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Fashion. Beauty. Business.

DAILY EDITION 20 MAY 2016 1

NEW SAMPLEDover Street Market is supersizing, and elevating, the sample sale. PAGE 5

PLEASANT SURPRISEWal-Mart’s shares leaped 9.6 percent on a strong comparable-store sales gain in the U.S. PAGE 6

YVES ON VIEWThe Fondation Pierre Bergé-Yves Saint Laurent gives a preview of its museum and archives due to open next year. PAGE 4

● The Gap reported that its net income and sales fell, leading to more store closures.

BY DEBRA BORCHARDT

Gap Inc.’s traffic problems keep getting worse.

As the retailer on Thursday revealed that net income declined 46.8 percent in the first quarter ended April 30, chief finan-cial officer Sabrina Simmons admitted the company didn’t expect things to be quite as bad as they were.

“We had never expected positive traffic, but we didn’t expect deeply negative traffic,” she said, adding that February and March started well, but then fell off precip-itously in the week before Easter.

The poor performance was across all the group’s divisions except Athleta. As Gap Inc. continues to search for a way to get back on the growth track, the company revealed plans to shutter another 75 stores, including all 53 Old Navy stores in Japan. The company wants to anchor that chain in North America.

Still, the group is sticking with its

BUSINESS

Gap ProfitsDrop 46.8%,More StoresTo Shutter

Transformation was the hot topic on May 9 as nearly 300 beauty executives, many of them leaders of the global industry, gathered in Palm Beach, Fla., for three days of intense analysis, reflection and debate involving 22 speakers, probing the fundamental metamorphosis that

grips the industry. All of it was under the theme of “See Change, Be Change.” For more, see pages 9 to 16.

The Beauty Ceo Summit

● A three-day run of public visits to the company’s workshops begins today.

BY PAULINA SZMYDKE

PARIS — Antoine Arnault wants to set the record straight once and for all: “LVMH is not just about numbers,” the son of Bernard Arnault told WWD during the preview of a photo exhibit celebrating the luxury group’s army of artisans. “It’s about people.”

Photographed by Stephan Gladieu, the series of 40 portraits marks the start of the third edition of LVMH’s Journées Particu-lières, or “open days,” scheduled for Fri-day, Saturday and Sunday at various sites across Europe, giving the public a rare chance to visit leather goods workshops, perfume labs, vineyards and other produc-tion sites belonging to French luxury giant LMVH Moët Hennessy Louis Vuitton.

“You know, I worked 10 years at Vuitton

FASHION

Antoine Arnault:LVMH Is Not JustAbout Numbers

Drew Barrymore, Flower Beauty

Patrice Louvet, P&G Beauty

William Lauder, Estée Lauder

Masahiko Uotani, Shiseido Co. Ltd.

FOR MORE INFORMATION, PLEASE CONTACT PAMELA FIRESTONE, ASSOCIATE PUBLISHER AT 212 256 8103 OR PFIRESTONE@WWD.COM

Security, Fraud & Loss

PreventionIssue: 08.10Close: 07.27

Materials: 08.01

Evolution of the In-Store

ExperienceIssue: 06.08Close: 05.25

Materials: 05.30

Align your brand with WWD’s New Series. Where the Industry Comes for the Inside Scoop.

Introducing a new advertising opportunity

BusinessInsights

The Future of Payment

Issue: 06.08Close: 05.25

Materials: 05.30

20 MAY 2016 3

● Group president Michael Evans pushed for industry unity at the IACC annual meeting.

BY VICKI M. YOUNG

Alibaba Group took its case directly to the International Anticounterfeiting Coalition’s annual meeting on Thursday, and urged that the industry collaborate with the Internet giant rather than shut it out.

The keynote speech by Alibaba Group presi-dent Michael Evans came amid a storm within the coalition of the group’s decision to extend its general member category to Alibaba as well as to The Real Real and Wish.com. Brands such as Tiffany & Co., Gucci and Michael Kors were said to have threatened to pull out of the IACC, leading the group to suspend its general mem-ber category. In turn, Alibaba founder Jack Ma — who was originally scheduled to speak at the coalition’s annual meeting in Orlando, Fla. — backed out and sent Evans instead.

Addressing the matter head on, Evans noted how the decision to create the general member category seemed a bold and visionary move, a reflection of perhaps a move in a collaborative direction. He admitted that change can be diffi-cult, with new ideas sometimes threatening to those who benefit from maintaining the status quo, adding, “[W]e cannot and will not allow a tyranny of the minority to thwart progress in this area. So while the general membership category continues to be evaluated by the IACC board and its members, we will continue to focus on ways to collaborate in this war.”

Earlier, the executive said, “We believe the future of Alibaba — and the future of many of your companies — will depend on us working closely together to fight counterfeits….As the global leader in e-commerce, we have both the responsibility and the commitment to be the global leader in anticounterfeiting. We are

100 percent committed to fighting this matter. We see no path to success other than working closely with you, the brands. And we have the tools to change the way this war is waged. Together, using data and technology, we can become the Special Forces that take on and defeat the counterfeiters.”

He acknowledged that many are likely skep-tical of Alibaba — “And you see us as part of the problem, not as a problem solver.” Evans said he understands the thinking behind that con-clusion, given that the company is huge. “Just last month, Alibaba became the largest retail commerce company in the world with almost half a trillion dollars of sales, more than 400 million consumers shopping our platforms, tens of million of sellers and more than one billion individual product listings” — and it also operates principally in China, “the manu-facturing hub of the world, which sadly also includes manufacturers of counterfeit goods.”

Further, many of the attendees also may have had “firsthand frustrations dealing with us and dealing with counterfeits of your brands on our marketplaces. So we get it. It’s easy to point the finger at us as the source of the problem.”

But Evans also suggested a different point of view: “Our size, where we operate, our insights available through technology and data and our commitment mean we have the tools and resources to make a significant impact on this issue.

“Our goal is not just to be the global leader in e-commerce, but also the global leader in anticounterfeiting. The responsibility for both goes hand in hand. That commitment sounds like the kind of partner you should want on your side,” Evans said.

He cited data, data management and ana-lytics as the company’s strengths, and how it uses them to fight counterfeiters. As examples, he said the company last year blocked 120

million suspicious product listings on Taobao before any brand asked it to do anything, and it also spent $15 million to buy products on its platform that it thought might be counterfeit merchandise. The company also regularly freezes Alipay accounts of those “we suspect are dealing in counterfeits,” he said, add-ing, “Last year, we froze over $72 million in accounts, and refunded more than $12 million to customers.”

Evans noted the firm’s good faith takedown program, where listings are taken down at a brand’s request, “no questions asked, no further evidence required,” he said.

To expand the benefits of good faith beyond just the brands working with Alibaba, he reminded the attendees that the e-commerce platform supported the creation of the IACC MarketSafe program. Through the latter, work-ing with just 16 brands, “We have shut down nearly 5,000 storefronts,” while more than “180,000 infringing product listings have been taken down,” Evans said, adding that the firm also “actively collaborates with governments, regulators and law enforcement on offline counterfeit investigations.”

He revealed that last year “Louis Vuitton and the Guangzhou police came to us for help to track down a sophisticated counterfeiting operation run out of China and Dubai,” noting that with Alibaba’s help, seven suspects were arrested in China, and two arrested in Dubai.

He said that by 2020, Alibaba plans to generate sales of more than $1 trillion and serve two billion consumers. “Neither Alibaba nor brands can capitalize on this opportunity without trust in our marketplaces, which is undermined by the presence of counterfeits,” Evans said.

He concluded: “We don’t see a path other than working with you, the brands. Together, using data and technology, we can make real progress.”

BUSINESS

Alibaba Urges Collaboration To Fight Counterfeiters

● Executives discussed exiting categories like swim, shoes and accessories during the company’s earnings conference call.

BY DEBRA BORCHARDT

L Brands Inc. held its earnings conference call on Thursday following the release of its earnings on Wednesday after the market close.

The company gave more insight behind the changes taking place at Victoria’s Secret as analysts peppered the executives with ques-tions. The changes included the exiting from categories like swim, shoes and accessories. Victoria’s Secret also revealed that Jan Singer would be the new chief executive officer; he previously was ceo of Spanx. The company repeatedly stated the changes were meant to get the company focused on its core product and simplify the product assortment.

Omar Saad, an analyst with Evercore ISI, asked for specifics regarding the bra business and especially the bralette trend. Victoria’s Secret sales increased over last year, but the rate of growth has slowed.

“The total bra business including Pink is up,” said chief financial officer Stuart

Burgdoerfer, “Certainly some changes in the trend that you comment on and that we are participating in. We’re not satisfied with a bra business that — we want it to grow faster than that. It’s not a sick business, but it’s not growing at the rate we want.”

Burgdoerfer did say that all types of bras across both channels had positive sales growth. But Saad’s question points to investor concern that the trend of push-up bras is waning.

The company also made it clear to analysts that the decision to pull back on the catalog

and printed promotions was the right one. Burgdoerfer said that it cost the company $125 million to $150 million a year to do the catalog.

“If one does the simple math on it, we need to get a lot of sales or a meaningful amount of sales to pay for the catalog,” he said. He pointed out that the company reduced the catalog activity by 40 percent and online sales rose 15 percent. He also noted that if L Brands was starting business today, it would not use a paper-based catalog sent through the mail.

Burgdoefer said the direct mail campaigns of a free panty or $10 off a bra needed to be retired. They had been running for a long time and he found that customers came to the store, claimed their free panty and then didn’t buy anything.

The company wants to achieve a seamless customer experience so that the product online is the same as the product in the store.

L Brands shares fell 4.6 percent Thursday to close at $60.62.

BUSINESS

L Brands Gives Insight Into Victoria’s Secret Changes

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Teen Vogue’s Amy Astley Appointed Editor in Chief of Architectural Digest ● Margaret Russell, AD editor in chief, has been replaced by Astley. A team of editors will run Teen Vogue.

● Cannes Fashion 2016

● Blake Lively Sparks Controversy With Cannes Instagram of “Oakland Booty”

● Cannes 2016: Inside L/Oréal Paris Blue Obsession Party

● They Are Wearing: Mercedes-Benz Fashion Week Australia

Global Stock TrackerAs of close May 19, 2016

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Marks and Spencer Group plc +2.82%

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The Swatch Group Ltd. +1.77%

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Elizabeth Arden Inc. -8.54%

Target Corp. -7.62%

Tailored Brands Inc. -5.54%

Sears Holdings Corp. -5.39%

Ascena Retail Group Inc. -4.10%

TOP 5TRENDINGON WWD.COM

Victoria’s Secret Angels in the “Score More” online campaign for the Super Bowl.

4 20 MAY 2016

● Ahead of two simultaneous openings of Yves Saint Laurent museums in Paris and Marrakech, the Fondation Pierre Bergé-Yves Saint Laurent opened the doors of the couturier’s studio and the house’s archives.

BY LAURE GUILBAULT

PARIS – When the Fondation Pierre Bergé-Yves Saint Laurent reopens in Paris next year as a permanent museum, people will be able to visit the designer’s studio and his former couture salons for the first time.

The museum will also feature a 70-piece display from the house’s archives, which includes 5,000 couture garments from Saint Laurent’s 40-year career and 15,000 acces-sories, as well as thousands of sketches, collection boards, photographs and objects. Garments will be shown in batches of 70 on a rotating basis to protect the textiles.

Ahead of the opening and the simultane-ous inauguration of another Saint Laurent museum in Marrakech, Morocco, in fall 2017, the foundation has given several tours of the studio and archives to a handful of journalists.

“It’s about understanding the extraordi-nary importance of the collections,” Bergé told WWD over the phone from Morocco.

Located on the first floor of the building at 5 Avenue Marceau, the studio feels frozen in time. On the couturier’s desk are his signa-ture eyeglasses, pencils and figurines, such as the one representing his dog Moujik. On the wall, there’s a framed 1980 W magazine cover.

Saint Laurent and Bergé had the preser-vation of the designer’s collections in mind from day one, when they set aside the proto-type of a black dress, “griffe 001,” in 1962.

Prototypes kept in the collection are the ones most faithful to what the designer sent down his runways. In addition, there’s a whole accounting component to the archives, which includes notebooks from saleswomen that detail each sale with the date, client name, product and price tag. Bergé calls them “his notebooks,” and it’s in them one stumbles across such names as Grace de Monaco, Catherine Deneuve and Claudia Cardinale. Plus, each fashion piece’s own “fiche d’atelier,” which is basically an I.D. involving technical aspects, such as “720 hours of work at Maison Lesage,” the embroidery atelier.

“This kind of conservation work, no other houses did it.…I did it since the very first day, because I believed that Yves Saint Laurent was to be the greatest couturier of the end of the 20th century. I was right, and therefore that he deserved this type of conservation,” said Bergé.

“I’ll meet with Anthony Vaccarello this week. I’ll tell him what I told Tom Ford, Stefano Pilati and Hedi Slimane – that the archives are open to him,” he added of the fashion house’s new creative director. (Of

the three, only Slimane took up the offer and went on a regular basis.)

Precautions to maintain the clothes are widespread: Visitors are equipped with paper blouses and covers for their shoes. Only employees sporting gloves can touch the pieces, and garments are shielded from light in hermetically sealed compacts that are kept in a room with a steady tempera-ture of between 64 and 68 degrees Fahren-heit and a 50 percent humidity level.

Lying flat in one drawer to protect the embroidery is the Iris jacket worn by Naomi Campbell in 2002 from the Vincent van Gogh collection from the summer of 1988. Hanging nearby is the dress in silk crepe and bayadère stripes that Deneuve wore at a Cannes Film Festival and the Piet Mondri-an-inspired dress from winter 1965. There is also an array of Bougainvilliers capes from summer 1989 and the Seventies wedding dress festooned with “Love me forever” on the front “or never” on the back.

Transparent gauze covers were conceived specially for the archives, as were rolls for padding the garments. Each time a pieces is taken out for an exhibit, or whenever an acquisition is made (the foundation makes about 20 of them each year, excluding dona-tions), it is treated with an anoxia process to prevent moths.

“There are things even we cannot pre-vent,” deplored Sandrine Tinturier, head of conservation at the Fondation Pierre Bergé-Yves Saint Laurent, citing examples such as white tulle turning gray or varnish getting cracked. (Anything else can be thwarted by the team of four restorers specifically on hand for that.)

French architecture firm Studio KO is heading the Morocco project, on Rue Yves Saint Laurent near Jardin Majorelle, the garden the designer and Bergé turned into a cultural site with a museum focused on Berber culture. Spanning more than 43,000 square feet, the building will display 50 pieces by Saint Laurent (out of the total of 150 pieces sent to Morocco, which will be shown on a rotating basis), and have space for temporary exhibitions, an auditorium, a

research library, a café and a restaurant. The first temporary exhibition will be dedicated to the painter Jacques Majorelle.

Meanwhile, the exhibition space in Paris will be doubled in size to 4,300 square feet and refurbished in the style of Saint Laurent’s original couture house. The reno-vation is headed by stage designer Nathalie Crinière and curation is to be spearheaded by Bergé.

Some 70 pieces will be displayed there. Although the selection has yet to be made, it’s understood that the Paris museum will feature such key pieces as a Smoking, a Piet Mondrian-inspired dress and a dress from the Pop collection. The museum is also to give a play to the work Saint Laurent and Bergé did together.

“Yves is the genius. But it’s true that this couture house, we created it together,” Bergé noted.

