Key lessons for marketers from L’Oréal Indonesia’s ecommerce journey | Marketing

Until a few years ago, building out a robust ecommerce business was lower down on the list of priorities for Umesh Phadke, president director for L’Oréal in the Indonesia market. While the cosmetics giant had built out a strong business there, it was based almost entirely on offline channels and ecommerce accounted for just a sliver of the market. 

However, as the company watched the China market sharply pivot online, Phadke too quickly recast his unit and grow ecommerce from a two-person offering to one that accounts for “strong double-digit share” of the firm’s topline in Indonesia. At a session on standing out in a crowded ecommerce environment, held as part of Campaign360 recently, Phadke told us how L’Oréal was scaling up the business, tweaking global product lines for local markets and the rapidly changing nature of competition in Indonesia, the largest market in southeast Asia, and home to five technology unicorns. 

Here are edited excerpts from a freewheeling conversation. Do go here for the full interview. 

Why L’Oréal rapidly grew its ecommerce business in Indonesia

As early as 2015-2016, the global talk in L’Oréal was that ecommerce is not the cherry on the cake. Ecommerce is going to be the cake. We had seen what was happening in China and we knew that it was a harbinger of what would be coming in the future. In 2017, we had barely [any] business in ecommerce in Indonesia. Still, we started building the team with two people. And, by the time we went into the pandemic, we had very consciously over-invested in ecommerce, assuming that this would become big. What was deemed as over-investment actually turned out to be under-investment thanks to the acceleration of the ecommerce trend in Indonesia.

An empty mall in Indonesia

But the complexity that Indonesia presents to us is, first it’s a very large physical trade market. We have more than 2 million [physical] stores. So, it’s a very big brick-and-mortar market. It’s also a very large informal employment market; 125 million people in Indonesia work in the informal sector. 

How L’Oréal  pivoted

Let’s take the example of department stores, we have all our luxury brands being transacted out of department stores. And the moment the lockdown happened, department stores and malls were the first things to be closed. So as early as March of last year, we started training these beauty advisors to consult their consumers on chat [and] to complete transactions completely on chat. We call it chat and shop. At the same time, there are small stores like in Indonesia, who were also closed or who were suffering from traffic problems because consumers were not going. We enabled these people to open their stores on the platforms like Lazada and Shopee.

The pluses and minuses of a large market like Indonesia

As far as positives are concerned, it’s a thriving space, there are [ecommerce platforms such as] Shopee, Lazada, and Tokopedia. So as far as platforms are concerned, there is a lot of innovation going on over there. [Iin terms of challenges], managing the store itself, because you know, just like we manage physical stores, managing ecommerce stores is an art and a science in itself.

Ecommerce platforms such as Indonesia’s Tokopedia have seen a sharp growth in usage

And while a lot of us have developed capabilities inside, this is an area which could do with the entry of experienced majors. And then, we talk about last-mile delivery. Indonesia is a country of 70,000 Islands. And even in the island of Java, which is about 60% of the economy, infrastructure is okay, but it’s not great, as a result of that.

How a fast-growing market like Indonesia will manage the transition to first-party identifiers with the demise of the third-party cookie

As far as this journey is concerned, I think this has just begun in Indonesia right now. I think the next two to three years will really shape the journey in terms of how we are going there. The ecommerce majors, the brands, ecosystem around it will play a big role in how this is going to shape up. I’m not able to forecast right now. But I think this is going to be one of the challenges just like ecommerce was in 2017.

Localising L’Oréal’s marketing for Indonesia

At the end of the day, the brand expression, presentation, the products that we sell, are all very global, and the appeal is very global. But you have to tweak it for local consumers in terms of shades, in terms of preferences. On the whole, there’s a lot that can be learned. A draconian approach of ‘this is what we’ve done in the US and this is what we will do all over the world’ would never work and that has never been the L’Oreal strategy.

We are a global beauty company and we pride ourselves on being very local and grounded in local insights and leveraging our global strength and scale and learnings rather than the other way around. The first example I can give you is the fact that we have halal certified brands in Indonesia, and we also have hijab-wearing celebrities fronting all our brands.

The changing competitive landscape and D2C

The Indonesian beauty market is booming, thanks to young and optimistic consumers. So there are a lot of innovations that are happening. The price of and the barriers to entry are are much lower than they were in the past. And so younger, digital, native innovative brands are popping up online every day, if not, twice a week. And they’re strong competition for us. The competitors that we have online today are very different from the competitors we used to have offline many years ago.

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