PDD Holdings’ international facing discount e-commerce platform, Temu, filed a lawsuit in a US District of Columbia court on Wednesday alleging rival Shein employed “Mafia-style intimidation” to coerce suppliers that also worked with Temu.

According to the filing, Boston-based company WhaleCo Inc, which operates in the US as Temu, alleges China-founded, Singapore-based rival Shein misused intellectual property legislation to stop merchants and suppliers working with Temu.

It also claimed Shein “falsely imprisoned” vendors who dealt with Temu by detaining merchant representatives in Shein’s offices for many hours, confiscating their electronic devices and threatening them with penalties for doing business with Temu.

Shein did not immediately reply to a request for comment on the lawsuit on Thursday.

Both firms, which have roots in China, have seen their businesses boom in the US market in recent years as inflation and cost-of-living pressures have helped attract consumers to low-cost e-commerce offerings, such as Shein’s $5 T-shirts and Temu’s $3 earphones.

The bulk of suppliers for both companies are in China and a spokesperson for Temu confirmed the alleged infractions involved Chinese vendors.

“We sued Shein because recently their actions have escalated. They began to illegally detain merchants, forcibly asking for their phones, stealing our merchant accounts and passwords, stealing our business secrets, and simultaneously forcing merchants to leave our platform,” the spokesperson said.

The lawsuit also alleges that Shein poached Temu’s key marketing and advertising personnel. It did not specify where they were based.

This is not the first time the fierce rivals have traded barbs in legal suits filed in US courts. Both companies withdrew actions filed against one another in October without giving a reason.

Shein’s previous US lawsuit against Temu alleged Temu told social media influencers to make disparaging remarks about the fast-fashion retailer, and tricked customers into downloading the Temu app using “imposter” social media accounts.

In July, Temu filed its own lawsuit in Boston federal court, accusing Shein of violating US antitrust law in its dealings with clothing manufacturers.

Last month, Shein confidentially filed to list publicly in New York in what could be a $90 billion float, renewing scrutiny of its business practices and supply chain.

By Casey Hall; Editors: Brenda Goh and Jamie Freed

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Estée Lauder is betting on two of beauty’s biggest buzzwords to pull itself out of its recent slump: “luxury” and “longevity.”

On Thursday, the flagship brand of the Estée Lauder Companies announced its newest launch, the Re-Nutriv Ultimate Diamond Transformative Brilliance Soft Crème, with Sirtivity-Lp™, the latest extension of the line’s high-end Re-Nutriv collection. Though La Mer’s Crème de La Mer is often the ELC product that beauty shoppers associate with luxury, Re-Nutriv was actually the conglomerate’s first crown jewel. Developed in 1956 by Estée Lauder, herself, Re-Nutriv contained 26 of the most precious and indulgent ingredients at the time, like royal jelly and rare oils; the formula was so special that the conglomerate’s matriarch was reportedly known to keep it in a special vault. Today, Re-Nutriv is a 30-piece lineup of both skin care and makeup, and retails from $75 to $450; a 50ml bottle of its latest addition, which launches in January with a big push in the US, China, UK and Western Europe, sells for $350.

Now, here comes the longevity part.

The new Re-Nutriv cream “reveals visible age reversal starting in just 14 days, a feat in longevity science,” according to Justin Boxford, Estée Lauder global brand president, a former leader at La Mer.

Beauty brands love to flaunt clinical and customer claims in marketing copy; Estée Lauder has taken pains to show its work, however. The launch comes after the brand has studied sirtuins, proteins that regulate metabolic processes, for 15 years. Estée Lauder has also signed on to be the inaugural supporter of the Stanford Center on Longevity’s new program on aesthetics and culture, and launched a longevity collective made of experts like Dr. Danica Chen, a professor of metabolic biology, nutritional sciences and toxicology, Dr. Mark Lachs, director of geriatrics at New York-Presbyterian and model Carolyn Murphy to reframe the conversation around anti-ageing to “visible age reversal.”

“We have an entire industry that has exploded across medicine, biohacking, wellness and we are now seeing it come into beauty,” said Boxford.

It makes sense for Estée Lauder to connect luxury and longevity. It is often the most affluent individuals who have gone to the greatest lengths (and have the greatest means) to indulge in optional MRIs, genetic testing and face creams that retail for more than $200.

But for Estée Lauder particularly, a sharpened focus on luxury could be an asset. The world’s wealthiest shoppers spend more than $350 billion every year on luxury goods, including couture garments and bags, but only a small fraction of that is on beauty. That’s because there is less and less difference between a lipstick anyone can purchase and those in the 1 percent. Dior’s popular Lip Glow Oil, for example, is $34. According to “The State of Fashion: Beauty,” created in partnership with McKinsey & Company, the luxury beauty market is expected to reach $40 billion by 2027, and yet most brands have yet to capitalise on “true luxury” (products that range in price from around $200 to $1,000) or “ultra luxury” (skin care, makeup or fragrance that reach well past the $1,000 price mark.)