In the meantime, around 100 fashion pieces will travel abroad for “Yves Saint Laurent: The Perfection of Style,” an exhibit opening at the Seattle Art Museum in October. And two pieces just went to the Salvatore Ferragamo Museum in Florence for the new show called “Across Art and Fashion.” There is also an exhibit set to open in 2017 on Yves Saint Laurent at the Virginia Museum of Fine Arts in Richmond.

Takeaways from Sandrine Tinturier, head of conservation at the Yves Saint Lau-rent-Pierre Bergé Foundation:

-Do lay down flat embroidered and heavy garments to avoid tears.

-Don’t lay velvet down flat. It gives a faded aspect.

-Don’t lay down feather pieces. Always hang them to keep the feathers plump and fluffy.

-Do space out pieces in a wardrobe – 12 inches ideally between each.

-Use rolls for padding when you hang clothes in a wardrobe.

-Before incorporating new pieces, give them an anoxia treatment for three weeks.

-When shipping clothes, use airmail instead of boat and do ship in several batches in case of accident.

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Inside Yves Saint Laurent’sStudio, Archives in Paris

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Oscar de la Renta Resort 2017Peter Copping took a patchwork approach to his resort collection for Oscar de la Renta — literally and figura-tively. “It’s about patchworking fabrics, ideas and textures together,” he said during a preview of the lineup, which included mixed tweeds suits in dusty pink, patchworked floral embroideries on a merino cardigan and graphic floral jacquard strips neatly paneled on a shift dress.

The jigsaw-mix idea gave Copping license to explore a range of motifs — florals, exotic jacquards, graphic lace, crochet and Sixties glamour — within a lineup that had great range, thus serving the resort’s vast selling season. “What does a resort collection mean?” Copping said. “It can be very ‘buy-now-wear-now’ in November through to things that feel much more resort-resort.” To his latter point, there was a sweeping white crêpe halter gown with a dégradé garden print. For winter months, there was a navy-and-white leopard jacquard coat embroidered with black-and-white mink pom-poms. Some of the freshest looks came in filmy black-and-white lace and a parachute taffeta dress that turned a traditionally dowdy fabric quite breezy.

Back to Copping’s question about what resort means — it means real clothes meant to sell. The collection was a commercial enterprise, com-prised of classic, straightforward yet highly elegant silhouettes dressed up in special treatments. — JESSICA IREDALE

Items from Yves Saint Laurent’s studio.

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● The two fashion heavyweights have teamed up to create a shopping experience “of mammoth proportions” opening this Friday to the public.

BY KRISTI GARCED

Sample sales. For savvy shoppers, they’re hot tickets. Those in-the-know — and even those not — have probably been to a few, especially if they live in New York City. These highly anticipated events, which labels conduct semian-nually to unload the previous season’s samples and excess stock, are routinely held in industrial warehouses. And though the deep discounts off retail can be rewarding, the experience can leave much to be desired. Hours-long lines around the block to gain entrance are not uncommon. Shoppers might try on clothes in makeshift changing areas — or often, in plain sight — elbowing each other for that last blouse or the only remaining pair of size 7 heels. It’s not exactly sexy — or fun.

Not so in the hands of Comme des Garçons and Dover Street Market, who’ve teamed up to create, in the words of a flier sent to press, “an epic sale of mammoth proportions” opening today to the public. Dubbed Super-Mar-ket-Market, the four-day event, themed like a luxurious supermarket sweep, is taking place at SoHo’s Skylight Clark-son Square, which fashion insiders will recognize as one of the newer venues of New York Fashion Week.

And while Comme des Garçons’ rare sample sales have always been the stuff of legend — about 4,000 shoppers turned out for the second one, held in May of 2013 at 127 West 30th Street, according to James Gilchrist, general manager of Comme des Garçons USA and Dover Street Market New York — the third and latest installment will be much different. It will be bigger than ever, covering all 23,000 square feet of Sky-light Clarkson Square, and Comme des Garçons merchandise will be offered alongside other designer labels from Dover Street Market for the first time. “This is the first time ever that Dover Street Market and Comme des Garçons

have joined forces on a Market-Market sale, so it was natural for the scale of it to be bigger, and as a result the whole thing became a slightly bigger project,” Gilchrist said.

And then there are the visuals. A far cry from your run-of-the-mill presenta-tion with a few racks and mirrors, the Super-Market-Market is more akin to an epic gallery opening, featuring art installations throughout, from black monster sculptures to prints by pho-tographer Roger Ballen. Two giant gold cherubs — or kewpie dolls — greet shop-pers at the entrance. Further inside,

near the men’s wear, an artful stack of shopping carts filled with Pharrell Williams’ unisex Girl fragrance serves as the centerpiece of the room. “It’s a mix of repurposed DSMNY and CDGNY installations, props and displays along with some newly created ones, made specifically for Super-Market-Market by our visuals team,” Gilchrist said. Artist Baron Von Fancy created the sale’s signage.

As for the merch, shoppers can expect discounts up to 70 percent off for Comme des Garçons brands and up to 80 percent off for designers sold at

Dover Street Market, with merchandise restocked daily. During an early pre-view, staff members were seen unpack-ing hundreds of Comme des Garçons wallets and backpacks into display boxes. A quick glimpse of the footwear selection found women’s shoes by Miu Miu, Azzedine Alaïa, Gianvito Rossi, Ann Demeulemeester, Walter Steiger and Robert Clergerie, among others. Archival pieces adorned the color-co-ordinates racks, such as a white embel-lished plastic dress from Simone Rocha’s spring 2014 collection priced at $663 from an original retail price of $3,315; a yellow Neoprene top from Jacquemus’ fall 2014 collection priced at $147, a price drop from $735, and a safari skirt from Valentino’s spring 2015 collection selling for $318 from $1,590. Looks from Raf Simons, J.W. Anderson, Christopher Kane, Undercover, Erdem, Giambattista Valli and Stephan Schneider were also spotted.

The atmospheric event will feature playlists by Calx Vive as well as live DJ sets from Minimal Wave, Slava, Katie Sullivan and Mike Q. Aaron Bondaroff ’s Know-Wave Radio will broadcast live from the event on Sunday from 2 to 6 p.m., and coffee, cold drinks and cookies from Rose Bakery should serve to energize the eager crowds. All of it certainly elevates experiential retail to new heights. “We always strive to give our customers a special shopping expe-rience,” Gilchrist said. “It is our goal to give them a reason to make the journey to one of our stores or events. And we apply this same thinking to the sample sale...I think our clients totally expect this and the more we do, the greater the expectation becomes.”

Production on the project was led by Comme des Garçons’ New York-based visual and operations teams. “Like our biannual New Beginning, this is one of the special moments that our entire team comes together. All staff from the CDGNY and DSMNY offices and stores pitched in and collaborated to make Market-Market happen; without this huge team effort it would not be possible,” Gilchrist said. Rei Kawakubo was also involved in the event from its conception. “She approved the venue and the theme and then gave feedback on the space design that was presented by our visual team,” he said.

The Super-Market-Market sale runs today from 10 a.m. to 7 p.m.; Saturday, May 21, from 10 a.m. to 8 p.m.; Sun-day, May 22, from 12 p.m. to 7 p.m., and Monday, May 23, from 10 a.m. to 3 p.m. at 550 Washington Street. Diehard collectors will likely turn up for it in droves; Gilchrist noted that shoppers from all over the U.S. flew out to New York for Comme des Garçons’ past two sales.

Despite the luxe atmosphere, one imagines that the prevailing mood at the much-hyped event — a beefed-up security staff not withstanding — will not exactly be serene. Overheard by one attendee during the preview: “I think whoever people are when they’re shopping at a sample sale — that’s their truest self.”

RETAIL

Comme des Garçons, Dover Street Market Elevate the Sample Sale

Giant gold cherubs greet shoppers at the entrance.

Candy-themed sculpture mixes with candy-colored clothes at the

Super-Market-Market sale.

Art-bedecked bins of merchandise at the Super-Market-Market sale.

An artful stack of shopping carts filled with Pharrell Williams’ unisex Girl fragrance.

plan. “As the pace of change across the apparel industry increases, now is the time to accelerate our transformation by scaling our product and operating capabilities across our global portfolio,” said Art Peck, chief executive officer at the Gap. “By taking every opportunity to exploit our strategic advantages, our brands will be able to more fully harness the power of the enterprise to better serve their customers across channels and geographies.”

The company’s net income for the quarter declined 46.8 percent to $127 million, or 32 cents a diluted share,

down from $239 million, or 56 cents, a year ago. This met the FactSet estimate for 32 cents per share.

Net sales for the three months ending April 30 decreased 6 percent to $3.44 billion from $3.66 billion a year earlier and matching the FactSet estimate. Comparable sales dropped 5 percent versus a decrease of 4 percent last year. Gap Global sales fell 3 percent, Banana Republic dropped 11 percent and Old Navy declined by 6 percent.

Peck talked about the problems at Old Navy on the earnings call, saying there was too much fashion and too much duplication in the assortment. On Banana Republic, he said he was seeing encouraging results there. The company cut back on discounting and has been trying to train the customer to not wait for promotions.

The ceo also the company made adjustments on the price tickets, com-menting that the initial ticket price at all three brands just wasn’t real.

The bright spot in the company was

Athleta. Peck said on the call, “That business is highest growing and it will be a very significant segment of the overall rated apparel space as we go forward and we plan on it being here to stay.” The Gap would not disclose the size of the Athleta business. Peck did say it was performing superbly.

During the quarter the retailer opened 18 stores and closed 17. The company expects net closures of 50 company-operated stores in fiscal 2016.

Gap would not affirm its earnings per share guidance, but took note of the First Call estimate of $1.92 for fiscal-year 2016. The company said trends would need to improve in order to achieve this estimate.

Peck did clear up some questions he had made regarding Amazon. Some thought he was alluding to a potential partnership, but he said it was inter-preted incorrectly. He said he men-tioned Amazon as a company he wants to be aware of because of all the e-com-merce happening around it.

6 20 MAY 2016

Gap Profits Drop 46.8%, More Stores To Shutter CONTINUED FROM PAGE 1

● The retail giant beat analyst estimates with an increase of 1 percent in the first quarter.

BY SHARON EDELSON

Shares of Wal-Mart Stores Inc. surged 9.6 percent to $69.20 on Thursday after the world’s largest retailer surprised investors and beat analyst estimates with a comp-store sales increase of 1 percent at Wal-Mart U.S. in the first quarter. Wall Street was expecting a gain of 0.5 percent.

The positive comp was due to continuing traffic increases, which rose 1.5 percent in the quarter ended April 30, marking the sev-enth consecutive quarter of positive comp-store sales and sixth consecutive quarter of positive comp traffic.

The surprise results at Wal-Mart came a day after rival Target reported a similar strong quarter, but Target’s shares dropped sharply Wednesday on its cautious outlook for the second quarter.

Earnings per share fell 4.9 percent to 98 cents from $1.03 in the first quarter of 2016, yet beat the analyst consensus estimate of 88 cents.

Revenue increased 0.9 percent in the period to $115.9 billion from $114.8 billion in the prior year’s first quarter, above the $113.3 billion predicted by analysts. On a constant currency basis, total revenue was $119.4 billion, an increase of 4 percent from the previous year’s $114.8 billion. Net income declined 7.8 percent to $3.079 billion in the 2017 first quarter from $3.34 billion in the 2016 period.

“It’s exciting to see the improvement in core retail fundamentals,” said Doug McMil-lon, president and chief executive officer of Wal-Mart Stores Inc. For example, “I’m

encouraged by the progress we’re making on inventory. That progress is important in its own right and for cash flow purposes, but it can also help create a virtuous loop. When combined with our investments in training and associate education, wages and store structure, it’s giving our associates more time on the sales floor to serve customers.”

McMillon said the company did a better job of managing costs in the first quarter of 2017. “SG&A discipline improved, as our store teams did a good job of more closely aligning expenses with sales growth,” he said. “Better expense management in the quarter gave us increased confidence to initiate our next phase of U.S. price invest-ment earlier than planned. Over time, we intend to lower prices further in a deliberate, strategic way to drive our productivity loop. Doing this in a sustainable way takes time and we’re seeing progress.”

The retailer said second-quarter earnings per share are expected to be in the range of 95 cents to $1.08. Comp-store sales for Wal-Mart U.S. should advance 1 percent, and Sam’s Club is expected to log a slightly pos-itive comp for the second quarter, without fuel. The company has said it expects sales to be relatively flat this year, in part due to the strong dollar. Earnings are expected to decline between 6 percent and 12 percent.

Globally, on a constant currency basis, e-commerce sales and GMV grew 7 percent and 7.5 percent, respectively. “Growth here is too slow,” McMillon said. “The U.S. num-ber is better than the global number, but neither is as high as we’d like. We’re pleased with our e-commerce operating system and happy to have our new e-commerce fulfillment centers operational. Those are necessary building blocks. We need to win in e-commerce.”

Net sales at Wal-Mart International declined 7.2 percent to $28 billion in the current first quarter from $30.27 billion in the 2016 period. Net sales at Sam’s Club rose 1 percent to $13.06 billion from $13.48 billion.

Consolidated operating income in the first quarter of 2017 declined 7.1 percent, as planned investments in people and technol-ogy and currency exchange rate fluctuations impacted results, the company said.

Gross profit increased 60 basis points during the quarter, primarily driven by gross margin improvements in the U.S.

Wal-Mart International had a strong start to the year, with ten of the 11 markets posting positive comp-store sales and nine markets growing comps by more than four percent on a constant-currency basis. Walmex and Canada posted strong sales and market share gains. “China remains a strategic market for our future and is now our fourth-largest international market in terms of sales,” said Brett Biggs, executive vice president and chief financial officer of Wal-Mart Stores Inc.

The highly competitive U.K. environment, with the added wrinkle of food deflation, significantly impacted traffic and comp sales trends at the perennially challenged Asda. “We’re focused on making strategic investments in price, while being diligent in managing our bottom line and cash flow,” Biggs said.

Sam’s Club grew membership income in the first quarter of 20017. “Comp sales for the period were in line with our guid-ance, but we know we can deliver stronger results,” Biggs said. “Leading in digital is a focus area for Sam’s.”

Wal-Mart U.S. saw strength in general merchandise, driven by solid sales growth in hardlines, home and seasonal, and apparel. Neighborhood market format delivered a comp sales increase of 7 percent.

Inventory declined 3.5 percent in the first quarter, including a 5.7 percent decline in comp stores. “The inventory discipline is driving benefits across the store, such as improved in-stock levels and more efficient processes for our associates,” Biggs said.

Operating expenses increased 11.5 percent over last year, primarily due to previously announced wage increases. “Our store teams were more efficient in managing expenses to more closely align with sales growth, and a milder winter drove lower utility and main-tenance expenses,” Biggs said.

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Wal-Mart Shows Improvement in Q1

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● The company’s new flagship is designed to evoke a town square.

BY MAGHAN MCDOWELL

SAN FRANCISCO — Apple senior vice pres-ident of retail Angela Ahrendts on Thursday gave a first look at the company’s new flagship in Union Square here. The space was designed to be a community gathering place, although certainly Apple wouldn’t mind showing or selling an iPad or Apple Watch in the process.

Fittingly, this is also the 15th anniversary of Apple’s stores, and in a small presenta-tion in front of press and photographers, Ahrendts shared that she really had to push to offer the preview.

“We don’t usually do this before the store opens,” she said, “so it’s like going in the kitchen before the meal is ready.” After asking for a bottle of water — the former Burberry chief executive officer still gets nervous, she said — she introduced a reimagined concept for what the future of Apple retail will be, while making note that the company’s largest “flagship” is apple.com.

