This is the ninth in a series highlighting operations of foreign luxury brands in Korea. ― ED.
L'Oreal Korea CEO Yann Le Bourdon
By Park Jae-hyuk
L'Oreal Group, which deals with brands in various price categories from luxury range Lancome, Yves Saint Laurent and Giorgio Armani to affordable consumer products, may have presented a good image worldwide in terms of social contribution especially toward women and children.
In Korea, however, the world's largest cosmetics company has seemingly failed to win the hearts of consumers due to its policies on product prices, and Korean retailers who accommodate L'Oreal Group's cosmetics brand shops, according to industry officials, Sunday.
In particular, the French-based company was criticized last November for raising product prices of its 500 brands in Korea without any prior notice to consumers. Korean consumer goods firms typically provide such information in advance.
What is worse, L'Oreal at that time was accused of trying to conceal the price adjustments. The company's Korean unit, which is led by CEO Yann Le Bourdon, attributed the price hike to increases in raw material prices, labor costs and inflation, after media reported it.
But few experts seem to accept such an explanation because luxury cosmetics brands like L'Oreal usually raise prices of their products every year without special reasons even when raw material costs fall or foreign exchange rates change in their favor.
The global cosmetics group caused problems for Korean retailers as well.
Demanding equal treatment as Chanel, the cosmetics firm pulled out salesclerks working for its six brands ― Biotherm, Yves Saint Laurent, Shu Uemura, Kiehl's, Lancome and L'Oreal Paris ― from Hanwha Galleria Duty Free last August.
Galleria employees at that time had to sell L'Oreal products, until the foreign company felt satisfied with the condition.
According to industry officials, luxury brands often make unreasonable demands to maintain the lead in negotiations and the situation seems to be worse, when more retailers open their duty free shops.
A L'Oreal Korea spokeswoman explained: "As our duty free division is managed by the Hong Kong unit, we could hardly do anything at that time."
As far as the absolute price levels are concerned, L'Oreal Group is on the lips of savvy Korean consumers, who tend to buy foreign cosmetics directly from overseas online shopping malls.
According to a local consumer group, a Biotherm product from L'Oreal Group was sold 50 percent higher in Korea than the average price in the U.S., the U.K., France, Germany and Japan; while the group's La Roche Posay product was double the average price.
In response to the criticism, L'Oreal Korea has continued to promote its social contributions to society here which have been acknowledged by the Korean government. However, as with most other foreign luxury brands the company declined to disclose the ratio of donations to its sales and profits.
Founded in 1909 by Eugene Schueller in France, L'Oreal Group has become the world's biggest cosmetics company after acquiring other world-famous brands.