L’Oreal: Failing to Adapt to New Markets?
“To L’Oreal, Brazil’s Women Need Fresh Style of Shopping,” by Christina Passariello, is from the January 21, 2011 issue of The Wall Street Journal. The article discusses how the French company L’Oreal decided to begin doing business in Brazil in 2009. This was because the financial crisis was hurting the cosmetics industry in the European and American markets, and Brazil is home to the world’s third largest cosmetics market, just below the United States and Japan. However, the company has not realized success as it hoped, which is mainly due to the fact that Brazilian women like purchasing their skin creams, mascaras, and other cosmetics from door-to-door salespeople, not in shops, which is L’Oreal’s current method.
The French company is remaining stubborn, however, and Jean-Paul Agon, the chief executive, says that L’Oreal will not be using the door-to-door sales approach. Instead, the company hopes to increase sales by providing personal beauty advisors in stores where L’Oreal products are sold. Mr. Agon is convinced that the market will continue to develop, and direct sales will become less popular. It appears that Mr. Agon is attempting to make Brazilian women just forget about part of their culture. Because of door-to-door selling, millions of Brazilian women have found jobs and pulled themselves out of poverty. Out of the 42 million women that are employed in Brazil, 2.5 million of them work as a direct salesperson. The chief executive for Natura, a cosmetics company that has one million salespeople across the country, predicts that door-to-door selling will remain strong for at least another ten years.
Mr. Agon still believes that the strategy his company has come up with will work best. He says that it is all about creating the appropriate atmosphere for Brazilian women to want to buy L’Oreal products. The company’s main focus will be on department stores, such as Lojas Americanas, which is similar to Kmart. The company is in the process of negotiating with Lojas Americanas to expand its makeup walls in stores across the country. L’Oreal also hopes to increase its skin care products by selling them in pharmacies and drugstores nationwide.
Mr. Agon has a very ethnocentric view on how to sell cosmetics. He says that it is all about creating the appropriate atmosphere, but he has failed to recognize that the “appropriate atmosphere” might be very different depending on in which country the products are being sold. Brazilian women like the whole experience of communicating with a salesperson in their own homes and being able to try out the different products being offered. If L’Oreal can afford to spend so much money on sales representatives in stores and in having Lojas Americanas expand its makeup walls, the company should be able to spend money on door-to-door salespeople instead. When a company enters a new market, it should not expect to be able to change the culture to its liking. Companies must adapt to new markets. A cosmetics brand will probably not be incentive enough to change traditions in Brazil, especially when there are competitors that are willing to sell products in the way that the consumers prefer. Even if the market is changing to become more retail-based, L’Oreal should invest in some door-to-door salespeople so that they can pick up sales while the market is in transition.
Although L’Oreal is not adapting its sales techniques for the Brazilian market, at least it is altering its products to meet local tastes. Research centers have been opened, and the company has made some discoveries. For example, foundation is a huge seller for L’Oreal worldwide, but Brazilian women believe it makes their skin oily. Because of this, Mr. Agon has directed its research team to develop products that have more natural ingredients. This is a step in the right direction, but Brazilian women would probably want to hear about the product improvements from friendly salespeople who come directly to their doors.
Passariello, Christina. “To L’Oreal, Brazil’s Women Need Fresh Style of Shopping.” The Wall Street Journal. 21 January 2011.