The changes will start with this location, which is just 38 miles north of Apple’s Cupertino headquarters, then roll out to other Apple stores in the U.S. Ahrendts

emphasized that the theme was designed to be evocative of a town square, but that it was really important that the stores didn’t lose signature elements, including the wooden tables that are designed to look like the tables that Apple chief design officer Jony Ive designed the products on.

The two-story space, filled with wood, steel and glass, is still reminiscent of current Apple stores, with a few updates. Most dramatically, the entire front and back walls of the store are built with massive

42-foot sliding doors that open up to the sidewalk outside, and there are live trees within the store.

“We have a deep commitment to the cities we work in and are aware of the importance that architecture plays in the community,” Ive said. “It all starts with the storefront — taking transparency to a whole new level — where the building blends the inside and the outside, breaking down barriers and making it more egalitarian and accessible.”

Ahrendts called the space “our largest product,” and said she loved the openness and transparency, saying that she was inspired by London’s Covent Garden. “Most importantly, this is not just a store,” she said. “We want people to say, ‘meet me at Apple.’”

The first new element to the retail concept is what Apple calls “The Avenue,” which is inspired by shop window displays. Apple’s interactive “windows” there feature rotating products and services, including third-party items found only at Apple. Ahrendts shared that the company has also created a new role it is calling “Creative Pros,” which nod to Apple’s culture of merging technology and liberal arts. These staffers, who are hired from backgrounds in arts like music and photography, will guide and demonstrate to Apple store visitors; the iPhone camera, she reminded the crowd, is the most used camera in the world.

The Genius Bar also got an upgrade; it’s now become the “Genius Grove.” Live ficus trees are meant to inspire peace, an anti-dote to the frustration of broken gadgets. Other new features are “The Boardroom,” created with small businesses and entrepre-neurs in mind, and “The Forum,” centered around a floor-to-ceiling video wall, where Apple will host “Today at Apple” programs.

Finally, “The Plaza” is the most literal interpretation of the town square approach. It is an outside seating space that will be open to the public at all times. It’s equipped with free Wi-Fi, a fountain, a green wall, artwork and the occasional local acoustic performance.

The highly anticipated space will open to the public on Saturday morning, staffed with 380 people. Ahrendts thanked them last. “There are 380 people who will open the store on Saturday morning, and these are the greatest people in the world,” she said. “We are incredibly excited — and I thank you.”

RETAIL

Apple Unveils Retail Concept in San Francisco

● Hong Kong was the hottest market in 2015 with 73 new brands opening there.

BY SHARON EDELSON

A new CBRE report, “How Global is the Business of Retail?” aims to answer the ques-tion of cross-border retail activity by analyz-ing the operational networks of 334 leading international brands across 61 countries, which accounts for a majority of the world’s economy.

To examine the extent to which retailers expanded their global operations in 2015, CBRE measured all the international retailers entering each of the markets it covers.

Overall, new cross-border retail activity grew 3.1 percent last year. The sample of 334 leading retailers slowed their expansion as their city footprint grew only 1.6 percent last year.

Retailers from the Americas continued to dominate as the most globalized brands, with 87 percent present in all three global regions: the Americas, EMEA and APAC.

Anthony Buono, executive managing director of retail services in the Americas, said some U.S. retailers may be using international expansion to offset sluggish sales at home. “Broadly speaking, there are only certain levers that retailers can use to grow their brands,” Buono said. “One way is expanding in the current country they’re in, but in the

U.S. there’s more optimization. They can expand the brand in other channels.”

EMEA-based brands have a stronger prefer-ence for APAC compared to the Americas, the study said, citing H&M, Agent Provocateur, Elevenparis and Jo Malone as expanding their networks of stores in Asia.

Hong Kong was the hottest market in 2015 with 73 new brands opening there. Singapore came in second place with 63 new brands, followed by Tokyo (57), Taipei (47), Moscow (40), London (39), Dubai (38), Beijing (37), Bucharest (35) and Daha (29).

“Despite retail markets in Hong Kong and Singapore being under significant pressure from strong headwinds, both cities welcomed more new entrants,” the report said. “The sharp correction in rents on Tier 1 streets in Hong Kong created expansion opportunities for mid-range fashion and accessories brands. Retailers seem to be gaining the upper hand in lease negotiations in Singapore as well.”

Notable exceptions include Harbour City in Hong Kong and The Shoppes at Marina Bay Sands in Singapore, where the slowdown in retail sales and tourist spending has led some brands to exit the market. “Nevertheless, Hong Kong, Singapore and Tokyo remain attractive markets as the gateway to Asia,” Buono said.

CBRE found that home and department stores grew their footprints the most in 2015 at 2.9 percent. Value and denim brands added 2.4 percent to their global footprint, for a presence in 72 cities.

Luxury and business fashion, and specialist

clothing, each rose 2 percent, while mid-range fashion grew its footprint by 1.8 percent.

The survey revealed that the top 20 target cities saw 700 new market entrants in 2015 compared with 676 in 2014.

Tokyo, which slid into third place after being last year’s top target market, has seen domestic demand that’s decidedly mixed. The majority of new brands in Tokyo selected sec-ondary locations in core areas to avoid high rents and low availability on prime streets.

Taipei’s retail sector has seen activity from fast fashion brands such as H&M, Forever 21 and SPAO. Tight leasing conditions sent new brands to shopping centers, such as the recently completed The Breeze Xinyi.

Despite economic and political turmoil, Russia welcomed 52 international retailers in 2015, 40 of which opened in Moscow and 12 in regional cities.

“Despite being the most internationally penetrated market, London continues to attract new brands — 39 in 2015 — with the large majority in the coffee and restaurant sector, and over half the new entrants hailing from France or the U.S.

Dubai saw 38 new retailers join its market in 2015, including AllSaints and Old Navy.

Doha, which attracted 29 new brands, is in the throes of a construction boom. The past decade has seen a variety of large scale malls open, which increased the opportuni-ties for retailers to open stores alone or with franchisees.

The Gulf Mall in Gharaffa is one of the new-est additions to Doha’s growing retail offering

and features 200 stores, including new international brands Old Navy, Reserved, Punt Roma, Kosebasi and Melenzane. Lagoona Mall, one of the country’s leading high-end shopping centers unveiled international brands such as Mulberry, M Missoni, IWC Schaffhausen, Karl Lagerfeld and Tory Burch.

The appeal of Canada’s cosmopolitan cities and diverse population has attracted Nordstrom and Saks Fifth Avenue to the north. Retail sales in Toronto grew 3.2 percent in 2015 and are expected to grow another 4.5 percent in 2016. “Despite sluggish economic growth, interest and spending on luxury retail is increasing among Canadian consumers to the benefit of high-end retailers,” the report said.

European and Asian brands may find this an opportune time to enter New York. “It’s clear that opportunities to enter the New York market are broadening daily,” Buono said. “There are going to be opportunities to sublease and we’ll see those growing.”

Buono said a specialized group of Chinese brands are starting to take a look at the U.S. “They are more discount-oriented brands that come from the manufacturing side of the world,” he said. “I think they’ll have a better chance of succeeding here than some of the mid-market brands.”

Notwithstanding the slowdown that’s clearly occurring in different parts of the world, the notion of expansion and globaliz-ing brands hasn’t stopped. “It’s being fueled by Internet,” Buono said. “The Internet is a global instrument. This all fits together.”

RETAIL

CBRE Report Cites Growth in Cross-Border Retail

Inside Apple’s new flagship in San Francisco’s Union Square.

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and every single time I go to the Vuitton workshop in Asnières I still discover new things, new techniques, new anecdotes about a method for instance that was invented by a great-grandfather of someone who still works there. These are family stories, and I find this is what makes these houses human and real. So the fact that LVMH is always perceived as a big financial group where it’s just about numbers, results, profitability and nothing else, is a little bit annoying to me,” divulged Arnault, who is also chief executive officer of Berluti, one of the 40 brands and 50 work sites belonging to the luxury conglomerate that are slated to open their doors.

He said many houses asked to be included in the program for the first time, such as storied winemaker Le Clos des Lambrays, whose origins date back to 1365, making it the oldest brand under LVMH’s umbrella, which also boasts such houses as Dior, Givenchy, Fendi, Loewe and Dom Pérignon.

“It was delicious news for me that the French artisans couldn’t wait to work on a weekend,” observed Arnault, alluding to the controversial subject of surpass-ing the French 35-hour week and Sunday openings, which the group supports.

Among some of the new venues added this year are the atelier of leather goods maker Moynat in Paris, Berluti’s factory in Ferrara, Italy, and Nicholas Kirk-wood’s boutique and studio in London.

The first edition of the Journées Particulières in 2011 attracted close to 100,000 visitors; 120,000 people turned out for an encore in 2013. This year the event has been extended by a full day to accommodate even bigger numbers.

“We skipped 2015 because my father wished to dedicate it to the Fondation Louis Vuitton, which was inaugurated last year and which is very dear to him,” explained Arnault, adding, “I feel we have a public that is very curious of the savoir-faire — not just passionate about the products but how they are made, and so we want to show a little bit of our secrets. In three days, anyway, no one will be able to steal our secret formula,” he laughed.

Arnault said he hopes this glimpse behind the scenes will also attract the attention of potential future artisans. “The first day will be primarily dedi-cated to students, who have shown great interest in our company. For the last 12 years, LVMH has ranked as the num-ber-one firm among business students,” he said.

But when it comes to the craftsman-ship side of things, the executive noted that the group has to do a better job in showing its value in order to ensure its future. “It’s difficult [to build the next generation]. Today people prefer to work in digital, not perform a manual job, but these jobs are beautiful and they are also the jobs of the future, we just need to valorize them and make them as important as they are.”

Jean-Paul Claverie, a longtime adviser to the LVMH group, noted how at the 250-year old Hennessy brand, some of the cognac specialists have transmitted their knowledge for nine generations

within the same family. “That’s remark-able. It doesn’t exist anywhere else in the world. So the willpower is there. Having a new leather goods=maker at Louis Vuitton train for four to five years is also how we ensure quality,” he added.

Arnault noted that quality essentially equals time.

“As there is more and more talk of immediacy — I see fashion shows today, I buy tomorrow — an event like this also gives people a sense of how much time it takes to make a perfect product. It does not happen overnight. For a pair of shoes at Berluti you will need to wait one year at the moment. And you know what? Clients don’t mind.”

The images at the exhibition, which took three years to make, are a further testament to the group’s philosophy. “For the first time, the artisanal work

has been documented by a single eye — that of Stephan Gladieu — and you can flip through it like an encyclopedia of professions that have been around for centuries,” Claverie said.

“How many of you actually know what a lozineur does?” he teased a group of journalists about the craft of fixing protective resin and metallic parts on suitcases.

While the artisanal work is what has put the luxury behemoth at an economi-cal advantage, both Claverie and Arnault remarked it was a win-win situation for both parties. “At a moment of major economic difficulties, every one of these brands manages to exist without posing itself any financial questions. That’s also thanks to a group like LVMH,” said Arnault, while Claverie added: “To confront an uncertain future, we have to perfectly own our past.”

The next edition of the Journées Par-ticulières might involve a leap across the ocean, Arnault revealed.

“My hope is that we will be able to show off Loro Piana’s vicuña [produc-tion] in South America. We have a whole ranch of hundreds of acres where vicuña are raised,” he smiled, adding: “Yes, we are also farmers.”

Dozens of LVMH’s 5,000 artisans gathered on Thursday night at the Fon-dation Louis Vuitton to pose in front of their portraits. Lozineur Eding Mutlu, a humble man in his late 50s, who started at the age of 15, said his job is so rare, everybody in the industry knows him. “You really have to like it,” he smiled. His secret: “You have to feel the metal — because no piece is like the other,” he said, dreamingly drawing an irregular surface in the air.

Carlos Formigal de Pinho’s said he has tried almost every craft before settling for leather. The so-called peaussier handles roughly 500 square meters of leather, or 300 skins, a day, chasing — well, perfection, he said. “There can be no scarring, no scratches,” he noted firmly. “The hardest thing to find is high-quality natural cowhide leather, because it’s the mason’s signature,” he revealed.

For Jean-Michel Casalonga, shoemaker at Berluti, the biggest challenge is to understand a customer’s expectations, in 70 hours, that is, the time it takes to create a pair of made-to-measure shoes. “Our job really is to find the perfect pro-portion between aesthetics and comfort, so there is a lot of psychology involved,” he observed.

Casalonga was hopeful about his craft’s future prospects. Because shoe-making is close to fashion, he noted, more and more young people are ready to take it on. “I think it’s a generational thing. Those youngsters who are fresh out of school just don’t feel like spend-ing their lives in a 9-to-5 job in the office.”

“But you have to be patient,” allowed Florence Cheher, chief seamstress at Christian Dior couture, after posing with Arnault in front of a picture showing her in action with a couture gown. “It’s what the young generation is missing. They have different priorities. Every-thing has to happen fast. On the other hand, we have never had this many apprentices, and they are good. I have taken seven under my wing,” she smiled benevolently.

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Antoine Arnault:LVMH Is Not JustAbout Numbers CONTINUED FROM PAGE 1

Antoine ArnaultBernard Arnault

Here and right: A portrait by Stephan Gladieu from the opening exhibition of

LVMH – Journées Particulières 2016.

● Lauder: If You’re Standing Still, You’re Going BackwardWilliam Lauder, executive chairman, The Estée Lauder Companies Inc., offered a peek behind the curtain at one of the most revered corporate cultures in the beauty business.

“First and foremost in a larger organization, there is more of a fear of failure and that creates caution,” Lauder said during the kickoff of the WWD Beauty Summit. “So one of the things we try to do in our culture is say it is OK to fail if you are trying something new. Just fail fast and fail cheap.”

While it seems most Lauder-backed ventures succeed, Lauder acknowledged there have been “things we shouldn’t have done.”

There’s the anecdote he relayed about the first time the founders of MAC contacted Estée Lauder. “We had this other brand called Prescrip-tives and it was doing very well. It was somewhat the spiritual parent of what MAC was. I said, ‘You know, I think $10 million invested in Prescriptives might be a better return on investment than MAC. Well — six months later we said let’s try to

reset this and we paid a little more than $10 mil-lion then, but it turned out to be an extraordinary investment and a magnificent brand that has been transformative in the industry.”

Lauder acknowledged the rapidly changing beauty world. “Change is a constant. If you are standing still, you are going backward. We are in a consumer industry and that means you are running up the down escalator. If you stop for a moment, you are going backward. You have to be running faster than the speed of the escalator to make some progress. If you’re not, someone else will.”

The emerging social media influencers are those creating a transformation in the beauty business. “There was a time when the editor was the authority and no one else could have a voice or platform. With the advent of the internet — social media, digital, YouTube and other forms of communication — the notion of authority changed fundamentally and permanently where anybody can be the editor,” Lauder explained.

Beauty is reportedly the number-one cate-gory for self-help videos on YouTube and that’s catapulted vloggers to the role of the dominant

influencer. “You realize that the vast majority are somewhere between the ages of 14 and 20 and they have millions of followers. In many cases, if you look at the raw numbers, they are more influential than much of network television.”

This market dynamic has ignited interest in in-dependent brands. “We are an industry that has an entire ecosystem dedicated to forming new brands. Barriers to entry are practically zero. Barriers to scale are still very large.” The flood of independent brands provides retailers and consumers with a constant churn of newness that is changing how beauty is marketed and sold including a shift in dollars devoted to print advertising versus digital.

For its part, Lauder keeps its eyes open to ac-quisition targets. “We like to see all of the great companies — and some of them are very great and they are the ones that join us — but there are other companies who are great that we admire. What’s really great is if the entrepreneurs are motivated not just to create, but to build,” he explained.

