Estée Lauder: Surviving Retail Disruption

A woman walking into the Neiman Marcus store in Dallas in the 1950s dressed for the occasion.

Staff knew her by name. They kept records of her sizes and the occasions she was shopping for. On her way out, the cashier would press her charge plate against an ink pad and stamp her account. The charge plate was a small embossed metal tag, kept in a leather case. At the end of the month, the woman’s account would be billed. The charge plate worked at that store and nowhere else — her credit and her loyalty lived at one address.

In the 50s, the great American specialty stores all worked the same. These were brands like Neiman Marcus. I. Magnin, in San Francisco. Halle Brothers in Cleveland. Saks Fifth Avenue in New York.

Factories had turned back to consumer goods after the war, and Americans were spending at a scale the country had never seen. According to PBS’s American Experience documentary series on postwar consumerism, between 1945 and 1949 Americans purchased 20 million refrigerators and 21.4 million cars. Leonard Lauder, writing in his memoir The Company I Keep, notes that by the end of the 1950s the average American family carried 30 percent more purchasing power than at the start of the decade. Aspiration, long rationed along with everything else, had become affordable.

And at the peak of that aspiration lay the prestige department stores. 

In 1958, a family cosmetics company with eleven employees and revenues just under $1 million was trying to get into them. That company was, of course, Estée Lauder.

About twelve years before, in 1946, Estée Lauder had started it in the family kitchen, with four skincare products and a belief that every woman wanted to feel beautiful. Leonard was her son.

Hard-Won Distribution Relationships 

Leonard Lauder started at Estée Lauder on February 5th, 1958. His parents had just left for three months in Florida. There were no instructions. On his desk sat two small stacks of unopened envelopes. One held orders. The other held checks. A secretary explained his job: open them and route them — the orders to the factory, and the checks to the bookkeeper.

Lauder started at the back office of the company. Every night he took the sales reports home and read them through. He could see which products were selling in which stores and which cities. Over time, he built a felt sense for market demand. This sense — so painfully constructed — would put him in good stead over the arc of his career.

Each month, beauty advisors sent in their sales figures. Leonard calculated their commissions and mailed them out. He began adding something the process had never included: a handwritten note to each advisor, personal and specific, congratulating her if sales were good that month. As the company grew and the list lengthened, he moved to dictation. Every note remained personalised, signed by him personally. When he became President in 1972, he wrote on his personal blue stationery. Staff across the country saved those notes for years.

During this period, his mother worked the other end of the relationship. 

The path to aspirational commerce was through the specialty stores, and above them — the prestige department stores. Getting into those stores was the central challeng ...

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