‘The Next Digital Frontier’ was the theme of the second webinar in the Beauty in Travel Retail event organized by the TFWA in partnership with BW Confidential and which took place on June 15. Topics covered digital initiatives in travel retail, how e-commerce will develop in the channel, Web3 – particularly the role of NFTs and emerging business models for the metaverse – and how to create top content on short video platform TikTok.
Hainan’s digital activations
Kicking of the session was Xue Guo, Consultant at Paris-based marketing firm WITH.
Guo told the audience that China will account for 30% of global travel-retail sales by the end of 2022, and that Hainan will represent 18% of global travel-retail sales this year.
Some 60% of Chinese passengers said they would return to Hainan for duty-free shopping, while 40% of them plan to increase their spend on their next trip, according to the consultancy’s research. “Hainan is no longer a one-time shopping destination but a space for repeat purchases,” Guo noted.
Guo said that the online push in Hainan is in part thanks to travel retailer China Duty Free Group’s (CDFG) strong e-commerce and digital ecosystem. She also outlined O+O initiatives from major groups, such as L’Oréal, Puig and Estée Lauder Companies.
Asked about what companies should do to encourage Chinese shoppers to spend their duty-free allowance online after their trip (the Bugou market) Guo said:
“Brands can promote their visibility in three different ways. The first is to invest in social media through platforms, such as WeChat, Weibo and Little Red Book. The second is to invest in some specific travel platforms such as Fliggy and Ctrip, which are a bit like SkyScanner and TripAdvisor in the Western world. The third is that many brands have the account both for fashion and beauty and if they could use their own account to post more information for duty free that would also be helpful.”
Guo predicts that the Bugou market will grow as the Chinese government continues to invest in the island’s development and as more brands launch initiatives to capitalize on the post-trip potential. “Companies should really see it as a strong opportunity to increase either the sales of their products or their products’ reputation,” she noted.
She added that the market’s competitive pricing and convenience will also be catalysts for the growth of Bugou.
“The price of the product in the Bugou channel is very competitive compared to buying a product from Mainland market,” she said. “Travelers do not even need to pick up the product in the airport. They can sit in their home, purchase it online and have it delivered to their home, so it is very convenient.”
Digital strategies for travel retail
The metaverse and e-commerce in travel retail were key topics raised by L’Oréal Travel Retail Global Retail & Digital General Manager Sophie Neyertz-Ehrsam.
She noted that L’Oréal is moving towards an O+O+O model, referring to online plus offline plus a new “on chain” channel.
“On chain means that consumers and creators will converge on emerging platforms to participate in the new economy,” she explained.
The on-chain approach is a key part of the metaverse, which Neyertz-Ehrsam defined as shared virtual worlds where users can interact with their environments and other users through digital twins and avatars. It is also a place where virtual products, goods and space can be sold and bought through cryptocurrencies and digital wallets.
“Web 2.0 is not at all dead, though, and it is still in deployment,” she said. “Web3 is a new world of infinite possibilities and immersive experiences with new models of consumer engagement, and we need to be ready for that. However, we are still in the early stage of Web3.” She added that what Web3 will look like in travel retail is difficult to predict.
However, she unveiled that L’Oréal is experimenting with initiatives in the channel. The company will partner with travel retailer DFS (LVMH) this fall to launch a metaverse initiative.
Additionally, Hainan could emerge as the space for new metaverse experiments in travel retail, and as indication of how metaverse initiatives in the channel will play out.
In terms e-commerce, while there has been growth in the channel in Asia, in the West, online shopping in travel retail is in its infancy. E-commerce represented some 40% of the beauty market in Hainan, Neyertz-Ehrsam said.
“While we see a strong acceleration in Asia on all fronts, with pre-ordering exploding, Bugou, the rise of social commerce, livestreaming, digital engagement, O+O retail experiences in Hainan and some first steps into the metaverse, the reality is that in the Western world we are still at the beginning of its digital transformation,” she noted.
“Travel retailers are still in recovery mode. They are re-opening shops and reinvesting in beauty advisors and points of sale to restart operations and to support traffic growth to refit shops that have been closed for quite a while – sometimes two years. This is all in a context where the local market has highly elevated the standards in terms of retail experience and image post-pandemic. But the good news is that digital has become a real priority and we can see a real step up,” she added.
She said that travel retailers should explore new partnerships, and added that new e-commerce business models will emerge, such as airport marketplaces and inflight platforms. Data and traffic acquisition will be key in the development of these new platforms.
Data and traffic acquisition
While L’Oréal has begun experimenting with consumer data gathering with retail partners in Hainan, more progress is needed in the area, Neyertz-Ehrsam said.
“We need to share data, but we are still far from getting that level of granularity and transparency that domestic markets have with retailers. However, in the past few months and few years there has been more transparency and retailers are more open to it.”
“Travel retail is a recruitment channel for our brands,” Neyertz-Ehrsam said. “Collecting consumer data on our brands in travel retail to then give back to our local markets to re-engage the consumer when they are home, then loyalize the consumer on our brands is absolutely critical.”
In addition to data, traffic acquisition is also vital to e-commerce development.