Recently, Lauder’s shopping cart has been filled with fragrances such as By Kilian, Editions de Parfums Frédéric Malle, Rodin Olio Lusso and Le Labo. Although Lauder explained it isn’t an “either/or” scenario, he said the company saw an opportunity to fill out its portfolio in luxury fragrance. These scents fit with a trend he observes of consumers gravitating toward a high-touch experience that isn’t just buying “something,” Lauder said.

And he urged brands to look at jewels they may have within their own companies, which can be reimagined for the new beauty world. “Remember Max Factor? What was the most valuable part — SK-II. P&G bought Max Factor and they got a gift with purchase. SK-II turned out to be more valuable.” — FAYE BROOKMAN

20 MAY 2016 9

WWD Beauty CEO Summit

● Industry leaders gathered at the Breakers in Palm Beach, Fla., last week to discuss how their brands have adapted to the landscape’s changing context.

BEAUTY

See Change, Be Change

● Masahiko Uotani Charts Shiseido, Beauty Industry Game PlanMasahiko Uotani is a man with a supersized mission. Right after it was publicly announced in December 2014 that he would be Shiseido’s next president and chief executive officer, Uotani was charged with an undertaking extending well beyond the beauty industry’s bounds.

“I received over 700 messages from politi-cians, business leaders and my personal friends. They all said Shiseido is an icon of Japan, so you have to work hard to rejuvenate Shiseido, since it means rejuvenating Japan as a country,” explained the executive, speaking at the recent WWD Beauty CEO Summit in Palm Beach, Fla. “I realized that the responsibility of this position is bigger than I initially thought.”

Not that he didn’t have his work cut out at the company alone, though: Over the prior eight years its value had been flat, domestic sales had declined by almost $1 billion and the internation-al business had grown significantly but wasn’t profitable.

Uotani — formerly chairman of Coca-Cola Japan Co. Ltd. — met with more than 4,000 employees in his first 100 days on the job at Shi-seido. He realized the company was in a vicious cycle, including lack of investment and increasing inventory.

“At the same time, I also realized that Shiseido has a rich heritage and passionate people,” he said.

Uotani explained the company had been found-ed on a trio of principles in 1872: products speak for themselves; richness should be in everything it does, and brands must be international.

“I believe in these three principles and that they are the DNA of Shiseido even today,” he said. “The challenge for Shiseido is to become a strong global company. We must change quickly, become more results-oriented, create speed and get rid of bureaucracy. At the same time, we also needed to embrace our heritage of high-quality products and caring for people like a family. Shiseido needs a transformation.”

Uotani maintained that for Shiseido to become global, it must develop by investing in people and the organization, plus building on diversity. That’s

where his Vision 2020 corporate strategy comes in.

The plan includes a regional headquarters system, upping the number of women in man-agerial positions and growing the percentage of business done outside of Japan. Succession plans for the top 150 positions around the world are in the works, too.

From his job at Coca-Cola, he learned that brand value is an intangible asset of the company and key for sustainable growth.

“Combining marketing with innovation is going to create the values of the brand for consumers,” said Uotani, adding Shiseido is putting money in both.

His second learning was the importance of thinking global and acting local, dubbed “glocal-ization.”

“The centralization model does not work anymore in this world with consumer diversity,” he said. “At Shiseido, we have just implemented the

metrics organization model so that we can em-power each region to drive the business, explor-ing the market opportunities. I want Shiseido to be a showcase for other Japanese companies.”

Another change instigated is that English will be the main language in Shiseido’s Tokyo head-quarters by 2018. Uotani nominated leaders for the Americas and Europe and set up a center of excellence for each region of the world.

“Centers of excellence as a global hub will be leading the consumer trend intelligence, strategic planning, new product development and sharing best practices not only for the region but for the entire world of Shiseido,” he said.

On a more macro-level, Uotani discussed the swiftly changing nature of today’s beauty land-scape into which brands are born and developed. He said consumers are influenced by their own cultures plus the world at large, friends and fami-ly, as well as by mainstream and digital media.

Other shifts include ideas coming from every-

where, rather than simply the West.“A great challenge for industry is to make

our products and marketing fit with new urban consumers, who want to blend their own identity with exciting global opportunities,” he said, adding some are emerging from regions with social unrest or other uncertainties.

Uotani said it’s key for brands to combine in-trinsic and extrinsic value, and that the mix of the two differs according to product category.

“I see the creative, artistic, emotional side becoming more important,” he continued.

Another trend is younger consumers being ea-ger for brands and products offering new ideas.

“Individuality and self-expression are now be-ing modified by values of community, family and social relationships,” Uotani said.

He explained that when considering how to build meaningful relationships with consumers, Shiseido executives thought about elements the company could offer the world.

“Some of them could be attentiveness, a sense of respect, the ability to listen and to serve, the ability to be quiet when others are talking, the abil-ity to present things in a thoughtful and beautiful way, seeing meaning in the tiniest detail and the unique Japanese aesthetics that can be innova-tive and aspirational,” he said.

“Our industry has great opportunity,” added Uotani. “It offers consumers positive influences and happy experiences every day. We are very fortunate to live in this historic time of change. We also have a great responsibility to do that.”

To wit: at the end of his Summit speech he called for a global industry forum in order to share ideas.

“The forum could be a platform where our companies can discuss non-competitive and industry-wide issues, such as sustainability, and the shared industry perspectives. With so much change, we’d all benefit from thinking as an indus-try about our shared responsibilities — by being change, not just responding to change.”

During his tenure at Coca-Cola Japan, Uotani said beverage makers would periodically meet — eventually deciding to standardize the size and color of the outer carton boxes. They also opted to collaborate in times of emergency. — JENNIFER WEILPh

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● P&G’s Balancing Act of ChangeChange can be a tricky, double-edged deal, at least in the view of Patrice Louvet, group presi-dent of P&G Beauty at Procter & Gamble Co.

“Some change is good because it delights the people who use our products,” Lovet said. “It creates value. But not all change is good. Some-times the changes we make simply confuse and frustrate people. As a result we erode value.”

Louvet asserted that the best way to deter-mine whether a change will create or erode value for a brand is to see it through the eyes of those who live with the consequences — “our consumers, our retail partners, our colleagues.” He noted, “when we see through their eyes we see the impact more clearly. As a result we are able to make decisions that balance the yin and yang of change. It’s not an easy balance to strike,” he continued, ”but those who do it well win, and industries that do it well grow.

“Without enough change, the industry loses its relevance. With too much change it becomes complex and loses trust.”

Louvet demonstrated the perilous nature of striking the right balance after his speech when an audience member asked how a company as smart as P&G could “get beauty so wrong.”

“How much time do we have,” he shot back with a smile, then gave a long, complete and extremely candid answer. The company had overextended itself with a spate of high-profile acquisitions a decade ago, adding that P&G thought it could leverage its strengths and create value, but the calculation was wrong. “The result of that is we ended up losing sight of the core and getting distracted by a whole bunch of activities...[that] we didn’t do…particularly well, and the core really suffered.”

But now having divested 42 specialty beauty brands with another waiting in the wings, “we are relooking at our portfolio, assessing where we can leverage our strength best, assessing

where we can create the most value and refocus our portfolio on the four core categories we’re calling out.”

During his speech, he observed, “change always carries an inherent risk and the secret to managing that risk is consistency — the look, the tone, the feel of a brand.”

Changes to avoid include following the com-petition or “giving in to pressure from retailers or suppliers or just getting bored with our products.

“When we give in to the temptation to change for the wrong reasons, we often frustrate our consumers at best and erode their trust at worst.”

These lessons taught Louvet to formulate three principles.

The first one is “understand what’s old is still new,” Louvet said, adding, “we get tired of innovations long before the people who use our products do. We move onto the next new thing when there’s still abundant opportunities to grow existing products.”

Case in point: Olay’s Regenerist product,

known in-house as Red Jar, which created a sensation and became the category leader when it was launched a decade ago.

But P&G moved on in a couple years, pulling resources away and supporting new smaller initiatives. “The women who used Regenerist, loved it,” Louvet said. But only 5 percent of women had actually tried the product, leaving a huge opportunity on the table.

“Instead of launching new products, which made our shelf more complex, we should have been focusing like a laser on creating trial of Regenerist and new Olay users.”

P&G has since refocused on Red Jar and sales for the last three months have been up 15 percent.

In contrast, Louvet asserted that P&G did not make that same mistake with its Head & Shoul-ders antidandruff shampoo that was launched 55 years ago. By continually improving the product, P&G kept it at the top of the charts. “Clarity and

consistency pay off,” he asserted.The second principle is — “the key word in new

and improved is improved. Product superiority is paramount, but we often focus on new, rather than improved. It’s a trap that is easy to fall into when change is driven by something other than consumer need.”

There was a period when P&G was restaging brands every three to four years to keep them fresh. For example, the packaging and product architecture of Pantene were redone, without a performance upgrade.

In positioning, the brand moved from “the hair you want” to the “hair you have.”

Louvet rhetorically asked, “I don’t know who wants to be stuck with ‘the hair you have.’ But I guess that’s a different talk for a different day.”

In addition, Pantene’s classic white packaging was replaced by a multicolor display, making it difficult for people to find their favorite familiar products. “We were changing for the sake of changing to bring news to the category,” he noted, reporting that the brand has been put back on track with a genuine product improvement , “and Pantene is growing in North America again.”

He noted that the company did better with is Secret deodorant brand, after the company dis-covered that one in four women considered them-selves to be “heavy sweaters.” Secret Clinical was invented with a near-prescription strength formula. P&G had brought something “new and truly improved to a stagnant category, and built a business as large as Secret’s competitors.”

“If we don’t stay true to this principle,”Louvet said, “innovation stops being a growth driver and categories tend to commoditize.”

The third principle is “think inside the box,” so that people can discover what is the core of a brand or an organization, before tackling the new and unknown. Referring to P&G’s mass beauty divestiture, he said, “the key is to help people un-derstand what won’t change before asking them to accept and lead what will.” — PETE BORN

WWD Beauty CEO Summit

● Looking Forward With Drew Barrymore, Flower BeautyDrew Barrymore is building a very different beauty brand — one that’s laser focused on for-mula and not the marketing engine that so many businesses are predicated on.

“We thought instead of carving out money for marketing and being a smaller upstart, we’ll put money into formulas so we can have a different company and be able to serve that same lipstick that retails for upwards of $40 and charge $6 to $8,” Barrymore said of Flower Beauty, which launched exclusively at 1,509 Wal-Mart doors in January of 2013 and has since expanded to 4,000 doors. Barrymore gave her thoughts on beauty during a keynote speech at the WWD Beauty CEO Summit in Palm Beach, Fla., last week.

Rather than relying on advertising to get the message out — she’s had an obsessive focus on formula since the beginning. There are enough mass beauty brands on the market “that are perfect the way they are,” she said.

Flower Beauty was going to challenge the traditional definition of “mass” beauty, and along with design and manufacturing firm Maesa Group, which co-owns Flower, Barrymore got to work.

Her plan was simple. In coming up with the original business model in preparation for launch, the actress-turned-produc-er-turned-beauty executive decided that she would develop prestige formulas to market at a different price.

She wanted to bring a luxury brand to con-sumers at a mass price point — and “Robinhood this motherf----r,” per Barrymore, who from the onset decided she would take less money and even put her own money into the project.

As a co-owner of the company, she had a very clear vision of what her involvement in Flower would be: she would have a hand in everything, from conception to finished product. Barrymore is averse to the notion of “name-slapping” — or celebrities just putting their name on a product with little to no involvement in the design, pro-duction and manufacturing processes.

“Name-slapping is bad and short-lived. If you

want a long career you should be really selec-tive. Steven Spielberg said this to me and my mom at age seven,” she said.

Even decades years later when Procter & Gamble Co.’s Cover Girl, called, the actress initially said no to working with them. But after talking to the company — she loved the idea of “running these campaigns” — and proposing “clean marketing,” Cover Girl called her again. They proposed that Barrymore serve as the face and cocreative director for her campaigns, and this kicked off a seven-year partnership that lasted from 2007 through 2013.

Fortunately, when her contract ended, Wal-Mart and Maesa reached out to Barrymore. For her, it was another “aligning of the stars moment,” where as much as she loves acting (“I’ll

always do it and it will always be my first love”), she was ready for the next.

Wal-mart challenged her to come up with an idea for the $482 billion retail chain’s much-need-ed white space -- four feet to be exact, according to Barrymore, who got to work.

“Imagine doing your upstart at the world’s largest retailer?” she said with a laugh. “It’s the kind of fear you need to work your ass off. I’ve never been a good name-slapper. I’m so im-pressed with those people who make a killing at that. When you take ownership of your company you’re thinking about longevity and not a greedy cash-out outlook.”

She talked about the time that the team final-ized their first BB Cream. The actress had been to “every lab across the country” and she was in

the San Fernando Valley “somewhere between a porn house and a bar” when she tested out the new product.

“It’s the most incredible innovation I’ve ever seen in the six years we’ve been building this company. That night I drove home with the win-dows open and music blasting and a new sense of energy. All because I thought, ‘Someone is going to love this,’” Barrymore said.

While Barrymore admitted that beauty is an all-consuming business that can be equal parts demanding and exhausting, she called it empow-ering. She is passionate about telling a story and communicating an emotional message to women all over the country: she just wants them to “feel their goddamn best about themselves.” And it’s working.

As Flower goes into its fourth year in retail, sales are up, with stores carrying the line nearly tripling to 4,000 from the initial rollout. Barry-more unveiled a Flower fragrance in the second year, which now comprises between 15 and 20 percent of revenue. She’s also expanded into bags, eyewear and brushes, (“We take pride in our brushes...[they] are made in the same labs that prestige ones are...[with] the horn and gold hot stamping. We hardly make a profit on those but go figure,” she said). The main cosmetics range has 200 stockkeeping units.

“Beauty is from within, and we’re just looking to put a little something on top that makes us feel the most confident when we walk into the room. If you walk in like an insecure nut bag, they will smell an insecure nut bag,” she said emphatically, adding that the brand will always fall back on joy and positive messaging. All of the packaging is even emblazoned with the quote “happiness is the best makeup.”

Up next is building a global footprint for Flow-er, starting with entry into Asia and South Amer-ica (the brand will remain exclusive to Wal-mart in the U.S.), and branching out to the bath and body category. While Flower will remain a color cosmetics company first, Barrymore is focused “on the rest of the body” and plans to venture into candles, lifestyle and skin care.

“Man, is it a really tough business. But I love it,” Barrymore said. — RACHEL STRUGATZ

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Drew Barrymore speaks at the 2016 Beauty Summit.

Products from the Olay Regenerist collection.

20 MAY 2016 11

● Marla Malcolm Beck Searches for the Next Big IdeaIn the 17 years since Marla Malcolm Beck and her husband founded Bluemercury, she has seen her share of innovators and revolutionaries. Now, she has the mind-set of a guide.

“I want to see if I can help inspire you and guide you on your journey to create revolutionary products, services and experiences,” she said. “But the journey will not be an easy one.

“Simple ideas alone will not change the future; we need big ideas,” said Beck, the retail chain’s chief executive officer.

“Innovation drives excitement, energy and en-gagement on the part of the consumer. One out of every five products we sell each day are new products that didn’t exist a year ago; 50 percent of the products we sell were created within the last two years. Innovation is the lifeblood of our industry.”

“But innovation for innovation’s sake is a waste; product proliferation is at a fever pitch. The majority of the products we launch don’t res-onate with the consumer — 18 percent of all new products we launched last year took 80 percent of our new product revenue.