The beauty business is known for its margins, but given the industry’s exposure to aspirational shoppers, many brands are struggling as interest rates remain high and the cost of necessities increase. That’s been part of Estée Lauder Companies’ troubles. The company has seen five straight quarters of declines as demand for prestige beauty fails to rebound in Asia, where ELC has placed a hefty bet. It has also seen a slower than expected recovery in travel retail. In recent earnings announced in November, the company reported a 10 percent year-on-year decline in net sales and 16 percent profit decrease. Net skin care sales, once a driver of overall company health, saw the biggest decline by 21 percent.

Some have argued that Estée Lauder Companies should broaden its mandate to be more inclusive of affordable brands like Deciem’s The Ordinary, and that’s true, but it should also move upmarket. That’s one way to ensure profitability, and Re-Nutriv is its clearest opportunity. Re-Nutriv is a top three franchise for the brand. Other best-selling products include its Double Wear Stay-in-Place foundation ($49) and Advanced Night Repair serum (which starts at $85), though those items fell squarely in prestige beauty.

Boxford acknowledged there is room for Estée Lauder to elevate itself among more affluent shoppers.

“Luxury consumers and particularly, the high end luxury consumers … are looking for absolute products [with] high performance, high efficacy and breakthrough technology, which of course, [includes] very precious ingredients,” he said, noting that over the next three years the Re-Nutriv portfolio has a robust innovation pipeline.

Still, moving upmarket will come with its challenges, especially when existing best-sellers sit under the $100 price market. To that end, Aerin Lauder, granddaughter of Estée, has evolved her role at the brand to focus more deeply on the luxury expression of the Re-Nutriv franchise for events, collaborations and marketing concepts.

Competitors also see an opportunity for the taking. Without its own Sisley or La Mer, L’Oréal, which has until now focused on clinical skin care, is putting its efforts into reviving sleeper luxury brands like Helena Rubenstein and Carita. Coty, meanwhile, is attempting to resuscitate Lancaster, a skin care line once used by Princess Grace of Monaco, as well as incubating its own in-house high-end line, Orveda. Even independent labels like Augustinus Bader, Dr. Barbara Sturm, and Biologique Recherche as well as newcomers such as 111 Skin and Eighth Day are attempting to create a clearer delineation between prestige beauty and luxury beauty with their products. (Augustinus Bader, for its part, recently partnered with Deepak Chopra to speak to longevity more broadly.)

For Estée Lauder, a successful and expanded Re-Nutriv could spur a much-needed, luxury-oriented renaissance. According to data from Circana, dollar sales for the Re-Nutriv franchise grew double-digits year-over-year in 2023, and the collection moved up nearly 20 spots in rank, driven by new launches and skin care sets. The appetite for more luxurious products is there. At this point, the company simply needs to deliver.

When makeup artist François Nars was dreaming up a blush collection for his namesake beauty brand in the late 1990s, the founder was fundamentally hoping to launch shades to put in his own makeup kit that he couldn’t find elsewhere.

“There was no grand plan or a meticulous strategy behind it,” recalled Nars, of the global cosmetics company that he founded with a collection of lipsticks in 1994.

But Nars did have the clever idea of naming his forthcoming blushes after emotions, not only giving customers a sensorial image of what to expect when they applied his products but also making it easy to remember each item’s name. Among the 12 shades rolled out in 1999 was Orgasm, a pinky peach blush with shimmer.

Orgasm provided Nars with what countless other beauty and fashion brands strive for — an iconic, easily identifiable item that withstands the test of time and essentially becomes synonymous with the brand itself. Hero products of this sort are important for not only their marketing power, but also their ability to drive sales. As of 2023, Nars has 62 SKUs, but Orgasm still accounted for 23 percent of sales volume in the US and 7 percent globally.

More Than a One-Hit Wonder

Of course, hero products are not unique to the beauty industry. In fashion, for instance, there’s Chanel’s iconic 2.55 handbag that features a chain link strap and a mademoiselle lock. Over at Nike, it’s Michael Jordan’s Air Jordan sneaker that transformed the company from a running brand to a basketball giant, while Levi’s has its always-in-style 501 jeans.

As this case study shows, developing a hero product in beauty requires a combination of factors, ranging from the quality of the product to the marketing discipline underpinning it, as well as, in some cases, luck.

But there are nuances even within a sector that can impact a hero’s ability to scale. For example, skin care best-sellers are generally the result of effective formulas and rabid consumer loyalty. Hero cosmetics typically fall in a volume-driving category like eye, face or complexion, with customers buying the item repeatedly. Cosmetics have the added hurdle of needing to evolve with cultural trends like “no makeup” makeup, contouring or whatever else happens to be in season.

But for any product to become beloved, it has to deliver on its promises and transform how customers look and feel about themselves at the same time.

Along with Nars, executives from Tarte and Too Faced provide insight about the evolution of their hero product strategies, laying bare how brands can identify heroes within their assortment and take advantage of these potential best-sellers.

