The E-Commerce Revolution Is Benefitting Big Cosmetics Brands

Did the rise of e-commerce and disruptive cosmetics brands throw L’Oréal off its stride? Not even close, the brand’s CEO says.

There has indeed been enormous growth in smaller brands, according to L’Oréal chief executive Jean-Paul Agon, but jumping from being a small brand to a large company has nonetheless stayed difficult, and the big brands have stayed big.

“A few years ago people thought that the digital revolution would disrupt the beauty brands. That big brands would lose their power,” Agon said at the Fortune Global Forum in Paris on Tuesday. “In fact the algorithms are favoring the top-of-the-line brands, and the top-of-the-line products.”

That has led to “extraordinary growth” for L’Oréal, which has benefitted in particular from the e-commerce in China, where customers are now able to buy the brand in any city or region in the country, reshaping how young customers find and purchase the brand.

“It’s fascinating to discuss with the young generation of Chinese women,” Agon said. “In a way she doesn’t even know that you can buy products in the store. For her, the normal way to buy products is online.”

The growth of the online Chinese cosmetics market has been a recurring theme at the Forum. On Monday, Vincent Qiu, the CEO of e-commerce solutions provider Baozun, said that this Single’s Day—the mammoth Chinese online shopping event—cosmetics were the fastest growing product category.

In its latest quarterly earnings, L’Oréal beat sales forecasts, with sales growing 11% on-year due to continued strong demand in Asia.

It’s a trend he attributed to social media—even as, in the west, demand for lipsticks and eyeshadows has largely been overtaken by skin products and serums, part of a trend driven by a younger generation of women who are eschewing obvious makeup. (The youngest cohort of teenage girls even have a name, the “VSGO Girl”.) It’s a trend which has hurt makeup sales at L’Oréal in North America even as the Chinese market has grown.

If the way women buy their makeup is changing, the packaging it’s coming in is also shifting, Agon said, with the company trying to shift the way it packages its products to replace plastic with other materials—for example, refillable luxury jars and bottles—while retaining the luxury of the product.

“We realize that in the future that we have to evolve.”