COPYING can be a
form of innovation when a company pinches ideas from a different industry and
applies them to its own. This is what Kiko, a Milanese cosmetics company, is
doing. It is adopting the principles already used to great success by
“fast-fashion” clothing chains such as Zara and H&M: constantly changing
the line-up of products in its stores to encourage customers to visit frequently;
responding rapidly to the latest consumer trends; and keeping prices low. Its
success is encouraging some of the industry’s bigger brands to rethink their
distribution model.
Worldwide, the
cosmetics market (including cleansers and skin creams as well as make-up) grew
by 3.6% to €181 billion in 2014; it is expected to double over the
next 10-15 years, according to EY, a consulting firm.
The industry is
divided in two. More expensive brands tend to be sold in specialist
beauty-store chains or in concessions in department stores, where shoppers can
try them and get beauty tips before buying. Cheaper brands are sold in pharmacies
or supermarkets, with little customer service. Kiko’s chain of own-label stores
offers the best of both worlds: cheap prices plus makeover advice.
Kiko’s revenues
have risen to €432m since it was founded in 1997 by Percassi, an Italian retail
group.
Much of Kiko’s
success draws on Percassi’s experience in fashion retail. Antonio Percassi, the
group’s boss, who also owns several other brands, a restaurant and a football
club, began working with Benetton, an Italian clothing chain, in the 1970s to
develop its shops around the world. In 2001 he entered a joint venture with Inditex,
the Spanish group which owns Zara, to bring its brands to Italy. This year
Percassi partnered with Victoria’s Secret, an American underwear firm which has
driven sales of lingerie out of department stores and into its smaller shops,
to open its first Italian outlets.
Kiko operates all
the outlets where its products are sold, which all have the same modern design.
This makes it easier to provide a consistent level of service. The chain has
two distribution centers: one in Bergamo, Italy, for European outlets, and one
opened recently in New Jersey for North America.
Kiko’s growth
seems to be encouraging other firms in the cosmetics and beauty business to
reconsider their business models. Higher-end brands like Benefit (part of LVMH)
and L’Occitane (which is mostly in the skincare end of the business) are
putting more emphasis on their own outlets and less on selling through other
retailers. Nocibé, a big French retailer, last year began testing stores that
stock mainly its own cosmetics brand, which it developed two years earlier.
L’Oréal, the world’s largest cosmetics group, is opening “dermacenters”,
outlets which sell its skincare brands, such as Vichy and La Roche Posay. It is
also developing the retail network of Nyx, a Los Angeles-based cosmetics firm
with annual sales of $200m, which it bought last year.
So far most
customers of Kiko, as at other cosmetics firms, are women. But men who moisturize
are becoming less rare, and in South Korea there is a brisk trade in masculine
make-up. Kiko’s parent company has taken a cautious step towards this market,
opening a chain called Womo (as in uomo, “man” in Italian), which sells
men’s clothes and toiletries.
