L'Oréal pulls back from China, Harvey Nichols moves in

L'Oréal ends Garnier sales in China after sliding sales, while the new Harvey Nichols CEO is considering entering the market.

by Elizabeth Anderson
Last Updated: 15 Jan 2014

With a burgeoning middle class, China has become a key target for many luxury firms looking to expand their customer base.

But it appears that companies have met with mixed success. L’Oréal is the latest firm to decide it's not worth it - announcing it is scaling back its China operations and halting sales of its Garnier product line following a slide in sales. It is now choosing to concentrate on L’Oréal Paris and Maybelline New York.

It comes hot on the heels of rival cosmetics group Revlon, which said last week it would be quitting the country, axing 1,000 jobs in the process, after making ‘a holistic assessment’ of operational costs versus opportunities in the market. Procter & Gamble also said last year that it was losing market share in China in its skin-care business.

China's $25.9 billion (£15.7bn) cosmetics market is the third biggest in the world. It is expected to grow 63% for the five years to 2015, according to consumer research firm Euromonitor. However, L’Oréal warned in its Q3 statement in October that the Chinese market was ‘slowing, although still dynamic,’ and as a result it is now focusing its efforts on its two biggest brands, L’Oreal Paris and Maybelline New York.

Meanwhile Stacey Cartwright, who is to become the new CEO of Harvey Nichols from March, has said that she is considering opening a store in China. Cartwright said that she wanted to introduce a Harvey Nichols own-brand clothing range, roll out more overseas stores, launch transactional websites and to consider going into China.

Harvey Nichols already has franchise branches in the country, along with outlets in Kuwait and Saudi Arabia and will open its eighth overseas store this summer, in Azerbaijan.

Cartwright was previously the chief financial officer and executive vice-president of Burberry before stepping down last summer. During her nine years at the firm, she helped launch the British brand into China and the Middle East, so she has some experience of negotiating the tricky markets.

China is a complex market with many pitfalls for foreign companies, while a slowing economy and a crackdown on extravagance hasn’t helped luxury brands sales.

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