Businessmodel of Estée Lauder Companies

Customer Segments

Estee Lauder provides cosmetic and beauty products to a range of customers of varying size and across multiple jurisdictions. These customers principally comprise:

• Distributors, comprising wholesalers and independent distributors that sell the Company’s products on to retailers and consumers;
• Retailers, comprising physical retail outlets such as department stores, pharmacies, and specialist beauty shops, as well as online retailers and marketplaces; and
• General consumers, to which the Company sells products directly. Estee Lauder’s largest customer is US department store chain Macy’s, which accounted for around 9% of the Company’s consolidated net sales for the year ended 30th June 2016.

Estee Lauder serves a global customer base. The region in which the Company records its highest sales is the Americas, in particular the US, followed by Europe, the Middle East and Africa, and Asia Pacific.

Value Propositions

Estee Lauder provides value to its customers in the following ways:

• Its industry standing and track record, with the Company being an established name in the industry, with a reputation for providing reliable and well-made products;
• Its brand marketing and perception, with the Company associated in the consumer market with luxury and quality, making it an attractive brand across all demographics;
• The accessibility of its products, with the Company operating global sales channels, serving customers across the Americas, Asia Pacific, Europe, Africa and the Middle East; and
• Its research and development activities, with the Company committing substantial financial and personnel resources to the development of innovative products. ### Channels

Estee Lauder operates a corporate website at www.elcompanies.com, through which its provides information on its various products, brands, activities and facilities. The Company also operates an online sales channel at www.esteelauder.com, through which it sells products directly to consumers, and makes products available through a range of third-party online resellers.

Estee Lauder also reaches consumers directly through its network of physical retail outlets, operated either by the Company itself or by third-parties, including stores for its Jo Malone London and Bobbi Brown brands. As of 30th June 30, the Company operated approximately 1,260 stores worldwide, with more than 400 stores operated around by authorised third parties. Estee Lauder also sells directly to consumers through various travel retail locations such as stores in airports and on cruise ships, and certain fragrances are sold in self-select outlets.

Estee Lauder maintains dedicated sales teams that manage its retail accounts, with operations in more than 50 countries worldwide, through which its markets, sells and distributes products. In certain countries where it is less well-represented, the Company utilises the services of selected distributors. Products ultimately reach consumers via department stores, specialty multi-brand retailers, perfumeries and pharmacies, and salons and spas.

Customer Relationships

Estee Lauder’s products are available to consumers on a self-service basis through its online sales channels, where customers can make purchases and arrange deliveries without interacting with members of the Estee Lauder sales team, as well as through the Company’s network of branded stores, where customers can receive a greater degree of personal care.

Estee Lauder’s retail customers deal directly with the Company’s direct sales team, in order to establish detailed sales agreements and ongoing relationships. The Company aims to build strong relationships with selected retailers globally, particularly large department store chains, with a view to securing recurring business over the long-term.

Customers are able to contact Estee Lauder directly with queries and enquires through brand-specific customer care channels, including over the phone and via online contact forms. Estee Lauder also provides a range of information on its consumer website relating to FAQs, shipping information, and returns policies.

Customers are also able to interact directly with Estee Lauder and its brands through a range of social media accounts, including with Facebook, Twitter, Instagram, and LinkedIn.

Key Activities

Estee Lauder is a manufacturer and marketer of cosmetic and beauty products, spanning the skin care, makeup, fragrance and hair care markets. The Company’s products are sold across more than 150 countries worldwide under a number of high-profile brand names, such as Estee Lauder, Aramis, Clinique, Origins, Le Labo, M.A.C, Bobbi Brown, La Mer and Aveda.

The Company is also the global licensee for fragrances and cosmetics sold under third-party brands, such as Tommy Hilfiger, Donna Karan, Michael Kors, Tom Ford and Coach. Estee Lauder operates a range of sales channels, including its own and third-party online stores; a network of retail outlets, including department stores, specialty retailers, and pharmacies, as well as its own branded outlets; and stores on cruise ships, direct response television, in-flight sales services and duty-free shops.

Key Partners

Estee Lauder collaborates with a range of companies and organisations in order extend its marketing reach and support its development and production activities. These partners include:

• Channel Partners, including distributors and independent sales agents that assist the Company in marketing and selling its products in jurisdiction where it does not retain a significant presence;
• Retail Partners, comprising retail outlets and operators that support the Company in the management and operation of its physical retail outlets, and authorised online retailers;
• Supplier Partners, comprising suppliers of resources, tools and services, that support the development and production of new Estee Lauder products, the creation of new packaging concepts, and the reformation of existing products; and
• Strategic and Alliance Partners, comprising various companies across various sectors, with which the Company collaborates on joint projects. Estee Lauder has recently announced a tie-up with Victoria Beckham to create a limited edition makeup range, has teamed up with Cosmopolitan to design a microsite targeting millennials as part of the launch for a new makeup range, and has partnered with Philips Lighting to raise breast cancer awareness.

Key Resources

Estee Lauder’s key resources are its products and intellectual properties – including its various brand identities, its supply chain and production facilities, its sales and marketing channels, its partnerships, and its personnel.

Estee Lauder owns the trademark rights used in connection with the manufacturing, marketing, distribution and sale of Estée Lauder, Clinique, Aramis, Prescriptives, Lab Series, Origins, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and Bumble, Darphin, GoodSkin Labs, Ojon, Smashbox, Osiao, Le Labo, RODIN olio lusso, Editions de Parfums Frédéric Malle, GLAMGLOW, and By Kilian. It is also the exclusive worldwide licensee for fragrances, cosmetics and related products for Tommy Hilfiger, Donna Karan New York, DKNY, Kiton, Michael Kors, and Tom Ford. These trademarks and licences are key to the Company’s ongoing operations.

Cost Structure

Estee Lauder incurs costs in relation to the development of its products, the acquisition of supplies, the operation of its manufacturing facilities, the implementation of marketing and advertising campaigns, the operation of its sales and marketing channels, and the retention of its personnel.

For the year ending 30th June 2016, Estee Lauder accrued selling, general and administrative expenses – including costs related to the payment of salaries and benefits to the Company’s 46,000 full-time employees – in the amount of $1.39 billion. Its research and development costs amounted to $191.3 million for the year.

Revenue Streams

Estee Lauder generates revenue through the sale of various beauty and cosmetic products. The Company’s sales are reported across five product categories:

• Makeup;
• Skin Care;
• Hair Care;
• Fragrance; and
• Other Estee Lauder generated total net sales for the year ending 30th June 2016 of $11.26 billion, up slightly on the $10.78 recorded by the Company the previous year. This increase was attributed to an increase in net sales across several brand offerings.

The Company’s makeup and skin care products accounted for the largest portions of net sales for the year, generating $4.70 billion and $4.45 billion respectively, representing around 40% of total net sales each.