The Rise and Fall of Estée Lauder’s Market Dominance

At the core of Estée Lauder’s success was its ambitious expansion into China, a market that fueled its rapid growth in the 2010s. Under former CEO Fabrizio Freda, the company aggressively pursued the Chinese luxury sector, focusing on duty-free sales, travel retail, and Tier 2 and Tier 3 cities. The strategy initially paid off, with China contributing a significant portion of its global sales.

However, a combination of external disruptions and internal strategic miscalculations has severely impacted its position in the beauty industry. The biggest factors contributing to its downfall include:

1. Over-Reliance on China’s Luxury Market

Estée Lauder’s China-first strategy left it vulnerable to shifting economic conditions and consumer trends. When COVID-19 lockdowns hit, travel retail—a major revenue driver—collapsed. Even as China reopened, the expected consumer spending surge failed to materialize at the same level as before, with Chinese consumers turning towards local brands and alternative luxury choices.

Adding to the challenge, Chinese beauty consumers have become more selective, favoring homegrown brands that offer high-quality, innovative, and culturally resonant products. This shift has made it difficult for legacy Western brands like Estée Lauder to maintain their market dominance.

2. Failure to Adapt to New Consumer Preferences

Beyond China, Estée Lauder has struggled to connect with younger consumers in Western markets. Today’s beauty shoppers prioritize influencer-driven brands, dermatologist-backed skincare, and digital-first experiences. Competitors like L’Oréal and Procter & Gamble have successfully capitalized on these trends, leveraging social media marketing, TikTok partnerships, and direct-to-consumer models to drive sales. In contrast, Estée Lauder has been slower to embrace these digital innovations, making it less relevant to Gen Z and younger millennial consumers.

3. Financial Woes and Inventory Challenges

The financial consequences of these missteps have been severe. Since 2022:

• Sales have declined by 12%.
• Net profits have dropped by 60%.
• Share prices have plunged by 76%.

Excess inventory is another pressing issue. As consumer demand waned, Estée Lauder was left with unsold products, forcing discounting and markdowns that further eroded its luxury appeal.

A New CEO and the Road to Recovery

In January 2025, Estée Lauder appointed a new CEO, Stéphane de La Faverie, who now faces the daunting challenge of reversing the company’s fortunes. His turnaround plan focuses on four key areas:

1. Reignite Growth in China: While Estée Lauder cannot abandon the Chinese market, it must evolve its approach by:
2. Strengthen Supply Chain Efficiency: The company is taking steps to streamline operations and reduce costs, including cutting up to 7,000 jobs (roughly 10% of its workforce). This restructuring aims to improve margins and create a more agile business model.
3. Win Over Younger Consumers Through Digital Innovation: To regain traction with Gen Z and younger millennials, Estée Lauder is increasing investments in:
4. Reposition Core Brands Beyond Aging Demographics: Many of Estée Lauder’s flagship brands, including Clinique and Estée Lauder itself, are perceived as outdated compared to fresher, indie competitors. A key priority is revitalizing these brands to appeal to a broader and younger audience.

Can Estée Lauder Make a Comeback?

Despite its recent setbacks, Estée Lauder remains a formidable force in the beauty industry. The company still owns an impressive portfolio of brands, including La Mer, MAC, Bobbi Brown, and Jo Malone. If it can successfully execute its transformation plan, there is potential for a rebound.

However, the company’s ability to adapt will determine its long-term success. The luxury beauty industry is evolving rapidly, and brand loyalty is no longer guaranteed. If Estée Lauder can embrace change, modernize its marketing, and reconnect with its global audience, it may once again reclaim its status as a beauty industry leader.

Key Takeaways for Global Brands

Estée Lauder’s struggles serve as a cautionary tale for other legacy brands. Market dominance today does not guarantee success tomorrow. The key lessons from this case study include:

• Diversify Revenue Streams: Over-reliance on a single market or retail channel is a major risk.
• Stay Ahead of Consumer Trends: Brands must continuously innovate to align with changing customer preferences.
• Leverage Digital Transformation: Social media and e-commerce are essential for engaging modern consumers.
• Be Adaptable: Agility, not legacy, drives long-term resilience in a competitive market.

As the beauty landscape continues to evolve, Estée Lauder’s ability to pivot and modernize will be the ultimate test of its staying power. The coming years will reveal whether this iconic company can successfully reinvent itself—or become a relic of the past.