Spinoff: Target distribution explanation (selling Origins, Kerastase, etc)

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  1. I'm in the cosmetics business and I'm opening a new luxury line, so I can give my input here...Just to recap, I'm talking about the thread where people noticed Target selling Origins, Kiehls, Clarins, Kerastase, Paul Mitchell, etc. and there was a question as to whether or not the products were authentic or if Target was (il)legally selling them.

    I'm sure it's 150% real and I'm SURE that Origins, Kiehl's etc is thrilled about the Target distribution contract. Target is making huge efforts to expand their customer base (successfully) and these brands (which aren't high-end luxury, by the way, they're more masstige (medium-end) - great quality, I use them myself, but high end would be a serum that costs $300, etc just a different price point, that's all) potentially make a huge amount of profit from Target's enormous orders.

    It's not that big of a risk because Target has many brands now that are selling $23 scrubs, so Origins actually "fits in" there now. But Guerlain wouldn't put their $390 Orchidee serum in Target because that would dilute their luxury feel and exclusivity. Maintaining "luxury" is a very difficult process. A lot of work is put into updating formulations, marketing strategies, and keeping an elusive air of exclusivity - while also being somewhat convenient to purchase - but not TOO convenient for the masses.

    But since Origins, Kiehl's, Clarins, Paul Mitchell, etc. are trying to appeal to the masses - hence they are "Masstige" product lines (a combo of mass and prestige), it's perfectly in keeping to seek a Target distribution contract, as Target has made these huge strides to distinguish themselves from Walmart, Sam's, Costco by seeking out Masstige lines (beauty, fashion), creating designer clothing lines, etc.

    As the prices for Mass lines have increased (Olay, Loreal) it makes sense that the Masstige lines would either hike their prices or try to compete for that huge, lucrative Mass customer base. Origins is owned by Estee Lauder. Estee Lauder is probably trying to expand as far as possible. They also own Mac and Creme de la Mer. So they truly are covering all customer bases.

    There is always a risk with these huge distribution contracts. I know someone who's product was picked up by Walmart. He had a small, single product company, but it had a lot of mass appeal. Walmart gave him a $10 million contract, which is fairly huge. Unfortunately, his factory was destroyed by Katrina and he couldn't fulfill his contract. Walmart took him to court and took his company for the price of .15 cents to the dollar. However, he was a very small company and the cost of defending the lawsuit literally broke him. Kerastase is owned by Loreal, the world's largest cosmetic empire. Origins is owned by Estee Lauder, Clarins is huge in it's own right. They are all successful companies that have been running for a long time, and if one of their factories were destroyed, etc. another factory could pick up the work. They can afford litigation costs without breaking the bank, and they can pull out of the contract fairly easily. So there is little risk for them if the venture doesn't work out.

    Coach's huge dispute was that they felt Target selling their products diluted their feeling of exclusivity, potentially harming their brand long term. Though Target did nothing illegal (as far as I know), it was a loophole as to how they procured the Coach bags and Coach was pissed.

    I hope this makes sense. I'm in the middle of reviewing a fairly heavy contract and I thought I'd take a break. But it's still morning and I don't explain myself terribly well until that second cup of coffee. :smile: And no, it's not *that* early, it's just me. lol

    All in all, everyone's observations are so spot on with the various issues going on in the cosmetics world right now. :woohoo: There are two huge international conferences this month discussing luxury or mass, etc. and how to continue to appeal to customers in harder economic times.
     
  2. Target's focus group is middle/upper middle class families with a college educated mother as the main economic decisioin maker... everything you have said fits that mold...
     
  3. I just wrote Kiehls a few days ago, and they email they sent back to me made is sound like they were not very happy with Target.:s
     
  4. thanks for your input! I enjoyed reading it!
     
  5. Yup. Thanks, by the way, for letting us know what they said.:tup:

    I just can't believe that Kiehl's, Kerastase, etc. would spend so much $$ making their brand exclusive and then be OK with it being sold at Target.

    **BTW, I LOVE Target -- I just refuse to buy products from them that they aren't authorized to carry/sell**
     
  6. Agree- esp. when Kiehl's have their own store in almost every mall.;)
     
  7. I have to say I completely agree with you. It's not like any of the brands that Target is already selling are really that hard to find anywhere. Almost every mall I've ever been in has Origins, and Bare Essentials is sold in quite a few places, the same as Kiehl's.
     
  8. I guess I'm in the minority because I don't consider Kiehl's, Kerastase or Origins exclusive or luxury products. Maybe that's how it was 10 years ago but as of lately those brands are distributed everywhere and thus became less exclusive. Kerastase is owned by L'oreal and I always see their products wherever L'oreal products are. Kiehl's is also owned by L'oreal. The prices of those products are also the same wherever they are sold so it's not like people are getting a discount if they buy them in Target. Kerastase is sold at my local CVS along with Aveda and Pureology.
     
  9. ^^You just proved my point -- by stores that are NOT authorized to sell brands like Kerastase, Origins, Kiehls, etc (like Target and CVS) still selling them anyway makes the brand appear 'less exclusive' and defeats the purpose of manufacturers spending MILLIONS of dollars on advertising its products to certain audiences.

    This is why I don't think that any higher-end company would want Target, CVS, or WalMart to be an authorized retailer of their products.
     
  10. I agree with you there. Now if I saw La mer or Cle de peau at target that would be a different story.
     
  11. Paula Begoun had an article about drugstores etc. carrying salon or department store brands. I cant find the article but if I remember correctly these companies are well aware of where their products are being sold. It's all about profit. Look at all the brands Ulta is carrying now, they used to stink.
     
  12. thanks for clearing things up sunsera!!!
     
  13. Great read! thanks!
     
  14. I still am confused, why are some posters saying target is unauthorized to sell these products?
     
  15. i heard that target obtains these products through the 'grey market' and that the companies such as Kiehl's, etc are not happy with it.

    and is target selling these products at discounted prices? if so, i can see why these higher end brands would be pissed. clearly there is a reason why there is different pricepoints and different lines of products from the same company.

    The OP said that Loreal is the largest cosmetic empire - which it is...and by being the largest empire they own MANY brands that appeal to different target markets and offer different price points on those products to they pretty much have all the markets covered. I cant see why they would jepardize their more higher end products so it can be more "accessible" to people. Loreal has always been good at targeting the right markets with certain products, and i dont see why they would want to somehow put them altogether. NOT very good marketing strategy if you ask me.