L'ORÉAL SA — EXECUTIVE MEMO
"Beyond Cosmetics: Digital Beauty and Avatar Positioning"
To: Executive Committee From: Chief Executive Officer Date: June 2030
SITUATION
L'Oréal has successfully leveraged AI for beauty tech innovation (virtual try-on, personalized recommendations). This has driven growth and maintained pricing power.
But an emerging threat: aesthetics disruption. Social media filters, virtual avatars, and digital beauty are reducing cultural emphasis on physical cosmetics. This threatens long-term demand for traditional beauty products.
CURRENT STATE
Revenue: €45.8B (up 20% since 2025) Margin: 16.5% E-commerce growth: 20-25% annually (vs. 10-12% pre-AI) Emerging challenge: aesthetics disruption (filters, avatars reducing makeup demand)
STRATEGIC DECISION REQUIRED
Option A: Defend Physical Cosmetics - Continue AI-driven virtual try-on and personalization for physical cosmetics - Focus on premiumization and emerging markets - Accept declining demand from younger cohorts - Risk: secular decline as filters/avatars become mainstream
Option B: Pivot to Digital Beauty - Invest in avatar cosmetics and digital beauty marketplace - Develop brands for virtual appearance (digital makeup for avatars) - Transition organization from physical to digital - Risk: physical cosmetics demand decline faster than digital revenue growth
Option C: Dual Strategy - Maintain physical cosmetics business with AI optimization - Selectively invest in digital beauty (10-15% of R&D budget) - Wait for market clarity before major pivot - Risk: caught between two markets; half-hearted execution on both
Recommendation: Option C with bias toward Option B by 2033. We have 3-5 year window to understand digital beauty market before committing fully.
ACTION PLAN
2030-2032: Dual strategy execution - Physical cosmetics: AI virtual try-on, personalization, premiumization - Digital beauty: pilot programs, brand exploration, AR/avatar partnerships
2033-2035: Rebalance based on market evolution - If digital beauty proves substantial: aggressive pivot - If physical cosmetics remain dominant: double-down on innovation - Likely: mixed portfolio with digital growing faster than physical declining
BOARD APPROVAL REQUIRED
- Dual strategy endorsement
- Digital beauty budget allocation (€200-300M over 2030-2032)
- Avatar/digital brand exploration authorization
- Organization structure to support both strategies
Confidential board memo