“The number-one goal of innovation is to create a must have, a big idea, an annuity [stock-keeping unit] or service.”

Beck then gave some pointers: You know you have an annuity sku if customers use words like “addicted” and if you can’t keep it in stock. “It’s a

high-velocity product,” she said. “To have a sus-tainable brand, you must have at least one hero.”

She warned that if marketers are not aiming to land a must-have product, then “you are not reaching high enough.”

“So how do I find the next big idea,” she asked. “Find a problem to solve that makes your custom-er’s life better,” she rhetorically answered, citing Rent the Runway’s service as an example.

“Be an anthropologist; go out into the field and see how the customer behaves,” she said, noting how her best source of information is on the selling floor. Customer dissatisfaction with certain aspects of natural and doctor brands, led her to create M 61, a vegan paraben-free cosme-ceutical.

It all starts with looking and asking questions. “Regaining our curiosity and opening our mind is the key to successful innovation,” she said, add-ing that average four-year-old asks 437 questions per day.

Bluemercury has been offering spa services, but the staff had made an unusual discovery. “[The customer] wants services out on a store floor, where there is activity and action, not in a quiet room,” Malcolm Beck observed. “It’s one thing to know the statistics on your customer, it’s another to see them in their store habits. We learn by talking to and watching them.”

That set up the next point. “Be an explorer: go outside the beauty industry, go outside your comfort zone,” she advised, while quoting a study that Richard Weiss had done on lucky people. They have traits that tend to make them luckier. “Instead of going through life on autopilot, they pay attention to what’s happening around them and are willing to try things outside of their usual experience.” Beck concluded, “to find a big idea you mush search in other fields.”

She mentioned making a trek to a new busi-ness competition at Harvard University, where mind-expanding ideas bubble up, and she primed the pump by outlining a number of sales trends, ranging from travel items to “instant results-ori-ented skin care” to ‘hair, hair, hair and more hair” and “mascara, mascara, mascara and more mascara.”

“I now unfortunately predict the death of foun-dation in a jar,” she said, noting that the name foundation came from the department where

women bought girdles (“We buy Spanx.”). And instead of jar foundation, women are reaching for CC and BB creams and tinted moisturizers.

She also tossed out some thoughts for the next big ideas, starting with an app and tech-based skin care diagnostic tool, combined with personalized and customized 3 D-printed skin care, then moving on to a method for achieving round-the-clock perfect hair, and another prod-uct for creating a perfect complexion at every age. “Can we create perfect skin,” Beck asked. She also called for more development to meet an “exploding trend for more vegan, natural and chemical-free beauty products. How do we get more chemicals out of the beauty industry,” she asked. At the same time, Beck asserted, “We need more serious science behind the skin-care industry.” One suggestion: a better SPF product. “Can’t we create an SPF pill to protect her from the sun?

“We are entering new territory together,” she continued. “The pace of change in the beauty industry is faster than ever before and it’s accel-erating at warp speed. Generation Z, the future beauty consumers, have fingers that move faster than the speed of light.”

“So go out there; be a hero, be an anthropolo-gist, be an explorer: hunt, gather, assess, analyze, curate, love, create. The beauty industry can transform people’s lives, but we have to continue to transform the beauty industry. People are happiest when they make a meaningful contribu-tion. What will your meaningful contribution be?” — PETE BORN

WWD Beauty CEO Summit

● Anastasia Leverages the Power of an Arched BrowOprah Winfrey has proclaimed Anastasia Soare, who emigrated from Romania in 1989, the embodiment of the American dream. “You took eyebrows, something you’re so passionate about, and you turned it into this amazing business,” said Soare, relaying the words of her superstar client.

Soare singlehandedly put eyebrows on the beauty industry map with her brand Anastasia Beverly Hills, but it took persistence and over-coming missteps to get them there. Few believed eyebrows could be a standalone service when she started doing them in the Nineties, and even the landlord at the Beverly Hills location, which she still occupies, then wondered if she’d be able to pay the rent by shaping brows.

“I’m a fighter. Have you seen the movie ‘300?’ You know when Gerard Butler takes his sword and goes to war everyday? That’s me,” said Soare. “But I don’t go after other companies. I go after my consumer.”

Soare has fought through setbacks. In 2000, she released a full makeup line without enough money to provide the infrastructure to support it. She retrenched to services and brow products before launching a makeup line again in 2014, which has scored huge hits with contour kits and liquid lipsticks.

“I came here. I was a single mom. I raised my daughter by myself, and I worked really hard. I did so many mistakes, but I learned from those much more than my successes,” said Soare. Today, An-astasia Beverly Hills’ retail network has reached 2,500 doors globally at a variety of retailers, including Ulta, Nordstrom, Sephora, Dillard’s and Macy’s.

Soare’s daughter Claudia, president of Anasta-sia Beverly Hills, has been crucial to pushing the brand to new heights. In 2012, Claudia convinced her mother to try Instagram. “I wasn’t a big fan of Facebook, but Instagram looked very attractive. I realized after a few months that this is the best platform for my company,” said Soare.

By the end of this month, Soare expects her brand to crack 10 million followers on Instagram. She posts every two to three hours on the plat-form, and changes her outfit four times a day to fuel content. She views social media as a vehicle to showcase her products and educate consum-ers about them, and offer behind-the-scenes peeks into her life and career.

“Social media changed absolutely everything about us. I knew that I had the best products. I knew that I had the best technique. They [social media followers] helped me to propel every-where,” said Soare. “I mean, I would post a picture and a woman in Pakistan will answer me. This

is unbelievable. I used to go to Nordstrom and touch — how many? — 100 people a day. I put a post, and I will get 100,000 comments.”

With Anastasia Beverly Hills registering impressive growth, private equity investors, investment bankers and strategic buyers have been circling it. Soare suggested they should stand down because she’s not planning to sell her brand. She said, “I own 100 percent of the company, if you are curious about that. I don’t have any investment, and I’m not planning to get any [any] time soon.”

As women continue to embrace makeup, Soare sees bright days ahead for Anastasia Bev-erly Hills. “When I arrived here, women used to do makeup for Oscar events or a wedding or some special event. Right now, every woman has to ap-ply makeup everyday, especially your eyebrows,” she said, elaborating that brows are the “one ele-ment in your face that will change everything. It’s one feature on your face that will bring balance and proportion of it is shaped correctly.” — RACHEL BROWN

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● Ulta Beauty Stays In Step With Consumer DemandUlta Beauty is a symbol of just how much beau-ty retailing has changed, but also how consum-ers’ wishes remain the same.

“If you asked a consumer 20 years ago about things that motivated her, you’d hear feeling good about herself or expressing her individuality. Fast-forward and those drivers are pretty much the same,” said David Kimbell, chief merchandising and marketing officer for Ulta Beauty.

But a quarter of century ago when Ulta Beauty debuted, consumers didn’t have a choice like Ulta Beauty. The company founders saw opportunities to go into convenient strip shopping centers where they could have a large footprint to bring a huge assortment of beauty and services under one roof. “They wanted to give her a place to immerse herself in a world of beauty and a selection she couldn’t find any-where else,” said Kimbell. “She can come in and curate her own experience in an environment that is set up specifically for beauty. What they found then is still true today.”

Over the years, Ulta Beauty has burnished its stores and attracted premium brands such as Benefit, Clinique, IT Cosmetics and Dermalog-ica. “It took us a while to get to the mix we got to today,” admitted Kimbell. But he added it is a format in tune with the shift in how consumers prefer to buy beauty, including products at vary-ing price points. “We’re always on the hunt for new brands,” he added, noting how the partner-ships with IT cosmetics resulted in an exclusive brush launch. Hot categories include personal care, especially body and hair care.

Ulta Beauty finds itself in the enviable position as consumers seek experiences and in-store services. “We see services as certainly a revenue opportunity, but even more impor-tantly, bringing engagement into beauty. When you walk into one of our stores and the services are really humming those people feel a sense of beauty happening. They can hear it, see it and smell it,” Kimbell said. “Beauty is happening be-cause of the services we provide in the stores.”

Eighteen months ago Ulta Beauty rolled out a strategic framework to guide it into the future. A refreshed beauty reward program is helping drive loyalty — there are currently 18 million members. Another pillar is the guest experi-ence — both in the store and online. And then there is the assortment where Ulta Beauty is always on the hunt for exclusives available only at Ulta. More than 20 brands were added to the portfolio last year, bringing to 550 the number of brands encompassing 20,000 items.

There are ambitious expansion plans. Ulta

Beauty now operates about 900 stores in 48 states and the District of Columbia.

One hundred stores are slated to open this year on top of 100 new last year, which is expected to total 970 units by year-end. Markets vary from urban in Los Angeles and Chicago to smaller, rural settings. “Last year we had our largest grand opening in our history in Fair-banks, Alaska — not normally what you would think of as a beauty mecca.”

Additionally, Ulta Beauty frequently updates existing stores to keep them “fresh.” Online is also earmarked for expansion to open up more access, so we are reaching her when and where she wants to be reached, Kimbell said. “What we are seeing is that our guests that shop us both online and in store are our very best guests. They spend two and a half times more than those who shop only in stores.” Mobile is well over 60 percent of the traffic, he added. “We are making it as seamless as possible not only to buy but the play and explore the wonderful world of beauty.”

Within the past year, Ulta Beauty invested in a national advertising campaign. “We launched the first-ever national communications cam-paign. Awareness of Ulta has increased very significantly over the past 18 months,” he said. — FAYE BROOKMAN

David Kimbell

Anastasia Soare

Marla Malcolm Beck

12 20 MAY 2016

● Walgreens Transforms The Drugstore Beauty ExperienceWalgreens has scale, convenience and is focused on elevating its beauty presence — perhaps even flirting with prestige brands such as those sold in Boots in the U.K.

Walgreens and Boots have been importing concepts across the borders since the two were combined in 2014 to form Walgreens Boots Alliance.

“We have accessibility to the best custom-ers in the market,” said Lauren Brindley, group vice president, beauty and personal care for Walgreens. “We really have to think about how we bring her something she wants where she wants it.”

With 76 percent of the U.S population living within five miles of one of Walgreens’ 8,000-plus stores, the chain certain has the reach. And that’s not even counting the pending acquisition with Rite Aid.

Brindley, who came from Boots, said the power should rest with the customers. “Custom-ers don’t understand what a channel strategy is. All they want to do is get the brands they want, when they want it, where they want it,” she said. She urged the industry to think about how and where consumers want to buy beauty. Select stores in the U.K. sell everything from Chanel to diapers under one roof. “What is important is that you keep to the understanding that it is lim-ited distribution,” she said, adding the ambience must rival that of department stores.

Walgreens, which already employees more than 26,000 beauty advisers, is adding thou-sands more who are receiving clinical skin care and makeover training along with technology in the form of tablets to access information and tutorials. Brindley wants to leverage the pharmacy heritage to use its experts as the credible source for nonbiased beauty advice. The enhanced beauty look is rolling out this summer to 2,000 more doors. “We are putting in new brands. We are putting in testing for the first time. We are really starting to elevate and differentiate that experience in a way you hav-en’t necessarily seen in the classic drugstore before.”

Not every store warrants a higher-ticket assortment and the chain is tailoring the mix on a door-by-door basis. But what has been learned in the U.K. is the elevation of brand assortment tends to bring in new customers rather than cannibalizing from existing business. “If we are going to look into entering prestige, we will be putting it into the doors where we know there is market potential. And we would ensure we would bring that high-touch experience to life,”

she said adding about 10 percent or slightly more of the doors in the U.S. probably have that potential.

But before that goes live, Brindley said the company wants to make “scalable” changes with the 2,000 doors first. “We want to take the cus-tomer on the journey and change her perception of Walgreens’ beauty.” — FAYE BROOKMAN

WWD Beauty CEO Summit

● Wal-Mart Seeks to Build Credibility in BeautyThe numbers are astonishing. Wal-Mart sells 1.6 mascaras every second. That’s 49 million mascaras a year.

But although the numbers are mouth-water-ing, Jody Pinson, vice president of merchandis-ing for beauty, acknowledges the sheer size and heavy foot traffic at the chain presents challenges in merchandising and managing beauty. Consider this: the company offers 1,750 different types of lip product. It would take five years to have a different lip look with the assortment using one per day.

“Our size and scale can be our friend and sometimes our worst enemy,” said Pinson, adding the chain is working in tandem with suppliers to make sure the beauty department doesn’t disappoint.

Polishing the beauty department is mission critical to Pinson who believes it is a category of utmost importance for its shoppers.

The beauty department is a treat at the typical Wal-Mart — a respite from a hectic trip perhaps with kids in tow and a long shopping list. “This is one of the most personal experi-ences we have in our stores for our custom-ers,” Pinson said, offsetting buying toilet paper or laundry detergent. “She stops [in beauty] because she wants to do something for herself. She wants to purchase something that is going to make her feel good. We are a part of her life and we do want to make her feel better.”

Wal-Mart is installing upgraded fixturing, better lighting, innovative products and offer-ing services such as Pick Up Today to bolster beauty. “We are committed to upgrading our stores and fixtures,” she said. “We have more opportunities to convert customers and we aren’t done yet,” promised Pinson in regard to the beauty business.

Over the next three years, Pinson said the chain will focus on building its credibility in beauty. “We are going to understand the brands that we want to carry and the quality that the customer is looking for — this is how we are go-ing to continue to build credibility at Wal-Mart.”

Her strategy to expand beauty at Wal-Mart includes “getting out in front of the changing consumer.” The chain wants to win with new. “Only 28 percent of our products are over five years old in the cosmetics world. We keep turning out new things and it continues to reso-nate,” she said. One request she presented was to reduce shopper confusion by doing “bigger and better” launches, rather than a slew of extensions which confuse shoppers.

Pinson also sees fertile growth in the burgeoning Hispanic population, which overin-dexes in purchasing beauty, along with mixed families.

And, she hopes the industry will work togeth-er on sustainable raw material sourcing and incorporate sustainable packaging into their innovation cycle.

— FAYE BROOKMAN

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● Muge Erdirik Dogan Charts Amazon’s Customer JourneyMuge Erdirik Dogan, general manager, Amazon Beauty, Amazon.com, wants to clarify three e-commerce-related questions to beauty brands that might be skeptical about selling online.

“Can the online experience preserve the brand equity — the brand equity so many of you worked so hard to build? Does the online space apply to beauty? Is the beauty customer online and is she shopping for beauty products online today?” Erdirik Dogan, who has spent the better part of the past decade at Amazon, asked the audience. “The answer to all three is yes.”

Acknowledging that customer behavior is un-dergoing a profound change — with path to pur-chase evolving as more and more brands build e-commerce sites, social media presences and standalone apps — she noted that 75 percent of consumers start their shopping journey online. These customers, never without their phones, can check their mobile devices more than 100 times a day.

“Think of all the quick buying this enables. With all the information at the customer’s finger-tips…they can research any time they want on their terms,” Erdirik Dogan said, listing popular products and trends that consumers head online to research such as BB Cream, CC Cream, con-touring, strobing and micro-needling devices.

Today, indie brands, rich content and an

auto replenishment option are driving Amazon Beauty’s growth.

Adoption for change is occurring faster than ever, Erdirik Dogan said, and a leading trend on Amazon Beauty — which initially rolled out its Luxury Beauty Store in October of 2013 with 24 brands including Nars, Stila, Ahava, StriVectin, Dr. Brandt, Burberry fragrances and L’Occitane — has been successful with niche brands.

