Bricks still matter: L’Occitane says physical store network remains ‘vital’ despite sluggish sales

On July 21, the Hong Kong-listed company reported that its net sales declined by 22.2% to EUR274.2m (US$313.8m) in the first quarter of its 2021 financial year at both constant rates and reported rates compared to the same quarter of last year.

The group, which owns brand such as L’OCCITANE en Provence, Melvita, Erborian and ELEMIS said restrictive measures around the world to contain COVID-19 were to blame as it “paralysed traffic and business activities”, ​hindering the performance of its brick-and-mortar stores.

André Hoffmann, vice chairman of L’Occitane International, told CosmeticsDesign-Asia​ that the company would have to rethink its retail strategy moving forward.

“It was an existing trend that is now accelerating. It is realistic to expect adaptations to the format and size of our retail footprint. Over the past few years, we have already been much more selective in store expansion, focusing on the most efficient stores in major cities that offer memorable and unique brand experiences.”​

However, the firm still sees physical stores as a critical part of the consumer experience and its overall omnichannel strategy.

“We still believe physical stores play a vital role in discovering and experimenting with new products – especially for skin care and body care ranges,”​ said Hoffmann.

“We are convinced the progress with our online and omnichannel initiatives also rides on the existence of stores and believe our long-term success will be supported by a strong store network, online activities and CRM expertise.”​

Doubling down on digital

On the other hand, the company saw online sales grow a whopping 95.8% while its brick-and-mortar retail sales were dragged down by the pandemic.

Its own e-commerce platforms, marketplaces, digital direct-selling and web partner channels, had outperformed in all markets. In total, the firm’s online sales made up 52.6% of net sales for the quarter.

“Despite the difficult circumstances in the first quarter, there were several bright spots. The extraordinary growth in our online channels has gone a long way to cushion the impact that COVID-19 is having on our physical channels,”​ said Reinold Geiger, Chairman and CEO of L’Occitane.

The strength of its online channels was also reflected in the performance of LimeLife.

LimeLife reported growth of 51.6% thanks to its resilient online-only business model, as well as successful new products launches, promotional activities and the recruitment of new beauty guides.

The group’s brands already have a presence on most major online platforms in the Asia Pacific market.

Most recently, the company launched ELEMIS in China in partnership with Sephora, giving it a presence in over a hundred of its brick-and-mortar stores and its Tmall store.

The company said it would to continue to expand the brand’s online presence in the region, including Hong Kong and South East Asia.

The firm also plans to reinforce its digital channels with new marketing tools such as live streaming.

It has already experienced considerable success with live streaming in China this year on key social commerce platforms such as Weibo, Little Red Book and Douyin.

“Live streaming certainly played in our impressive sales recovery in China through April to June, as well as in the 95.8% growth we saw in our online channels at the Group level. With COVID-19 likely to change some shopping patterns for the foreseeable future, we plan to do more of this kind of marketing,” ​said Hoffmann.