At Too Faced, the brand’s volumising Better Than Sex mascara came 15 years after the beauty label was founded in California in 1998. For Tarte, its hero product is the Shape Tape concealer, a buildable face product that could be used as a foundation, contour and, yes, a concealer, which transformed the entire line’s trajectory. As with Orgasm, shoppers have not grown tired of these items, continuing to buy them through multiple trend cycles.

Shares of Etsy Inc dropped on Wednesday after the e-commerce platform announced it would slash 11 percent of its workforce as it seeks to cut costs, pressured by weakening demand for handcrafted goods.

Etsy will lay off 225 people, about 11 percent of total staff, and will incur financial charges of between $25 million and $30 million for severance payments, employee benefits and related costs, the company said in regulatory filings on Wednesday.

Etsy also announced several organisational changes and the departure of several executives, including Ryan Scott, chief marketing officer. Following the job cuts, Etsy’s headcount will drop to 1,770 people.

The company’s shares, down 32 percent year-to-date, fell to as low as $78.54 after the announcement and were on track for the biggest daily percent decline since August. The stock was down more than 8 percent at one point and was last down 5 percent.

The median price target of the 32 analysts covering Etsy’s stock is $70, unchanged from a month ago, and their current recommendation is “hold,” according to LSEG data.

Last month, Etsy warned of a possible decline in its gross merchandise sales in the fourth quarter as consumer spending on non-essential goods shrinks ahead of the holiday season.

By Chibuike Oguh; Editing by David Gregorio

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Early holiday shopping season discounts from high-end fashion retailers like Bergdorf Goodman on New York’s Fifth Avenue raised concern that a lacklustre Christmas could lead to inventory gluts – potentially dragging labels into a discounting spiral that would cheapen their image.

The latest US credit card data from Barclays released on Wednesday showed that spending on luxury goods remained negative in November, down 15 percent year-on-year after a decline of 14 percent in October.

That performance “doesn’t bring much optimism” for the fourth quarter, with the weak trends in the US reason for caution about the performance of luxury brands over the period, Barclays analysts said.

Credit card data from Citi, also released on Wednesday, showed purchases of luxury fashion were down 9.6 percent year-on-year in November, after an 11.4 percent decline in October, with steeper declines in department stores and online, down 13 percent in November year-on-year.

Retailers entered the season with too much inventory, said Olivier Abtan, consultant with Alix Partners, noting that last year’s purchasing orders were made before the sector began to cool off after a months-long, post-pandemic splurge.

“They’ve already begun the season with overstock, compared to normal levels,” said Abtan.

Share prices of LVMH, Kering and Burberry were down 12 percent, 23 percent and 33 percent, respectively, since early August, while shares in e-commerce operator Farfetch have lost the bulk of their value and were down 90 percent.

“We know that the US consumer is going to keep being reasonable, and retailers have to adapt,” said Caroline Reyl Head of Premium Brands at Pictet Asset Management, which owns shares of LVMH.

Conflict in the Middle East added geopolitical uncertainty to a luxury industry outlook already clouded by inflation, with shoppers in the US and Europe tightening their purse strings while expectations for a strong post-pandemic rebound in China were derailed by a property crisis.

The lower spending comes at the all-important end-of-year season, with November and December accounting for 25 percent of annual sales.

“It’s not going to be a good Christmas for luxury brands,” said Abtan.

But department stores could feel the pinch from slowing demand for the next six to 12 months, predicted Citi analysts, a potential challenge for luxury brands generating a significant amount of sales outside of their own networks of boutiques.

Department stores, particularly in the US, are known for aggressive discounting, drawing shoppers to stores, but offering lower prices can erode the attractiveness of fashion brands and encourage people to hold back for future deals.

Leading global brands like Hermes, privately owned Chanel and LVMH’s Louis Vuitton and Dior maintain a tight grip on retail operations, selling mainly through their own stores which allows them to avoid discounts and fully control their brand image.

Such direct-to-consumer sales by high-end labels have increased from 40 percent of the personal luxury goods market in 2019 to 52 percent in 2023, according to Bain.

Analysts say fashion houses are overall much better equipped than during the crisis of 2008 and 2009, when the spending slowdown was sudden.

Since the previous crisis, labels have applied artificial intelligence to predict sales volumes and adjust production, while they have also fine-tuned their proportion of seasonal and more permanent styles.

The end of this year will be “a season for bargain seekers but not the markdown season of the century,” predicted luxury consultant Mario Ortelli.

Technology has played a “decisive role” to avoid overstock issues, said Mathilde Haemmerle, partner at Bain. She cites macro indicators, historical sales of similar products, trends scraping on social networks as variables examined through AI to better anticipate sales volumes.

The bigger labels are also more agile, having cut their development time in half over the past 15 years by streamlining production and regrouping certain stages of production, according to Abtan.

“That’s a game changer,” said Abtan.

By Mimosa Spencer; Editing by Josie Kao

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