She noted that incubating niche brands with very little to no distribution outside of Amazon has been part of the strategy to grow Amazon Beauty since the beginning. While she didn’t name specific brands, she did say that the rate at which customers are discovering and shopping for these products is “remarkable.” In some cases, “the velocity of sales [of these niche brands] reached the velocity of main-stream brands on Amazon Beauty. They became bestsellers.”

She credited the process of product discov-ery as instrumental in this. Product is front and center, she said, and bringing the products to life through content allows the customer to “feel the click of a lipstick cap” or “the pigmentation and the silky application of an eyeshadow.”

Loyalty is also a key facet of Amazon Beauty’s business. The average customer replenishes their skin care five times per year, and the site’s auto replenishment option has been a major growth driver for the segment over the past two years, Erdirik Dogan added. — RACHEL STRUGATZ

Jody Pinson

Lauren Brindley

Muge Erdirik Dogan

20 MAY 2016 13

● MAC’s Karen Buglisi Weiler On Keeping Brand FaithKaren Buglisi Weiler’s worst nightmare is MAC’s talent losing belief in the brand.

“When we lose the connection to the people around the world, when they don’t believe as much as we believe, everything changes,” she said, adding, “In the position we’re in now, we have to understand where we are strong and how to do that better. That’s to me the best way to continue to sustain the growth we’ve had in the past.”

As much as shepherding product launches or breaking into new countries, Buglisi Weiler views nurturing the brand’s differentiated culture as critical to her role as MAC’s global brand presi-dent. She takes a cue from Leonard Lauder, now chairman emeritus of Estée Lauder Cos. Inc., who impressed upon her after the company acquired MAC that the brand would suffer greatly if its culture deteriorated.

“Leonard Lauder said to [executive group president] John Demsey and myself, ‘You know, you have got to keep MAC, MAC. In fact, if you can make MAC even more MAC, that’s the best thing to do,’” recounted Buglisi Weiler.

In particular, she emphasized three pillars that distinguish MAC in the beauty marketplace: art-istry, diversity and creativity. The brand employs 20,000 makeup artists around the world. To foster those artists’ creativity, MAC issues two challeng-es to its artists monthly to inspire them to come up with makeup looks that they post on social me-dia with the hashtag #MACArtistChallenge. The follower counts of artists jump upon Instagram reposts of those hashtagged looks by MAC.

MAC’s goal is to ensure the quality of makeup artistry at its stores is high globally. That’s not always an easy feat. Early on in MAC’s venture into India, Buglisi Weiler lamented “the makeup artistry wasn’t there. They weren’t good makeup artists at all and, if we’re basing everything that we do on makeup artistry, this is a problem.”

Seeking a remedy to the lackluster quality in

India, MAC implemented a boot camp-style train-ing program designed to enhance the makeup capabilities of artists in countries it enters. To date, MAC has held 18 boot camps in 14 countries, and 2,000 artists have been through them.

Evidence of MAC’s diversity is found in its extensive roster of makeup artists, vast product assortment, multichannel strategy, various store formats and swelling geographic footprint. Buglisi Weiler underscored MAC’s selection contains al-most 300 lipstick shades and 350 foundations. In terms of retail, she pointed out the brand senses opportunities for expansion in Europe and the U.S. as well as tier-one and tier-two cities outside the U.S. and Europe.

“The only way you’re going to protect yourself to have sustainable growth is to have diversity of geographies ’cause there’s going to be a moment when you hit a blip in one of those countries, and the only thing that is going to protect you is to have growth coming out of other markets, which is kind of simple to say, but it’s very important,” said Buglisi Weiler.

To maintain sustainable growth, MAC is careful not to overextend itself. Buglisi Weiler stressed the brand sticks to a limited distribution in 2,300 stores, a tiny fraction of the total international doors it could conceivably sell at. The brand is also reviewing the number of collections it releases yearly after hitting 90. “We need to scale back,” said Buglisi Weiler. “It’s not scaling back to none, but it’s scaling back to maybe 70 or 80 to make sure that we are…focusing on what makes the most difference.”

Although the beauty industry is changing at a rapid pace and MAC is changing with it, the original vision cofounders Frank Angelo and Frank Toskan had for the brand is never far from Buglisi Weiler’s mind as she evaluates its many initiatives. “Don’t forget where you came from,” she asserted, continuing, “Then, you leverage and make bigger what you are good at.” — RACHEL BROWN

WWD Beauty CEO Summit

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● Millennials Want Real BeautyAfter her teenage daughters kept peering into her makeup bag instead of sourcing cosmetics inspiration from the web, chemical engineer Jen-ny Frankel, who founded Nudestix, realized there was a white space in the beauty market for a line that focused on easy, natural beauty.

“Millennials are increasingly after a no-fuss, natural approach to beauty,” Frankel said. She also started CoverFX, a brand she exited in 2011, followed by a brief period of retirement which she intended to use to connect with her children.

“I noticed very early on that in order to connect with Ally and Taylor, I literally needed to connect,” Frankel said. “I needed to connect with technol-ogy, I needed to connect via iMessage, text, not even e-mail — they don’t check e-mails — but I had to connect through what they were using.”

That process also included Frankel following the same thing as her daughters on social media to gauge and discover the online communities they were interested in, she said. “What they didn’t follow was a lot of beauty,” Frankel said. And after they kept popping into her bathroom to check the contents of her makeup bag, she realized there was an opening for a new brand. “Aspirational beauty has evolved,” Frankel said. “They want beauty that feels authentic.”

“It became very clear to me that there was an

obvious neglect, or disconnect, for real beauty, which is natural-looking beauty, by brands and in-fluencers,” Frankel said. When she’d take Ally and Taylor to the mall, they would pass by the beauty counters and acknowledge the advertisements and models were beautiful, but kept saying, “this isn’t for me,” Frankel said. “They were seeing so much perfection it totally served in turning them off, because they do not aspire to be perfect,” Frankel said. “They don’t believe in perfection and they don’t believe in being flawless either. They kind of like being quirky.”

Another thing they don’t believe in is waking up early to spend time putting on makeup — they’d rather sleep another 10 minutes and scroll Ins-tagram, Frankel said, and frankly, at 44, so would she. So the trio created a cosmetics line in the form of pencils — all they require is for a user to apply and smudge with their fingertips. The tech-nique is demonstrated across Nudestix’s broad social media following in quick videos, which take much less time to watch than full YouTube tutorials.

“I’ve been told before that we can’t talk less-is-more because it doesn’t sell product, and I don’t agree with that statement,” Frankel said. “I think that we need to talk less-is-more because that is what the client wants. It doesn’t mean they’re not using six products to get less-is-more.” — ALLISON COLLINS

● IT Cosmetics’ Jamie Kern Lima Stresses AuthenticityAuthenticity is the driver of IT Cosmetics’ suc-cess, stressed its founder Jamie Kern Lima.

Shortly after the brand’s debut on QVC — the network that gave the beauty company its first big break — a competing prestige brand knocked off a best-selling product, according to Lima. “They launched that product and it did OK for a moment, and then sort of faded into the back-ground,” Lima said. “For us, it’s still one of our best-selling hero products today.

“Now, when I see competitors knocking off something we do, whether it’s how we use be-fore-and-afters, or our product or our message, I feel bad for them because I know that they’re confused and they’re getting distracted,” Lima said. “Every brand connects and speaks with customers in a new and different way, and the moment that way isn’t authentic to that brand’s DNA, in my opinion, is when the potential of their great success gets diluted.”

IT Cosmetics has grown into an amalga-mation of hero products, according to Lima, who launched the business after her rosacea, hyperpigmentation and sparse eyebrows made it tough to find cosmetics with enough cover-age, especially for her then newscasting career. Once, during a four-hour broadcast, Lima said she accidentally wiped off half an eyebrow. “You can’t go to the bathroom, you’re there, you’re on and you just smile really big and you are totally screwed, and you just keep going,” Lima said.

She then identified the white space for problem-solution makeup that IT Cosmetics has grown to fill, and wrote the business plan on the flight to her honeymoon, she said. After that, she hired one of her bridesmaids, pulled together an advisory board of plastic surgeons and derma-tologists, and channeled funds toward research, development and product. “I remember the time when we needed to hire a second employee but couldn’t afford it. So we literally had a struggling actress live in our home, in our apartment, which was our office, rent-free, in exchange for work-ing 20 hours per week packing customer orders in our living room,” Lima said.

She and husband Paulo didn’t pay them-

selves for the first three years, and despite no after no, Lima continued to approach potential partners. “I remember one time in the Sephora corporate offices trying to get to the bottom of the elevator and out the lobby and onto Market Street — out those doors — as quickly as I could because I started to feel tears coming down,” Lima said. “I was like ‘no one can see me, I’m tough.’”

Since those days, IT has expanded its distri-bution though Ulta, Sephora and Guthy-Renker. On the product side, the company is branching out into skin care — launching its first product, Confidence in a Cream, in January, with a full, problem-solution-focused line on the way.

“When we starting having success as a brand is when real women started spreading our authentic brand mission and DNA,” Lima said. “When women find a product that actually truly works for them, they tell people. They spread the word. It was real women getting real results — that’s what kept our company alive in the early years,” Lima said. — ALLISON COLLINS

Karen Buglisi Weiler

Jamie Kern Lima

Jenny Frankel

14 20 MAY 2016

● Foreo’s Paul Peros on the Future of Beauty DevicesDevices can become even more disruptive to the beauty category than they’ve been in the recent past, according to Paul Peros, chief executive officer of Foreo.

“Beauty has not taken in a lot of the technolo-gies that are available today,” said the executive during his speech at the recent WWD Beauty CEO Summit in Palm Beach, Fla. “It makes sense – the businesses are organized to be stable and efficient, which is sort of the exact opposite of [today’s] consumer. She is eager for innovation. She is really good at choosing and selecting new products.”

The Stockholm-based company entered the category three years ago, as facial cleansing devices were shifting from the professional and niche channels into the mainstream.

“At the same time, there were little choices out there for consumers,” said Peros. “We want to make products that are superior in perfor-mance, but that are also fun and exciting to discover, to explore and to use. Our biggest and strongest weapon is not just to try hard, but to be really disciplined in challenging our decisions and opening up to new inputs.”

Foreo’s teams include musicians, architects, designers and financiers.

“Traditional companies generally do not have a good track record at keeping diversity in teams and the integration of novel inputs,” continued Peros. “We try to get really every dimension right with the best possible solution at the beginning of a product’s life.”

The company came out with the Luna fa-

cial-cleansing device, which was unique in its moon shape (rather than being in the form of a brush), in its not involving external charging and in being made of medical-grade silicon. Foreo subsequently launched an oral-care solution and eye applicator.

Peros said another challenge is getting inno-vation accepted.

“When we go far out on a limb, chances are we are going to get surprises,” he said. “We have to be able to be fast at learning and adjusting to them.”

That’s why little is outsourced from Foreo – manufacturing, logistics, copywriting and design are all done in house, for instance.

Meanwhile, Peros is bullish on the future.“I think that within five years we will be looking

at devices beyond imagination today,” he said. “We are still an embryonic market. It’s very much like home computers in the Eighties, with a few brands. We are missing applications.”

After facial cleansers, the next largest beauty device category today is epilators.

“But then as you go into B and C classes, it gets really weird really fast,” he said. “This is where we need to do work.”

Peros said he believes that facial-cleansing devices have low-penetration levels at present, so Foreo is conceiving a high-performance sonic product at an entry-ticket price.

“Overall, devices will continue, but for that to happen a lot of innovation has to happen,” explained Peros. “I think that the new devices or the new applications will not stay within skin care – we’re talking color, we’re talking hair.” — JENNIFER WEIL

WWD Beauty CEO Summit● Selling Experiences Works, Says MasterCard’s Sarah QuinlanBeauty companies need to shift the focus away from the product and more toward the experience, said Sarah Quinlan, senior vice president and group head of market insights at MasterCard Advisors.

“The heck with buying stuff anymore, we want services,” Quinlan said. “This is the biggest growing area.” Beauty services specif-ically are the way that consumers take a break and pamper themselves, and it’s an area where they are more likely to spend money because it creates a memory. “We want to create memo-ries more than anything,” Quinlan said. “That’s all she wants.”

Consumer desires have shifted following the recession, and they are placing higher values on experiences, including food, and less value on possessions. “So if you sell stuff, what do you do? You’ve got to put a service with it,” Quinlan said. She also advised brands to switch the focus from the affluent consumer — who

won’t spend as much — to the aspiring affluent consumer, who spends regularly.

The MasterCard data also shows that follow-ing the recession, women are shopping in fewer stores — about half the number they shopped in before the recession. “You have to have that re-lationship to bring her in,” Quinlan said. Loyalty programs are one way to build that relationship, as they can provide valuable customer insight and a way to individualize offerings. “Anything that you can do to know her better will increase your sales,” she said.

In a shifting landscape, department stores in the U.S. have not generally fared well — and it can be hard to reach the consumer through the department store channel, Quinlan said. Smaller stores — those with $50 million or less in annual retail sales — are winning, with growth for four years in a row. That means it’s time for retailers to stop discounting, Quinlan said. “If she’s shopping at these stores…she’s paying full price,” Quinlan said. “The other thing she is saying is she wants to be special…she’s willing to pay for that.” — ALLISON COLLINS

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● Chris Birchby Found Opportunity in a Melanoma ScareA market gap and melanoma scares were the catalysts for Coola Suncare, a sunscreen specialist that’s spread its natural products throughout spas, beauty specialty chains, television home shopping and mass-market stores.

“When my parents were diagnosed with mela-noma, it forced me to take a really hard look at my own bad sun habits,” said Coola founder and chief executive officer Chris Birchby. In the process of changing his habits, he continued, “I started looking for an organic sunscreen. I couldn’t find anything I liked on the market, and I thought, ‘Oh, this might be a great opportunity.’”

Birchby had no chemistry or skin-care experience prior to launching Coola. His resume included stints as a painter and professional poker player, not the most traditional entries into beauty, but he’d always had a passion for the beach. Even during gradu-ate school at the Art Center College of Design in Pasadena, Calif., he lived in Venice to be close to the waves.

“We say at Coola, the only board meeting we like and really the only board meeting we ever have is on one of these,” said Birchby, showing a surfboard hanging the wall at the Carlsbad, Calif., headquarters. He added, “We just want to create a very well-ness-oriented company where it’s a lot of fun.”

In the maturing natural sunscreen segment, Coola

has worked hard to define customer perceptions. It’s trademarked the phrases Farm to Face, Plant Pro-tection and Solar Powered. More than 97 percent of Coola’s base formula is certified organic, and Birchby highlighted the brand relies on GMO-free ingredients grown by local producers. “We can say unequivocally

that our sunscreens are just as effective or more effective than any other sunscreens,” he said.

While staying true to its sun-care heritage, Coola is pushing its assortment beyond standard sun-screens to break into women’s cosmetics bags. It’s introduced a lip range called Mineral Liplux with SPF

30 and Makeup Setting Spray with SPF 30, which Birchby called the first setting spray of its kind with sun protection. “It answers the question for women: How do you apply sunscreen over your makeup?” he said. “This has been for us a big breakthrough product.” — RACHEL BROWN

Paul Peros

Sarah Quinlan

Chris Birchby

20 MAY 2016 15

● Alice H. Chang Taps Into Youth Mindshare Through MobileAlice H. Chang, chief executive officer, Perfect Corp., has figured out how to attract a Millennial audience online: interactive, beauty-based mobile experiences.

Perfect Corp., the parent company of four beauty-centric apps — YouCam Makeup, YouCam Perfect, YouCam Nails and Beauty Circle — had 230 million users as of the first week of May, according to Chang. She said the growth rate is sharp, with the number of users increasing by five million each week.

