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L’Occitane: an upscale flair in personal care

By Nancy Cohen

In the last four years L'Occitane, the French personal-care products chain, has blossomed like the botanicals on which its goods are based. From a handful of stores in France, it has grown into a $51 million company with 150 stores scattered across the globe, and plans for another 100 by year's end.

The company, based in Manosque, purveys its own upscale line of skin and hair care items, bath products, soaps, personal and home fragrance, and cosmetics, all composed of essential oils and other natural ingredients. It has found fertile opportunity for expansion in a burgeoning personal-care market.

"The total market continues to grow, and consumers have proven interested in finding different venues for health and beauty products than department stores and mass cosmetics stores," said John Horvitz, president of Horvitz & Associates, New York, management consultants to beauty and fashion companies.

However, L'Occitane is hardly alone in tapping this market: A crop of specialty chains has taken root, and retailers in other merchandise categories — from Gap to Target Stores — have rolled out their own lines of personal-care products. Competition has already weakened some players, including The Body Shop, whose same-store sales slipped last year, and Garden Botanika, now in Chapter 11.

But L'Occitane is sufficiently distinct to thrive, its executives say. In cultivating an exclusive image among discriminating shoppers, the company expects to skim the cream from the market for in-home pampering.

"There's not much competition at the very high end," said Stephanie Guinard-Moise, vice president. "Our customers do not go to The Body Shop; we attract a customer they never would, and vice versa. Ours are connoisseurs — educated, well-traveled, usually wealthy, with the sophistication to appreciate $4 to $10 soaps."

Seconding her opinion is Ed Ladd, general manager of MacArthur Center, a super-regional mall in Norfolk, Va. Among its 140 specialty stores, the health-and-beauty category is heavily represented by nine stores, including Aveda, Crabtree & Evelyn, Sephora, Bath & Body Works, and Body Shop.

"There's little duplication in the mix, because their appeals are different," Ladd said. "If you're into L'Occitane's stuff, you're not going to go anywhere else. By demographics their customers may look similar, but the 'psychographics' are different; L'Occitane customers perceive themselves as more worldly than, say, Crabtree's, which has a more traditional, all-American, more feminine image."

L'Occitane does attract an unusually high percentage of male shoppers — some 30% to 35% of its customers, Guinard-Moise said. She attributes the chain's unisex appeal in part to the store design, which evokes the French countryside rather than a boudoir; the vintage-style packaging; and the products themselves, most of which can be used by men or women.

High price points are another distinction, said Guinard-Moise. A 2.5-ounce bottle of room spray costs $18; a 5.3-ounce tube of hand cream is $19; and an 8.4-ounce bottle of shampoo runs $14.50.

"We're not promotional," she observed. "We don't do two for one, we don't give away umbrellas: We're into educating people."

To ensure consistently high-quality service, every store employee — from managers to part-timers —undergoes two weeks of extensive training in New York.

Another way L'Occitane builds sales is through the samples given to all shoppers, even those who buy nothing at all.

"The beauty of this industry is that people come back, and our job is to introduce them to new products," Guinard-Moise said.

The first L'Occitane in the United States opened in 1996 on New York's Madison Avenue; 24 more were in operation by the end of 1999. This year, the chain expects to double its Stateside presence.

While retail expansion is the company's primary focus today, L'Occitane's origins are in manufacturing. It was founded in 1976 by Olivier Baussan, a native of Provence, whose interest in distilling plants' essential oils stemmed from the region's centuries-old perfume-making heritage. (The company name, pronounced lock-see-tahn, means "the woman from Occitania," the ancient name for Provence.)

Baussan started by selling his line of essential oils, bubble baths and shampoos at the local farmers' market. By 1994 the company had grown to 120 employees, with one store in Manosque and a second in Paris. At that point he sold the majority interest to Austrian businessman Reinold Geiger, now the CEO, who sought to develop L'Occitane internationally.

To establish the brand in the United States, the company sold its products through Barneys New York and high-end specialty stores. While L'Occitane continues to cultivate wholesale accounts, its own stores now contribute about 80% of the business. To accommodate the chain's growth, the manufacturing facility is doubling in size.

Only the company's real estate requirements hinder more rapid retail expansion, Guinard-Moise said. "The challenge is to find the perfect locations, and to be patient until we do. We're positioned in markets where we attract the crème de la crème. 'A' and 'A+' malls are the goal, but the sophistication of the people who shop there is more important than sales per square foot."

From small stores — about 750 square feet, with 550 of them devoted to selling space — L'Occitane racks up average sales per square foot of $1,500, said Guinard-Moise. Some sites boast up to $3,000 per square foot. She attributes that success to the products' high quality, which in turn derives from the company's vertical integration. "By manufacturing everything in Provence, with our own chemists, we are able to control every aspect."

However, the advantages of production in Provence ultimately may be outweighed by the toll it exacts on the cost of goods abroad, said Horvitz, the beauty industry consultant. "How good are their landed U.S. margins? An export market can be challenging."

Nevertheless, he said, the personal-products category has inherent advantages over many others: It's less seasonal, enjoys higher sales per square foot and better margins, and, comprised of impulse items, is less price sensitive. All that could help L'Occitane set deep roots in foreign soil.