So, outside of Biologique Recherche’s direct sales channels, “We stick to very high-end hotel [spas], med spas and day spas” as partners.

She added, “We’re too hard to shop to be in a non-assisted, specialty multi-brand environment, like Ulta or Sephora. And the fact that we’re not reliant on Nordstrom’s, Neiman’s and Saks’s foot traffic has helped us, as of late.”

In its store locations, Biologique Recherche offers a Skin Instant Lab, which uses a device to analyze skin via five probes. There’s also a Visio Lab, which analyzes the skin’s layers with a focus on the presence of hyperpigmentation and sun damage. And, finally, its staff provides visual and tactile diagnostics. Customers book time to be walked through these steps.

“You won’t start a BR treatment or buy a product until we’ve clearly understood what your skin needs,” Humbert said. On the brand’s e-commerce site, which only launched three years ago, creating a login is required for a shopper to even see products’ prices. The channel is a “big growth driver” for the brand under its new management, Humbert said.

Biologique Recherche has been co-owned by Rupert Schmid, Pierre-Louis Delapalme and Dr. Philippe Allouche since 2007 and took on investment in 2019. In January 2024, the company announced 19-year Estée Lauder executive Jean-Guillaume Trottier as CEO, and so far this year, it’s experienced “high double-digit” growth online, according to Humbert.

By early 2025, Trottier aims to crack the opportunity around DermToks and influential plastic surgeons, despite BR’s ultra-personal, diagnostic approach to recommending products.

“We don’t really have that super-user skin-care consumer who is trying products left and right,” Humbert said. “We’re not obvious and spontaneous — we’re a complicated brand. And we require help and support to ensure you get what you need.”

Currently, the average Biologique Recherche customer is 35-40 years old, highly educated and lives in an urban environment. Twenty-five percent are men. They’re “very into skin care” and typically discover the brand abroad or through a skin-care esthetician, Humbert said. And they’re loyal, which is aided by the brand’s recommendation of quarterly skin analyses.

Among the brand’s current challenges is securing store talent, from estheticians to front desk managers, who can deliver a luxury experience meeting the brand’s standards, Humbert said. “You get people, you train them for two months, they become great, and then they leave,” she said. She owed part of the problem to the lack of regulations for U.S. esthetician schools, which are graduating students with minimal skin expertise.

Just two weeks in, the revenue driven at Biologique Recherche’s Boston location is double the brand’s expectations, Humbert said. The 2,400-square-foot store is seeing more foot traffic than the brand’s 5,000-square-foot store in L.A.

Hermès is sticking to its pricing plan as Japanese exchange rates lure luxury shoppers

Hermès is not increasing its prices in Japan, despite exchange rates for the yen reaching a 34-year low, said Eric du Halgouët, the company’s evp of finance.

“We continue with our strategy of increasing prices at the beginning of the year and leaving it at that,” he said on Hermès’s earnings call on Thursday. “We had a two-digit increase at the beginning of 2024. For 2025, we are … expecting the trend to change” and for the yen to increase in value.

During the first half of the year, Hermès’s sales in Japan increased 22% year-over-year. Its total business in Asia, excluding Japan, saw a 10% boost.

Axel Dumas, the company’s executive chairman, added, “In Japan, we have a very local customer base, and not many tourists are buying Hermès in Japan. The Chinese tend to buy in China.”

That’s unique among luxury fashion companies, based on this week’s earnings reports and corresponding calls.

For its part, Moncler is changing its prices in Japan but taking a tame approach, as reported on Wednesday.

“We decided not to … match the prices in China because we probably would have jeopardized or alienated the business we have with our local customers,” said Gino Fisanotti, the company’s chief brand officer.

Instead, it established a 5-7% gap in prices between Mainland China and Japan, which is lower than the price difference reported by the brand’s luxury peers. According to reports, differences of 10-30% have been typical.

The change has worked to generate “a very healthy and nice growth with tourists, while also bringing positive figures [among] local consumers,” Fisanotti said.

Likewise, LVMH has taken care to avoid “unduly penalizing local demand in Japan,” said the group’s CFO, Jean-Jacques Guiony. He hinted that the penalty would be extreme, considering “the magnitude and velocity of the yen weakness.”

“Currencies fluctuate” and the trend could soon reverse without warning, he said. And, as such, the company’s pricing will go unchanged.

But the group’s margins are taking a hit, as a result. Guiony described “a really big shift of business from Asia to Japan,” particularly from Chinese shoppers traveling to the region to shop. Though LVMH saw a second-quarter sales boost of 57% in Japan, the growth came at a cost, in terms of profit and margin.

“Luxury arbitrage has always been at play with Chinese consumers,” said Syama Bunten, founder and chief strategist at Scaling Retail consultancy. “While some speculate that spending domestically [in China] has gone down due to a government crackdown on luxury spending, I believe shopping is simply ‘relocating’ to where the most advantageous prices are.”

According to Bunten, brands with a strong presence in China “shouldn’t pull out and be scared by this downturn,” because Chinese consumers will be back as currencies stabilize and economic pricing increases. What’s more, they shouldn’t “make the mistake of increasing their footprint in Japan based on the current economic indicators.” Those who do will likely be faced with lower profit margins as consumer trends stabilize.

“The boom days of spending are stabilizing,” she said. “Moving forward, evaluating global performance versus doing region-specific analysis will become an important factor as luxury brands start to tell a new narrative around global success and dominance.”

L’Agence bets on personalized service with new Jean Bar

On Friday, the advanced contemporary fashion brand L’Agence introduced a new retail concept dubbed the L’Agence Jean Bar on L.A.’s Melrose Place.

With the Jean Bar, the aim is to call attention to the brand’s assortment of 35 denim styles to increase its share in the market. L’Agence’s denim is pacing to account for 50% of the total business by 2025, and the brand plans to open more Jean Bar locations this year.

Personalized service and styling are key features of the Jean Bar, which is merchandised by denim style, said CEO Jonny Saven. For example, store associates are trained to style the denim with L’Agence ready-to-wear pieces to create looks suited to every occasion.

As stated by Tara Rudes Dann, the brand’s fashion director, “Denim is a personal category to shop for.”.

The Jean Bar’s opening comes at a time of rapid growth for L’Agence. The brand also opened its first European flagship, in Paris, this month.