Kiehl’s is a 161-year old pharmacy that carries luxury beauty products. Globally it has stores from Australia to the U.S. and countries in between. L’Oreal bought the affordable U.S. luxury brand in 2000. Facing the worldwide economic downturn, Kiehl’s recently cut prices of beauty creams by about 20 percent in 21 markets especially in the Europe. A 4.2 ounce Ultra Facial Moisturizer SPF 15 container that cost $31 in the U.S. carried a price tag of €37 in France and now cost €25 after the price reduction. The U.S. prices are one third less compared to European prices. Estimates indicate that sales of premium cosmetics in the Europe will grow only by about 0.7 percent until 2016. Kiehl’s who had a 56 percent growth rate dropped to about 20 percent recently and price reduction is expected to improve its sales outlook moving forward.
Instead of dropping prices to stay alive, some luxury brands have increased prices. During the 2008 financial crisis Helena Rubinstein boosted prices for her fragrance collection which boosted demand. At a time when sales of premium cosmetics are slowing especially in the Europe, price cutting may help Kiehl’s to stay in business.