Successful strategies of cosmetics businesses in America
Dolce & Gabbana has internalized the cosmetics business, teaching competitors how to sell beauty products in the U.S. market today
Dolce & Gabbana has made a decision that goes against the grain of the business strategies of its luxury competitors. The brand created its own cosmetics company to control the production of makeup products for the U.S. market and the rest of the world. Most fashion companies in the cosmetics industry have licensing agreements with larger groups such as L'Oréal and give up the control of their beauty brands in exchange for a percentage of sales. Dolce & Gabbana's move to regain control of the cosmetics segment is thus leading the way in an industry that has always relied on outside decision makers to sell cosmetics in the US.
This is happening because the Covid pandemic has changed the retail world, forcing brands that export to and sell in the U.S. market to rethink their business models: the time has come to alter organizational models and how companies work, in short, to satisfy an increasingly qualified and demanding American consumer.
The cosmetics industry is booming in the U.S.: internalizing the beauty business looks like a farsighted and more profitable choice than ever before
By 2023, D&G Beauty will be a 100% Made in Italy brand: the company expects a positive response from new generations of American consumers and wide profit margins
Sales for fashion companies operating cosmetic brands have grown significantly in the US. Chanel, for example, has seen its international business grow to $7.2 billion with a profit of about 740 million, double what it was ten years ago.
Now that the cosmetics industry is booming, internalizing one's beauty business seems like a farsighted and probably more profitable choice than ever. After all, licensing offers a minuscule percentage of profitprofit percentagecompared to the partner's earnings (in the luckiest cases, 20% of profits), while having your own company allows you to generate a higher net profit. In addition, American consumers are buying more and more beauty products online, so there is no longer a need for traditional outlets in all investment areas.
Dolce & Gabbana's strategy demonstrates that all makeup brands need a defined identity to sell in the U.S., and having control of the brand is essential to building a defined identity
The decision to manage the cosmetics business in-house will enhance the brand experience for U.S. consumers and make them perceive a brand that is unique and consistent with Dolce & Gabbana's identity. Product development and bringing the brand closer to the American Gen Zs are also aspects where Dolce & Gabbana wants to invest to become a beauty industry leader in the U.S..
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