“Having a website does not help us grow the business. To have a successful website you need to have the audience and the traffic,” she commented. “Chinese retailers have done this really well and have invested a lot in traffic acquisition. This is part of the reason why e-commerce has accelerated so hugely in Asia, reaching 32% of the beauty travel-retail market.”
Some 30% to 40% of beauty products are digitized today, beauty tech company Perfect Corp Executive Vice President and Chief Strategy Officer Louis Chen told the audience in a presentation outlining its vision of beauty in the metaverse.
“Consumers are more willing to try out unconventional brands, alternative ways to buy and innovative systems of value like NFTs,” he commented.
With this shift in consumer behavior, more brands are looking to expand their virtual presence.
“This has created a sense of urgency among brand partners to really think ahead,” Chen noted. “They want to invest early and to have an infrastructure ready.”
For example, a string of luxury brands has released NFTs or NFT collections in a bid to respond to the rising trend.
He noted that, for beauty, brands could offer consumers NFT collectible versions of virtual try-on sessions. The approach helps to engage consumers in brick-and-mortar in new ways, he commented.
V commerce, or virtual commerce, also presents brands with new opportunities to strengthen engagement with customers.
“With V commerce, not only are shoppers able to navigate and virtually shop in stores, but can also try on products via a camera,” he commented. “It is going to be a long learning experience. We will see how the consumer will react and if they will spend more time in the store virtually. However, in the end it is easier for the customer to be there virtually, or more convenient at least.”
When asked about consumer interest in NFTs and some uncertainty about their value, Chen said: “In a year or two when these experiences are more streamlined, consumer awareness will grow. It is still very early in terms of what brands are offering. We will see more new concepts coming up in six to 12 months,” he predicted.
Web3 business models
Igancio Longarte, who is CEO of Szentia, a deep-tech startup that aims to help beauty brands to deliver augmented personalized beauty experiences through sensors and AI, explored how companies can go about approaching the metaverse and the business models they can put in place to be ready for these new virtual worlds.
Noting that the transition to Web3 will take three to five years, Longarte said that brands need to begin preparing for it now, while still playing in the current environment of social media and e-commerce.
“This new world is pretty daunting. In the transition to Web 3, we will have new entrants and they will come with their native technologies, so you need to be prepared,” he stated.
Longarte recommends three key steps in the move to Web 3. The first is designing for utility over hype. “You need to add something that adds utility in the experience and that will make it relevant and sustainable in the future,” he said.
The second step focuses on the move from product to experiences – and to augmented experiences. Augmented experiences involve not only catering to the needs of the physical person, but also the different personalities or moods of their different avatars.
Thirdly, companies will need to align their talent and culture with Web 3.
Central to all these steps is foundation data. “On top of brand IP, for this new world, you need to have to have relevant foundation data that is unique and that you control. I’m talking about first-party data or zero-party data, which is data consumers will voluntarily give you in exchange for something of value.”
He continued: “If you don’t have control of this data, you will suffer margin destruction, as other players and others industries will jump into beauty and gain more control and power than you, and could earn part of your margins.”
Data will also be key for digital twins – such as having a digital twin of your consumers’ skincare routine or how their skin evolves.
“Relevant data leads to consistent value creation, which leads to loyalty and a loyal community,” Longarte stressed.
Creating content for TikTok
Conor Begley, Co-founder of Tribe Dynamics and Chief Strategy Officer at CreatorIQ (the influencer marketing platform that acquired Tribe Dynamics last year) talked to Alanah Dixon, Senior Director Influencer Relations and Social Media at make-up brand Anastasia Beverly Hills, about creating content for TikTok and what works and what doesn’t on the short-video platform.
The key takeaways from their conversation are that TikTok requires experimentation and authentic, raw and almost behind-the-scenes content, as opposed to conveying an over-produced, polished version of the brand. Key to pulling this off for Anastasia Beverly Hills is the input and involvement of founder Anastasia Soare and her daughter Claudia Soare.
While marketers aspire to their content going viral on TikTok, creating content solely with this goal in mind often doesn’t work, Dixon commented.
“The biggest thing when you’re thinking about viral content, is not putting so much pressure on creating content that you want to go viral. If you do, it doesn’t feel organic. TikTok is very much a platform where things can go viral at any moment, and it’s very obvious when a brand or an influencer tries to come into a moment a little too late, or if it doesn’t feel natural to who they are,” Dixon stated.
“We create each piece of content with the hope of course that something can go viral. But if it doesn’t, it is what it is, and it means that it just didn’t resonate at that moment. TikTok is a platform where anyone at any point can just go crazy,” she continued.
In terms of selling on TikTok, which is in its infancy, there are still more questions than answers. “It feels like people are still trying to figure it out. I’ve seen it work and I’ve seen some fails. But TikTok is a platform where if someone purchases it is because they feel like they need that product right now. TikTok thrives on that element of FOMO [Fear of Missing Out] and there is a sense of urgency to buy. For us, it’s about how are we going to push sales like that. It’s about it’s how we are connecting with our consumer in a way that makes sense, authentic and feels good for them, and you don’t feel like you’re peddling product just for the sake of it. I think sales are going to be interesting on TikTok, and we’re certainly trying to figure that out. But you have to create that FOMO if you want someone to buy on TikTok,” Dixon said.