L’Oréal Paris, Aveda, and Pantene were named as the top 3 ‘genius’ brands in L2 ThinkTank’s latest Hair Care and Color Digital Index in what has been dubbed the ‘hair wars’.
L’Oréal has gained significant market share on the backs of its L’Oréal Paris brand, which drove 75% of the value growth creation in the category in 2013, stemming from the launch of its Advanced hair care line.
Estée Lauder reported healthy sales growth of its Aveda and Bumble and bumble brands in fiscal 2013, in part thanks to partnerships with specialty retailers such as Sephora.
Margin pressure
However, L2 founder Scott Galloway says the cocktail for success in Hair Care & Color is no longer a mix of celebrity endorsements, product innovation, and aggressive print and television spend.
“In a category where margin pressure threatens a race to the bottom, deft managers have turned online to establish direct relationships with the end consumer further down the purchase funnel,” he explains.
However, despite increased online investment, e-commerce sales across the category remain underwhelming. In 2013, Euromonitor figures show that only 1.3% of U.S. Hair Care sales took place via e-commerce, versus. 6.1% across the broader Personal Care and Beauty category.
Challenges
Galloway says that limited brand loyalty, eroding margins, and high ship-to-weight ratios introduce challenges for consumer brand manufacturers and their e-commerce partners.
“At the high end, professional brands are late to the game, riddled by channel conflict and grey market concerns,” he says.
“With salon hair care sales down almost 10% vs. 2007 levels, Professional brands are searching for new sources of growth—premium products sold through salons grew only 3% in 2012, compared to 16% sales growth via other retail channels.”
According to L2, digital competence is inextricably linked to shareholder value. Its study attempts to quantify the digital competence of 61 Hair Care & Color brands in the U.S.