Jean-Paul Agon: Investing in China is a strategic priority for L'Oréal

The environment is very favorable. I mean, as I was telling you, we were very much supported by the municipality of Shanghai, which encouraged us to invest. I should say we perhaps didn't need that, but it was still welcome. They encouraged us to invest, and so we have superb offices right in the middle of Shanghai, we have two factories, we have laboratories, we have the most modern distribution centers in the world. So investment in China has been truly strategic for us, and I must say it has been the clear priority for 20 years. During the 20 years we've been established in China, we've done our growth in China. It was the priority worldwide. The priority was to invest in China.

Well, what we could sense at the beginning was confirmed afterwards. That is to say, the Chinese have this great appetite. First, you have to remember that there is a very great tradition of beauty in China. It doesn't come from nowhere. It goes back centuries, if not more. So there is a real tradition of beauty in China. So in a way, there is indeed a culture of beauty in this country. Very quickly, as you recall, we saw this appetite for beauty products, this appetite for brands, this appetite for quality, this appetite for innovation. And so what was bound to happen did happen — the market developed extremely quickly with many competitors. At first, many international companies, and gradually many local companies, since there are Chinese competitors who make very good quality products with a lot of innovation, very beautiful packaging, good formulas. So it's an extremely competitive market. And personally, I think it has become the most competitive market in the world.

To succeed in China, first you really have to be very strong, and you always have to run very fast in terms of innovation, quality, and so on. And in a way, for us it's also a bit of a torture test, because succeeding means succeeding in China first, and when you succeed in China, you can succeed everywhere. It's like Sinatra said about New York — if you make it there, you make it everywhere. Well now, we can say that for Shanghai and for China. If we succeed in China, we can succeed worldwide. So it's a very dynamic, very innovative, very demanding, very competitive market — which is exactly what we love at L'Oréal.

That has been truly remarkable. I mean, e-commerce — you could say in a certain way that even though the Americans from Silicon Valley were ahead in technology, it was really the Chinese who were the global pioneers of online commerce. Since in fact, as early as 2010, we started our partnership with Tmall from Alibaba, then with JD, and now with Douyin. And online commerce has taken on an incredible dimension. Today, 60% of the revenue from the products we sell in China comes from e-commerce. But for certain brands like Maybelline, the world's number one makeup brand, it's 80%.

I have a rather amusing anecdote. Five or six years ago, when I was visiting Shanghai and meeting with young consumers, we were doing focus groups and I would ask them, 'So what do you use?' Maybelline — very good, you're right, it's superb. And where do you buy it? They all said online. And I would ask, 'Did you know you can also find it in stores?' They would say, 'Really? You can find makeup products in stores too?' So China was the first country in the world where the new generation had almost forgotten that you could also buy products in stores. For them, online commerce is something totally natural and normal, on the phone and so on.