“[They are] eager to try everything first, ex-press themselves socially...[try] quality products (leading and indie) and omnichannel purchasing,” said Chang of the predominantly Millennial user that makes up 80 percent of Perfect Corp.’s user base. An app update is unveiled every two weeks that contains new features.

The suite of apps isn’t limited to beauty tools and trying on makeup and nail colors, though. These women want to share with their peers, Chang explained, and a Beauty Social feature inside the app allows them to share messages and photos.

She repeated her mantra, “Be change, see change and embrace change,” several times throughout her presentation, as she outlined the leading innovations in the space: facial recog-nition technology, beauty big data, augmented reality, color visualization, blending technology and mobile. Many of these are incorporated into Perfect Corp.’s products, which have resulted in a

group of highly engaged users.YouCam Makeup, for example, sees users

trying on 11 colors during an average 3.4 minute session. They open the app, on average, 15 times per month. Thirty million photos are taken with Perfect Corp. apps every single day, and one billion sessions have been logged so far.

But beyond the consumer-facing app experi-ence, there is an arsenal of data that can be very valuable to brands and retailers.

“We can see the top-five lipstick preferences by volume in the U.S. versus China. There’s no need to wait for sales reports to come in [any-more]. We understand real-time user demand differences across geography, age and more,” Chang explained.

Perfect Corp. sends a monthly trend report, Beauty Buzz, which she said is the “first time you can get five million users and see what lip colors they prefer.”

Chang outlined a case study with Elizabeth Arden, the first brand to partner with YouCam Makeup. Over 100 products lived on the app, with each linked to Arden’s e-commerce store at elizabetharden.com. In three months, there were 295 million brand product trials and four million click-throughs to the brand’s e-commerce site.

“We’re still scratching the surface of beauty tech,” Chang said, adding that getting into “real 3-D mode” is next, along with making Beauty So-cial even more interactive, live casting and better harnessing and analyzing the big data Perfect Corp. collects to give personal recommendations to users and partners. — RACHEL STRUGATZ

WWD Beauty CEO Summit

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● Is There a Critical Shortage of Licensed Professionals?In the e-commerce age, the importance of beauty services is increasing, but the amount of skilled workers to provide them isn’t.

Dermalogica chief executive officer Aurelian Lis detailed the number of accredited under-graduate schools for licensed beauty profes-sionals — such as aestheticians, makeup artists and hairdressers — that is declining. The pay for graduates from the shrinking number of schools is feeble. He beseeched members of the beauty industry to wake up to the reality that they might find themselves without enough capable profes-sionals to support their offerings.

“The need for licensed individuals is going up substantially and has gone up yet the supply is not there. So that, as an industry, what I feel is that we’re actually heading to a crunch time, which is not very pretty, but we have the ability to get out of that and do much, much better,” Lis said.

He suggested the supply-and-demand discord should garner greater attention because the relationships between aestheticians or make-up artists and their clients can’t be replicated digitally, and services remain a significant draw to brick-and-mortar locations. On top of deliver-ing services, licensed professionals can speak knowledgeably about products, one reason why Lis mentioned that Whole Foods is adding them to its Whole Body departments to improve con-sumer education and interaction.

“We all desire this physical connection. It’s huge,” said Lis, adding, “Why in 10 years from now do we need a physical store at all if there’s no service there? I don’t think we do. Even the

last reason of having a physical store for instant gratification could possibly be eroded by the fact that within two hours you can get the product to your home.”

Adequate vocational training for licensed professionals also affords women with ample job opportunities. Lis noted licensing programs often have placements in excess of 80 percent. “We see vocational training as the pathway to finan-cial independence for women,” he said, empha-sizing that empowering mission drives Dermalog-ica’s foundation FITE or Financial Independence Through Entrepreneurship.

Financial independence for licensed beauty professionals is threatened by low pay in the jobs they obtain. “Eleven dollars an hour is not going to cut it in the long term. We’re not going to have long-term employees who are building a career, who are proud of what they do, if they can’t feed, never mind their family, but even themselves,” he said. “We have to pay decently.”

As he pled for beauty industry leaders to boost pay and help support licensing programs, he underscored the issues that have stymied new cosmetology schools. Lis doesn’t believe online programs, possibly cheaper options to develop and attend, are good substitutes for one-on-one learning. And a complex web of state regulations is difficult to sort out for potential programs, a dilemma that’s deterred Dermalogi-ca, a specialist in post-graduate education, from building an undergraduate curriculum.

“We’ve experimented with that, and it is quite difficult,” said Lis about Dermalogica stepping into vocational training. “We find it more produc-tive to entrust and to delegate to very capable partnership schools.” — RACHEL BROWN

● The Single-Service Model Works in BeautyThe single-service model — like SoulCycle — can work in beauty too, according to Yen Reis, founder of Skin Laundry Holdings Inc.

“We, too, have borrowed from the Henry Ford school of thought, where you can have any facial treatment as long as it’s this one, a single laser and [intense pulsed light] treatment that takes less than 15 minutes and costs on average less than $50,” Reis said. The strategy works, resonating with consumers because it is a curated offering with no upsell. Plus, the treatment’s efficacy breeds loyalty.

Reis started the business back in 2011 following the birth of her third child, when she developed hormonal acne. She spent roughly $2,500 on laser treatments while living in Asia to clear her skin, she said. It worked — and her friends complimented her — asking what she had been doing and then immediately declar-ing they could never afford to. “So many more people could benefit from the treatment if only they had access to it,” Reis said. “I wanted mild

laser and light facials to be available to the beauty space.”

Part of Skin Laundry’s plan includes opening the consumer’s eyes to a facial treatment that is often new with a free first try. Reis said that 90 percent of customers have never tried laser or light treatments before — but that 70 percent return. “We noticed that our customers were actually doing the marketing for us,” Reis said.

“Vanity these days has been taken to a totally different level thanks to the selfie and Instagram and Tinder,” Reis said. “Beauty, along with health and wellness, is becoming more and more about prevention rather than reversal or cure.”

Now, the business has 14 locations, including its first shops-in-shop in Lane Crawford in Hong Kong. “Since 2013, we have grown from 900 treatments per month to 11,000 treatments per month today,” Reis said. “By the end of 2016, we expect to increase to 30,000 treatments per month. What’s interesting is that this actually happened without us spending a single cent on marketing or pr for the first two years.” — ALLISON COLLINS

Yen Reis

Aurelian Lis

Alice Chang

16 20 MAY 2016

● Experiential Retail With Uri Minkoff“When we started, there was a dictatorship in fashion,” said Uri Minkoff, cofounder and chief executive officer at Rebecca Minkoff. “We had to create a peer-to-peer relationship and break down the dictatorship and create a democracy with the customer where we would ultimately be on the same level.”

This meant taking to digital to build a brand that, according to Minkoff, was among the first to have a presence on the leading social media channels, from Instagram to Snapchat.

“We invited the consumer in to experience the brand,” Minkoff said of programs where followers were able to crowdsource designs, for example.

Once the brand had firm footing — from its own e-commerce site at rebeccaminkoff.com, to global wholesale accounts and a large social media following — Minkoff turned the focus to physical retail. The first Rebecca Minkoff flag-ship opened on Greene Street in Manhattan’s SoHo in November 2014, and technology played a critical role.

“She wants to be catered to; she wants the brand to know her likes and tastes,” Minkoff said, noting that, previously, stores were unable to perfect the “human element,” whether this meant a sales associate trying to “stalk you down in the store” to the moment a shopper has to leave the fitting room to get a different size.

Minkoff wanted to solve all of these retail problems in the brands’ stores. For starters, smart fitting rooms allow shoppers to add cloth-ing to a fitting room from a connected wall at the entrance of the store. Once inside the fitting room, they can adjust the lighting using the mir-ror that doubles as an interactive touchscreen to request different sizes or styles with the tap of their finger. Product recommendations based on what was brought into the fitting room also populate the mirror.

Minkoff said the combination of these features in the brand’s freestanding stores have resulted in apparel sales being three times higher than originally anticipated.

Today, the brand has seven stores in New York, San Francisco, Los Angeles, Hong Kong and the Middle East. A door in Chicago will open next month.

Minkoff said the brand decided to take the notion of experiential retail even further last year when opening its Los Angeles store in Oc-tober. He already knew that stores could serve as showrooms and distribution centers, but he wanted to see if the new boutique could double as an entertainment hub.

“Let’s have hip-hop yoga classes in the dark and let’s run each class with 30 people. Let’s do this four to five classes a day and see what happens,” Minkoff said.

The result: E-commerce traffic spiked, which led to a new theory for Minkoff.

“If you create entertainment in-store you have people in the store, but it’s that extended peer-to-peer network that goes on out there

that created FOMO [fear of missing out]. It created an external surge of traffic on our social and e-commerce areas, which yielded higher conversion.”

Another example of this occurred in Octo-ber when the brand partnered with Smashbox and Donald Robertson, who was hand-painting Rebecca Minkoff products in-store while cus-tomers were able to custom make lipsticks with Smashbox. Minkoff said this garnered 19 million impressions on Instagram for that night alone, along with a spike in web traffic and conversion. — RACHEL STRUGATZ

WWD Beauty CEO Summit● It’s Back to the Future For Kilian HennessyKilian Hennessy shared key learnings.

“For me, a great perfume is a great story long before being a beautiful olfactive harmo-ny,” said the founder of fragrance brand By Kilian. “What’s important is that since the origin of perfumery, there has always been a triangle between the name, the bottle and the juice, and the three of them respond and echo each other.”

He confided: “That’s why all my names are long. For me what was important was really to create an emotion.”

Hennessy explained that when he started his line’s production in 2007, its cost of goods had increased over the cost objective by 300 percent, so he was obliged to retail By Kilian fragrances at a price two times higher than the most expensive perfumes on the market.

“But that gave me two great lessons. Num-ber one is that if the product feels [luxurious], then the price has to follow,” he said.

Hennessy added that if his was going to be a true luxury product it should and could not be disposable. So from the outset, By Kilian bottles were refillable, like perfume decanters of yesteryear.

“The last element that was very import-ant to me when I started the creation of the brand was to be honest with the customer,” he continued.

Hennessy’s objective with the line was to place perfumery on a pedestal again, like it was a century ago, but with contemporary olfactive and aesthetic takes.

As for the subject of what keeps him awake at night, Hennessy said with a grin: “Well, if you talk to my wife, considering the fact that I am up at 5 [a.m.], the industry is really having too many issues for me.”

More seriously, he ticked off subjects like — first and foremost — how to stay relevant. To illustrate the point, he played a video of “Gangnam Style,” the blockbuster single by Psy that garnered 2.5 billion views at launch four years ago.

“Who knows the name of his last creation?” Hennessy scanned the audience. “No one.”

To avoid being a one-hit wonder, the execu-tive said he built his brand not on one aesthetic, but on a series of collections that would allow him to “keep my finger on the pulse of the moment.”

Another question weighing on Hennessy is how to increased the perceived value of per-fume. He reminisced on the price of Levi’s jeans 30 years ago — $50.

“When I hear that my perfume is expensive at $260, and I compare it to a pair of jeans [today] at $350 it makes me wonder. It makes me question what the jeans industry has done in order to increase so significantly the per-ceived value of the product,” he said, adding an answer is creativity.

Hennessy also ponders about how to build brand awareness. He explained that while coverage in top magazines remains important, there are also blogger relationships necessary in markets such as the U.S., for instance.

“When you are a young brand built on one person and you have to be connected with all those people times 40 countries and you still have to do your job – I just can’t wait for cloning to happen,” he joked.

Lastly, following By Kilian’s acquisition by the Estée Lauder Cos. Inc. in February, Hennessy has been mulling how his label can remain grounded by its roots, keep its DNA intact yet still fly.

“We are going to continue to build, to invent new things,” he said. — JENNIFER WEIL

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● Hil Davis Emphasizes Connecting Emotionally With Consumers“It’s not about distribution anymore. It’s really about: Are you relevant to the customer? And are you emotionally connecting to the custom-er?” said Hil Davis, founder and chief executive officer of BeautyKind. “I feel like this is a pretty new conversation for this industry.”

BeautyKind, a recently launched prestige beauty e-tailer, gives people the opportunity to donate 5 percent of their total purchase to a preferred charity. The company also proposes “cause”-based gift cards to new shoppers to apply against purchases and a rewards program allowing people to earn points from purchases made by their referrals.

Prior to BeautyKind’s launch in late 2014, Da-vis and his team queried a slew of women about what drives them to shop. From their answers emerged three main themes, dubbed “give,” “get” and “click.”

Giving back to a cause is important across all demographics, explained Davis.

“Get” refers to people asking: “What’s in it

for me?” That led to the rewards program being conceived.

“[It] is really about driving average spend, driv-ing frequency, driving retention and stickiness,” he said, adding that rewards programs need to be refreshed perpetually, since 82 percent of customers chase the best offers. “They want options.”

Davis called cash the “holy grail.”“If you can create a cash component, it reso-

nates with [the] customer,” he continued.People polled voiced frustration about their

ability to easily replenish and discover products online — in other words, the “click” element.

He called the core principles of BeautyKind “head,” “heart” and “wallet.”

“Head” refers to the shopping experience, where personalization and convenience are par-amount. BeautyKind, for instance, is rolling out an application that will be a one-touch reorder method. The company — which is expanding its bricks-and-mortar component — also believes in the opportunity to develop a personalized and free sampling program.

“We’re changing the conversation; it’s not

where you buy, it’s what you buy,” said Davis, while discussing the “heart” principle. “So now a product is something so much more than just a product, it’s this emotional benefit that gives back to what you care about.”

“Wallet” is linked to people wanting to belong to the brand.

“We are going to profit share,” said Davis. “Five percent of our revenue goes back to the customer…not only for their purchases, but also for referring friends and, through that, raising money for causes.”

Such strategies are bearing fruit. BeautyKi-nd’s average new customer order is $68, while that of its repeat customer is $89, explained the executive.

“The average customer is coming back 3.3 times a year for us,” continued Davis. “[They’re] spending over six minutes on the site and look-ing at 11 pages.”

He summed up: “What we think about when we develop this program is how can you create the most customer benefits, because whoever creates [that] will probably take the most share.” — JENNIFER WEIL

Uri Minkoff

Kilian Hennessy

Hil Davis

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C L I C K H E R E T O L E A R N M O R E

Kiersey Clemons is just 22 years old, and yet boasts a resume with range many a seasoned actor would drool over. Her Disney Channel start has parlayed into roles in some of film’s most-cov-eted projects, including “Dope” and “Transparent,” and she’s got a busy 2016 of film releases to keep the momentum up.

She goes full-on comedy this Friday in “Neighbors 2: Sorority Rising,” the fol-low-up to the 2014 surprise cult hit “Neighbors,” which saw Seth Rogen, Rose Byrne and Zac Efron go toe-to-toe in frat-themed, gasp-inducing comedic fashion. Much is expect-ed of the sequel, which features the original cast plus Chloë Grace Moretz and Selena Gomez — but Clemons seems a natural for the in-your-face brand of funny that “Neighbors” rides on. “It’s the most off the wall stuff and the s--t you’re not thinking about that makes you laugh,” she says.

Clemons, 22, is the eldest of four sisters in a “musical-ly inclined” family. “Everyone has a pretty good singing voice, that they kind of just did nothing with,” she says, over the phone while “just taking a walk” around SoHo. “But my great-grandmother actually made a trip to Hol-lywood to be a movie star and then she got pregnant by my grandpa — so that didn’t work out very well. But everyone is kind of living

vicariously through me.” She grew up in L.A. watching “Grease” and doing karaoke with her family, favorites of which include Bob Marley’s “Red Wine,” “because my cousin would always sing it, and I would be like ‘oh man I can’t wait until I’m older and can sing that song.’”

