“Tofu” cream. “Protein” lotion. “Ice white” facial masks. These are the nicknames that loyal Chinese fans of the skincare company Erno Laszlo have made up for the brand’s products PHelityl Night Cream ($126), Hydraphel Skin Supplement ($60), and Hydra-therapy Skin Vitality Mask ($88), respectively.
And when consumers get creative with pet-names for brands and products in China, it means that those items have become wildly popular.
Erno Laszlo’s CEO Charles Denton is fully aware of the potential his brand has in the Chinese market. After entering the country’s marketplace over five years ago by setting up several counters in department stores and shops on Alibaba’s B2C marketplace Tmall, Denton decided that this year was the time to hatch a much more ambitious plan for the brand: grow Erno Laszlo into a RMB 1 billion brand within five years.
“Our goal [in China] is over the next five years to have 30-40 department stores [up from five] and 10-20 boutiques, which we call ‘Laszlo spaces,’” Denton told Jing Daily in a recent interview in New York, adding that “we will be launching our stand-alone stores with the first one in Shenzhen this spring/summer.”
The timing of Erno Laszlo’s China expansion couldn’t be more intriguing. Ever since the National Day Holiday last October, the Chinese government officially started cracking down on cross-border daigou agents (individuals who purchase high-priced products abroad on behalf of buyers and ship or carry them back to China without paying customs taxes), and this January, the country passed its first-ever E-commerce Law in an attempt to further regulate this illegal buying behavior and drive consumers to spend at home.
For premium brands like Erno Laszlo that saw a significant part of its China business come from daigou agents, the development was disastrous. Denton admitted that the brand did “expect to see some slowing of our growth in markets like Hong Kong and South Korea due to fewer people buying the products for reselling in China.”
But recent luxury success stories in China from brands like LVMH, The Estée Lauder Companies, and Kering Group seem to point the way for high-end goods makers to avoid disaster after the government’s daigou crackdown. That path involves brands having a sophisticated presence in the market that’s completely available to serve Chinese customers on the ground. Without a doubt, Erno Laszlo’s expansion is looking to fill this gap.
As a matter of fact, the 93-year-old brand already had a decent presence in the market. It opened online flagship stores on Tmall’s domestic and cross-border platforms four years ago, with the combined revenues from Tmall accounting for roughly 60 percent of Erno Laszlo’s business in China, according to the brand.
This year, aside from opening four to six more counters in Chinese department stores, Denton said Erno Laszlo would also focus on tidying up and driving the brand directly on Taobao, which should hopefully offset any declines. “Overall we don’t expect any real impact on our rate of growth,” he said confidently.
How Erno Laszlo communicates with Chinese consumers via marketing campaigns is going to be another important aspect that determines how well it can do in this market. According to Kristy Watson, the chief marketing officer of Erno Laszlo, being authentic, truthful, and transparent with customers is always their brand’s rule of thumb, no matter how vastly different China’s digital landscape is from the U.S.’s.
And the same approach applies to their influencer marketing. “We think of KOLs the way we think of our consumers,” said Watson. “Our objective is to build authentic relationships with those KOLs who have a real passion and liking for our brand.”
In the West, Erno Laszlo is fortunate to have had a legendary line-up of devotees, including Hollywood goddesses Audrey Hepburn, Marilyn Monroe, and Grace Kelly, which, to some extent, makes the brand an easy sell. In China, Erno Laszlo is still a niche brand, but it has accumulated a small number of loyal fans in recent years because of its high-quality products. Denton said that this loyal group of Erno Laszlo advocates would need to be the company’s champions for it could grow in the future.