Estee Lauder announced this week that it will purchase Smashbox, the LA photo-studio and Hollywood inspired brand, founded by Dean and Davis Factor, great-grandsons of legendary Hollywood makeup artist Max Factor. The move by Lauder complements the existing make-up portfolio consisting of MAC and Bobbi Brown, both make up artists brands and shouldn’t bring any cannibalization. Au contraire, it gives Lauder access to a younger audience reached by a variety of alternative channels (outside the traditional department store that is responsible for 30% of Lauder’s sales) including QVC, Sephora, ULTA and Macy’s new Impulse Beauty concept.

Smashbox will also bring knowledge in digital and social media."We are excited to be acquiring a uniquely positioned cosmetics brand with true talent well known for engaging consumers," John Demsey, a group president at Estee Lauder (LA Times).

Here are my 3 takeaways from the acquisition:

- Expansion into new channels of distribution (i.e. assisted open-sell environments and specialty distribution channels)

- Access to younger generation

- Expertise in digital and social media to advance its current capabilities

Read original Estee Lauder Press Release. Found at NYTimes blog.

Traditionally cosmetics are rarely discounted on major department stores and specialty stores.  Estee Lauder, Clinique and Lancome may offer free gifts with purchase but brands usually don’t leave additional money on the table. However, I was surprised to find several offers in the Bloomingdale’s catalog I received last week. One side of the catalog was dedicated to beauty and featured several brands with discounted sets. At Bloomingdales.com the bonus offers are even more prominent. Fragrance sets are offering the largest value. For example, Marc Jacobs’s Lola Holiday Gift Set is $70 ($105 value) and Prada L’eau Ambre Set is  $76 ($108 value). 

On the specialty end, similar values are available at both Sephora and Bliss. Sephora has even deeper value offers, with Tarte offering a Crown Jewels Lipgloss Multi-Gift Set for $39 ($165 value). By the way, almost every holiday gift reco comes with an offer. Bliss’ catalog announced "over $450 in savings on these pages" and their website is offering 15% off plus free shipping on all Bliss and Remede purchases (expires today 12/14). Despite the discounts, some gift offers may still be pricey for many shoppers, and therefore there is a risk of alienating them for other goods. Cell phones and other durable goods are priced at similar levels and may steal the beauty industry’s Christmas lunch. If this is proves to be another tough holiday season, many companies will need to rethink their product development, pricing and marketing strategies in order to stay relevant until the economy recovers.

Insight by Leah

Estee Lauder, P&G and even L’Oreal have all announced intentions to offer consumers lower cost items and smaller sizes of some products in order to drive sales during a down economy.  Although the strategy may provide an initial bump up for these companies, it could be a dangerous decision for two reasons – 1. Consumers who had previously purchased "luxury" line items from these companies may completely abandon the higher priced lines for a similar, lower-priced offering deciding that the lower priced one is "close enough;" 2. Lowering prices on some luxury items (for example, La Mer cream) may cheapen the value of the brand.  It’s a thin and difficult line to walk for these brands.

Read the full article.