But music was never her aspiration profession-ally. “I grew up knowing that music was something that brought people together, and I liked that, but I don’t have the desire to be a big pop artist or sell out arenas,” she says.

Her film acting debut was on the Disney Chan-nel’s “Shake It Up,” and marked the first of many kid network projects she would do, including Disney’s “Good Luck Charlie” and “Austin & Ally” and Nickelodeon’s “Bucket & Skinner’s Epic Adventures.” “I always want-ed to do film and TV, and my mom didn’t want to just throw me to the wolves,” Clemons says. “So I kind of had to beg her. I think she started to believe me when I was like 15 or 16 and every-one else was kind of looking at colleges, and I think she

realized ‘OK, this is actually what she wants to do.’”

The transition from Dis-ney starlet to serious adult actor is, putting it lightly, a frequently botched road. But Clemons has seam-lessly landed roles in some of film and TV’s biggest socially aware breakouts over the past couple years. She starred as Diggy, a teenage punk lesbian in the 2015 Sundance indie darling “Dope,” a role she won late in the audition process. “I guess I was a f--kin’ last resort,” she teases, adding that she initially doubted her chances of landing the part due to her looks. “I have a very sweet looking face, my features are very round, and I think our director wanted someone tougher looking,” she says. “It was

exciting for me to go in and be like ‘Hey! Sweet girls are lesbians, too!’”

Adding to “Dope,” her credits include “Extant” with Halle Berry and Amazon’s groundbreaking “Trans-parent,” a show any young actor would’ve fallen over themselves to book. “I knew that it was amazing and that it was, I guess, revo-lutionary, but I didn’t know how people were going to receive it,” she says. “And that’s true of any project that you do, really. Any project where you’re trying to be part of a new wave or trying to change people’s thinking process, you’re always afraid they’re not go-ing to take it in the right way or be receptive to it.”

Audiences and film critics alike have been

more than receptive — the show has won two Golden Globes and five Emmys. It also served as proof for Clemons to silence her doubts over what kinds of characters she could go out for. “From ‘Dope’ I learned that instead of letting these things work against you, it’s better if you just embrace them and make them work for you,” she says.

In “Neighbors 2,” which, she says, is not a sequel to the first but rather “an anthology film,” according to costar Moretz, Clemons is one of three ringleading freshmen who aren’t down with the Greek life system that seems to cater to fraternities and their linge-rie-themed parties. Togeth-er with Shelby (Moretz) and Nora (a debut performance

from Jonah Hill’s sister Beanie Feldstein), Clemons’ character Beth starts a spin-off sorority that clashes, especially, with Rogen and Byrne.

Though it is without a doubt comedic, “Neighbors 2” does handle topics of sexism in Greek life and safety issues on college campuses, which was part of the appeal for Clemons. “I had done a PSA sort of short music video with Lady Gaga called “Til It Happens to You” and so I really wanted to continue to bring awareness to [the issues of] college campus rape and the safety of girls and boys on college campuses, because that’s a place where you should feel protected,” she says. “A comedy is easier for people to swallow — you’re laugh-ing at it, but it’s still in your subconscious.”

And though she says Greek life is not for her, she argues she might know a thing or two about it from the acting world. “I think sororities are very similar to films, in that you arrive on the first day of set not really knowing anybody, and you’re like ‘OK need to make friends with these people,’” she says. “And it was definitely like that on set — the cast was mainly female and we had a lot of girl writers, and we had a lot of fun together.”

— LEIGH NORDSTROM

Kiersey Clemons: ‘Dope’ Girl Next DoorThe 22-year-old has starred in “Dope” and “Transparent,” and breaks out Friday in “Neighbors 2.”

For the Riverkeeper’s 50th annual Fisherman’s Ball, the orga-nization hooked itself some Big Fish. Ralph Lauren and Leonardo DiCaprio were the marquis honorees at the event held at Pier Sixty in New York, while Robert De Niro was the evening’s Hudson Hero, and Dr. Howard A. Rubin was the Big Fish Emeritus.

Andy Cohen hosted and Sting practically left his fellow stars in his wake after his show-stopping acoustic performance of two hits (“Message in a Bottle” and “Every Breath You Take”) and “The River,” which he chose because he was asked to keep it relevant.

Dedicated to keeping the Hud-son River’s water safe, swimma-

ble and drinkable, Riverkeeper’s cause, as well as the clout and fervent advocacy of a Kennedy — Robert F. Kennedy Jr. is the organization’s chief prosecuting attorney — has baited Big Fish in the past. Bill Clinton, a former Big Fish, filmed a video segment for Wednesday’s festivities; Jeff Koons, last year’s recipient, was

also in the house, along with John McEnroe and Mark Ruffalo. But 50 years called for something splashy.

Lauren had flown in earlier in the day from London, where he opened The Ralph Lauren Centre for Breast Cancer Research on Tuesday. If he was tired, it didn’t show. “My inspiration, my excite-ment is Bobby,” said Lauren, ac-knowledging Kennedy’s spirit and dedication to Riverkeeper. He can also appreciate how remarkable a 50th anniversary is, particularly in New York.

“I’m a New Yorker. I was born here. I was married here. I raised my children here,” said Lauren, whose wife Ricky, son David and daughter-in-law Lauren Bush Lauren also attended, along with Ralph Lauren chief executive officer Stefan Larsson and Valérie Hermann. “And almost 50 years ago I started my company here. The Hudson is my river. It’s our river. And like many of us who grew up with it, I often take if for granted….Everything I’ve done in my life was inspired by people like [the Riverkeeper]. People like Bobby and the Waterkeeper, bold, unselfish and with an extraordi-

nary vision. Next year our com-pany, like Riverkeeper, celebrates its 50th anniversary. We have accomplished much to make our workplace and the products we create environmentally sound. We recognize that we have much more to do in our future and we’re committed to this endeavor.”

Who saw the Oscars? Ken-nedy did. “I’m so happy that you won that Oscar and gave that speech,” he said to DiCaprio. “I hope you win one every year.”

“I met Leo probably the first time 20 years ago, and I imme-diately fell in love with him — not for the reason most people do,” Kennedy said. “He understands that celebrity is currency. You can spend it down…saying good things. He can do it in places that none of the rest of us can go. He can go to Davos and talk about this. The oil companies are

always welcome, but environ-mentalists aren’t. But Leonardo DiCaprio is.”

“Listening to Bobby speak for the first time, you quite literally feel as if you’re witnessing a war cry from ‘Braveheart’ as he propels in to the battlefield for Mother Earth,” DiCaprio said. “In-deed, he has inspired me to grow my own environmental founda-tion and join that crusade. And maybe some day I’ll be honored being thrown in jail as often as he has been.”

Since Big Fish are best served with big checkbooks, Lauren pledged $100,000 to Riverkeep-er. Then DiCaprio promised to match it through a grant from his Leonardo DiCaprio Foundation. “I’m basically just following in your footsteps,” he said to Lauren from the stage. — JESSICA IREDALE

Ralph, Leo and the RiverkeeperRalph Lauren and Leonardo DiCaprio are honored by the environmental organization.

Kiersey Clemons

Kiersey Clemons in “Neighbors 2: Sorrority Rising.”

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Amy Astley Gets A New HomeTeen Vogue editor in chief Amy Astley is taking the reins at Architectural Digest, replacing Margaret Russell.

A trio of editors from Teen Vogue will be promoted to run the magazine.

In addition to overseeing all editorial content, Astley is charged with “reimagining and significantly expanding the brand’s digital presence across all platforms and formats, and furthering the reach of Architec-tural Digest’s design authority,” Condé Nast said.

She will work with Giulio Capua, Architectural Digest’s chief revenue officer and pub-lisher, on business innovations and brand extensions, including new consumer experiences and products.

“Amy’s leadership and creativ-ity can be seen in the success of Teen Vogue, which she has built into the influential source

of emerging fashion, beauty and culture for young women everywhere,” said Anna Wintour, Condé Nast artistic director and editor in chief of Vogue. “Amy also has spent a great deal of her career immersed in art and design, including five years at House & Garden where she also served as the de facto personal interior stylist for Alexander Liberman, which has given her a deep knowledge and lifelong passion for design that will lift Architectural Digest to new heights.”

Astley succeeds Russell, who led Architectural Digest for the past five-and-a-half years. Russell will remain onboard through Astley’s transition, and then begin consulting on arts and cultural special projects for Condé Nast.

There had been rumbles that Russell’s job was on the line for some time, and that speculation only amplified after Wintour was apparently not pleased with the

styling of March’s cover featuring Kourtney and Khloé Kardashian.

Russell, who is known for her meticulous work ethic and criti-cal eye, was said to have clashed with Wintour. Russell was also not exactly known for her digital

chops, even though Architectural Digest had recently undergone a web site rehaul under her stewardship.

As for Astley, she is a Wintour protégée, who was handpicked by the Vogue editor to launch Teen Vogue in 2003. In her new role as editor in chief at Archi-tectural Digest, Astley will be charged with bringing a younger, more digital sensibility to the 96-year-old title.

Meanwhile, Teen Vogue will be run by Elaine Welteroth, who has been named editor and will jointly oversee the title along with Phillip Picardi, digital editorial director, and Marie Suter who will contin-ue as creative director.

In recent years, Teen Vogue has experienced masthead shake ups in both editorial and on the business end, leaving open the question of whether the title will eventually go all-digital.

Last year, Susan Plagemann, chief revenue officer and pub-lisher of Vogue, added Teen Vogue to her oversight to form The Vogue Group. Then-Teen Vogue publisher Jason Wagen-heim departed and recently reemerged as head of revenue at Univision’s Fusion. — ALEXANDRA STEIGRAD

ShowtimeGiorgio Armani chose Chinese men’s wear label Miaoran to show at his Armani Theater during the upcoming men’s fashion fashion week in June.

Miaoran, who studied fashion in Milan and estab-lished his namesake label in 2015, will host a runway show on June 18 at 10:30 a.m.

Defined by an eclectic look blurring the boundaries between genders, Miaoran’s collections are focused on oversize silhouettes and the combination of con-trasting materials.

“Discovering new talents on the international scene is something interesting and stimulating, since it enables me to confront myself with very different stylistic ideas and creative visions,” Armani said. “I wish Miaoran, the designer I selected this season, a career filled with satisfactions.”

“I thank Giorgio Armani for the support and the opportunity he gave me to show at the Armani/Teatro,” said Miao Ran. “It’s a great honor for a young designer who comes from far and chose Milan as the place to live.”

Miaoran is the 13th talent selected to show at Arma-ni’s location on the Via Bergognone, which hosted the runway shows of a range of designers, including Lucio Vanotti, Daizy Shely, Andrea Pompilio, Stella Jean, Ju-lian Zigerli, Au Jour Le Jour’s Diego Marquez and Mirko Fontana, Angelos Bratis, Christian Pellizzari, Vivetta Ponti, Facetasm and Ujoh. — ALESSANDRA TURRA

Kobe’s NightEven retired after a 20-year run in the NBA, five cham-pionships with the Los Angeles Lakers and an Olympic gold medal, Kobe Bryant still commands an audience.

Stepping out of a black SUV on his way to christen the freshly renovated Hublot store in Beverly Hills on Wednesday night, he stopped for a selfie with several Mexican tourists. A crowd began to swarm the block around the corner from Rodeo Drive. A hipster dude in white sweatpants and tan tunic couldn’t believe his luck in being so close to his 37-year-old idol, who shares his birthday. “We need to stay, bro,” he told his friend. “I’m not going anywhere until I get a picture. I’ll buy a watch right now.”

That superfan should have had $20,400 in his pock-et. That’s the price of the limited-edition watch, which was nicknamed the HeroVillain after Bryant’s two personas on the court. It was designed with a ceramic case, gold screws, snakeskin strap and a snake with gold eyes and tongue writhing under the glass face. The third in Bryant’s series with Hublot — following the Black Mamba in 2013 and Vino in 2015 — the timepiece is a symbol of a new phase in the NBA star’s life. While the previous two styles were sporty, this is his first dress-up watch.

In his post-basketball career, “he’s becoming a businessman,” said Jean-Francois Sberro, managing director of Hublot of America.

Indeed, Kobe Inc. is a media company focused on creating, in Bryant’s words, “timeless stories” that can inspire kids. “We are absolutely obsessive about publishing and producing,” he said. “We have one clear focus — it’s storytelling.”

For its dinner following the store party, at a sleek mansion in Beverly Hills, Hublot called on Erin Andrews, who’s a friend of the brand as well as a host of Fox Sports’ college football games and “Dancing With the Stars,” to interview Bryant. Before stepping onto the dais set up in the backyard, she fielded some ques-tions for Bryant from her boyfriend, Jarret Stoll of the Minnesota Wild. “Does he work out? Because when I’m not playing, I’ll do nothing for a while,” the ice hockey player told her.

Sure enough, the day after his final game with the Lakers, Bryant woke up at 4 a.m. to do his usual routine of wind sprints on the treadmill and weight-lifting. He also spends a lot of time grooving with his 10- and 13-year-old daughters to dance video games. “You can’t walk around with ‘Pudgy Mamba,’” he told the diners, who laughed at a possible new nickname for the trim 6 foot, 6 inch athlete. “It’s not a good look.”

As for the crazy looks sported by Russell Westbrook and younger players in the NBA, Bryant was at a loss for words. Despite dressing like Wesley Snipes as com-ic-book hero “Blade” for a past visit to the White House, he said, “It’s not my cup of tea. If you see me walking around like that, drug-test me immediately.”

Eventually Bryant sought courage through alcohol when guests took turns recapping his career in a round of Mad Libs that came across like a roast. Not only was he described as “the juicy beef” but he also was com-pared to a Rihanna song. “Give me a drink, man,” Bryant told a tablemate. “Pudgy Mamba” may be a no-no but “Tipsy Mamba” sipping Dom Pérignon was a slam dunk. — KHANH T.L. TRAN

Fashion ScoopsMemo Pad

● “The Woman Who Reads” will be held at the Ca’ Pesaro International Gallery of Modern Art from Sept. 17 to Jan. 8.

BY JENNIFER WEIL

The Ca’ Pesaro International Gallery of Modern Art in Venice will hold “The

Woman Who Reads” exhibition, part of the Culture Chanel series of shows based on the life of Gabrielle “Coco” Chanel and the house she created.

This seventh chapter of the showcase, which will run from Sept. 17 to Jan. 8, focuses on the designer’s relationships to books and reading.

“From Greek authors to modern poets, Gabrielle Chanel’s abundant library reveals the works that left an impression

on her life and shaped her personality,” Chanel stated.

The Culture Chanel exhibitions are conceived and curated by Jean-Louis Froment. The cycle began in Moscow’s Pushkin State Museum of Fine Arts in 2007, and subsequent editions were held in cities including Shanghai, Beijing, Guangzhou, Paris and Seoul.

“The relationships Mademoiselle Chanel maintained throughout her life with some of the greatest creative minds of her time were crucial. Her friendships, conversations and exchanges went on to provide sustenance for her thoughts and her own creations,” the house continued. “Thus, each successive exhibition sheds under a new light what constitutes the foundation of a language that is universal today. It is this formal vocabulary that has forged the style of Chanel.”

FASHION

Chanel Sets ‘Culture’ Exhibition in Venice

Amy Astley

Gabrielle Chanel