We know retail volumes in the UK and Ireland have been impacted by COVID-19. What is the experience of beauty brands?
Consumers traditionally fall into three categories: those who shop only in store, those who shop entirely online and those who do both. The pandemic has forced many consumers, particularly those who fall into the first category, to change their habits. Almost overnight, they’ve had no choice but to shop online. This was particularly pronounced in beauty, skincare and cosmetics, where consumers turned to home self-treatments to replace salon services.
In most European countries, with salons closed until very recently, there has been an insatiable demand for everything from salon-quality nail gels to home hair dyes. Some of XPO’s customers in the beauty and personal care sectors have witnessed an increase in demand of between 200% and 300% for their products.
Have beauty brands in the US experienced something similar?
Yes, demand for DIY and self-care beauty products also grew quickly in the United States. Sales of nail care, hair colouring and bath-and-body products are way up in recent months compared with the same period in 2019. Interestingly, people in the US seem to be braver when it comes to cutting their hair at home. Sales of hair clippers in the US rose by 166% in the first week of April, according to industry research. Meanwhile, in the UK, the surge in DIY nail care has some analysts wondering whether COVID-19 will result in the ‘nail polish effect,’ much like the uptick of lipstick sales during the 2001 recession. Leonard Lauder even coined a term to describe the phenomenon: the ‘lipstick index’. This means that
more consumers will see DIY nail polish and lipstick as a luxury they can afford, driving demand higher.
What has this meant for XPO’s supply chain operations?
We’ve been operating at volumes close to Black Friday levels for extended periods at some of our sites. This has had some unique challenges, because the amount of volume increase for certain products was unexpected. We’ve needed to be agile and responsive in ramping up operations whilst operating under new government guidelines and restrictions to ensure everyone’s safety. We’re proud that we’ve been able to provide continuity of service to our customers within the cosmetics and beauty sector, including Shiseido and Beauty Bay in the UK.
How have brands coped with the sudden surge in demand?
The fluctuations have been easier to cope with for beauty retailers who already have robust e-commerce and omnichannel distribution strategies in place. Challenging, yes, but not impossible. As demand has ramped up, their logistics and supply chain operations must make the necessary adjustments.
As countries start to roll back restrictions on brick-and-mortar shops, there is still an elevated demand for beauty products online. On average, our customers in this sector are operating at around 150% above their normal levels. When you compare this with the usual year-on-year uplift of 10%–15% in e-commerce volumes, it isn’t difficult to see how 10 times that change can cause significant stress on a brand’s supply chain. And there’s the added pressure of ensuring that retailers can keep their service promises to consumers. The importance of managing those higher volumes ripples all the way down the supply chain.
What must brands do to adapt to the ‘new normal’?
There seems to be no debate that more consumers will continue to shop online. This is why beauty brands need to continue scaling up stock levels and service processes. For brands that have both an online and in-store retail presence, it’s an easier solution. The stock for retail and e-commerce is usually in the same warehouse and readily available to be moved quickly between channels. Brands that don’t have an online presence will likely need to pivot to some kind of e-commerce strategy and divert some of their stock. It’s important to keep in mind that significant planning – almost military precision-like planning – is needed to prepare for the distribution of large volumes of product.
And it’s not only the supply chain that needs to adapt: it affects a beauty brand’s entire operations, from how they define their e-commerce strategy, including any potential strategic partnerships, to how they engage with consumers and fulfil orders. Digital strategy is becoming even more central to survival, and the pandemic has amplified what we’ve known for a while now: almost all beauty brands will eventually succeed or fail based on the quality of their online service. Keeping promises to customers and delivering a superior consumer experience should be fundamental objectives of any brand’s distribution strategy.
Sarah Booth, Account Director, Supply Chain, UK and Ireland, XPO Logistics