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Super Premium Beauty on Cusp of a New Era of Growth

By: Fflur Roberts, Euromonitor International
Posted: August 31, 2011, from the September 2011 issue of GCI Magazine.

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As a result of its consistently strong growth, India has attracted a number of multinational beauty companies to focus their expansion on the country. In most cases, their target has been urban areas. L’Oréal India launched the first Kiehl’s standalone store in 2011 in New Delhi, but others have targeted India’s rural consumers, who still account for approximately 70% of the total population.

The Regal Hug That Launched a Luxury Scent

In 2009, London’s iconic luxury retailer Harrods struck a deal with New York’s trendsetting Bond No. 9 to make a super premium house fragrance. As the story goes, the inspiration for the partnership came about after a protocol-breaking hug between Queen Elizabeth II and First Lady Michelle Obama during a presidential visit to London in May 2009. The fragrances, Harrods for Him and Harrods for Her, positioned at around $230 for 100mL, were promoted as a celebration of kinship between the U.S. and the U.K. and, in particular, their two most famous cities, London and New York City.

In that launch year, the U.K. was the biggest super premium fragrance market in the world, with retail sales of $340 million, according to data from Euromonitor International. However, the latest (fifth) edition of the Harrods and Bond No. 9 collaboration, introduced last month under the branding Harrods Amber and priced at around $400 for 100mL, comes at a time when the U.K. is set to lose its top ranking position in super premium fragrances to Russia. This dethronement of the U.K. aligns with trends across luxury goods consumption, as the scales of global demand tilt inexorably toward emerging markets and, in particular, China, Russia and Brazil.

Harrods Footfall Boosted by Chinese Bank Terminals

Executives at Harrods are unlikely to lose too much sleep over the U.K.’s loss of leadership in luxury fragrances, though. The store’s customer base is made up mostly of international visitors, and they will be the biggest buyers of Harrods Amber in 2011, not U.K. residents. Within that international customer base, the biggest participation is likely to come from China. Remarkably, without actually opening a store in China, the burgeoning wealth of Chinese shoppers has become key to the strategic development of the London Knightsbridge store.

For example, Harrods now employs 75 Mandarin-speaking staff members to help serve its huge volume of Chinese visitors, with approximately half the store’s footfall made up of Chinese shoppers on the first day of January 2011. And earlier in 2011, 75 China UnionPay (CUP) bank terminals were installed. This CUP investment has yielded an immediate retail upside, with Chinese shoppers spending on average almost $6,000 per Harrods visit in the first quarter of 2011, up 40% on the same period in 2010, based on VAT returns and according to company sources.