In 2017, the cosmetics industry grew by an estimated 5% globally. Not to mention, there’s plenty of room for smaller cosmetics companies to make a splash. Just look at Fenty Beauty’s explosion onto the market. Today’s consumer is more demanding and savvy than ever. Thanks to social media and influencer marketing, trends can change in an instant, which makes cosmetics inventory management a rapidly changing and sometimes complicated process.
Unlike technology products, which may only release a new product once per year, cosmetic brands usually release new products seasonally, plus special holiday products. This means you have a tight margin for keeping your customers happy without being left with excess out-of-style inventory.
In this post, we cover a few different topics as they relate to your cosmetics supply chain:
1) Why The Cosmetics Supply Chain Matters More Than Ever For Marketing Your Cosmetics
Despite the almost year-over-year growth in the cosmetics industry, supply chain disruptions can severely impact your bottom line. Coty Inc., a Covergirl cosmetics maker saw a 10% and 14% decrease in sales in Europe and North America, respectively. Coty attributes this decrease to severe supply chain disruptions in those global regions.
Supply chain disruptions, like Hurricane Florence, couldn’t have been prevented. However, Coty is also struggling to create a smoother distribution center system with the 40+ brands they acquired from Procter & Gamble.
If you’re a ecommerce cosmetics retailer, you may offer multiple brands to your customers. Or perhaps you offer a single brand straight from the manufacturer. Either way, your inventory management and supply chain have to factor into your other business functions. Even for portions of your business that appear unrelated, like your marketing.
BONUS: Before you read further, download our Inventory Management Software Whitepaper to see how Logiwa uses real-time tracking to help our Cosmetics customers get up to 100% inventory accuracy and increase shipments by 2.5x.
Challenges for Beauty Inventory Management: Trends and Bad Marketing
Cosmetics inventory management presents various challenges. One of the top ones is keeping up with the latest trends. Much like fashion, your customers can drop yesterday’s hottest trend like a bad habit.
You have to keep careful track of your inventory to make sure you’re not left with obsolete inventory for any reason.
Some things can’t be avoided, like a social media fall out. In cases like that, where the brand or an influencer may have been insensitive to their target audience, you stand to lose as well.
As an ecommerce cosmetics retailer, you have the freedom to carry brands that align with your companies own values. But if your messaging the brand utilizes influencer marketing or marketing tactics that misses the mark with their target audience, it could impact your bottom line.
Case Study: Beauty Influencer Marketing Gone Wrong
For example, in 2018, Laura Lee, a beauty blogger, faced backlash for tweets that many interpreted as racist. She lost 500,000 YouTube subscribers, which translates to about $65,000 lost revenue for her each year. How? Because beauty retailers like Ulta and Boxycharm stopped selling her products.
Brick-and-mortar Ulta made the decision to distance themselves from Lee. This decision would’ve been calculated to compare the cost of pulling the inventory to the potential for lost sales by continuing to carry her line. The results must have been clear for Ulta.
For a cosmetics subscription box service like Boxycharm, influencers are a serious marketing strategy. Subscription box services have intense competition now, and one bad influencer could drag multiple companies down with them.
You want to keep enough inventory to keep your customers happy but keeping too much could end up costing you, depending on how your products are marketed. Since you’re not the only one marketing them, negative press can come from any direction.
It may benefit your business to look beyond your own marketing strategy and look at how the brand markets its products. Most consumers don’t see a difference between the product manufacturers and the sellers.
Case Study: Beauty Brand Marketing that Missed the Inclusion Mark
One of the latest themes in recent years is inclusion. Specifically regarding skin tones. The general feeling is that people of color (POC) aren’t given as many options for products like foundation.
This is where Fenty Beauty really saw success. They marketed to a segment of the market that has long felt neglected. This left more established brands scrambling to show they were also inclusive. Some of their marketing tactics weren’t well received.
Many brands are looking to update their product line to cater to the needs of POC. That takes time of course. Altering makeup swatches to make a brand seem more inclusive right now has made some customers question their brand loyalty.
Becca Cosmetics posted an image to Instagram to showcase their 24 shade foundation line. The image showed four different models, but the photo editing was done in such a way that the models’ skin tone appeared to be altered to some people.
These are just two examples of how marketing external to your company can throw your forecasting out of whack. You can predict seasonal demand, but bad press can pop up at any time. Keeping your inventory data accurate can help you plan better should you need to get rid of inventory quickly.
Don't Let Your Inventory Become a Liability: Poor inventory accuracy is like death by a thousand cuts for any online cosmetics seller. Learn how Logiwa integrates with the technology in your warehouse and automatically updates your inventory across all of your channels.
2) Makeup Products Expire. Is That a Factor When You Calculate Lead Time?
Most of the expiration dates you hear about for cosmetics tie to the day they’re opened. However, if you don’t make sure your products are transported and stored properly, you run the risk of sending your customer a less than optimal product.
The Food and Drug Administration (FDA) considers it the manufacturer's responsibility to ensure their products are safe. You already know that your customer isn’t going to blame the manufacturer if they receive a subpar product. They’re going to blame your company, since you sold it to them.
They’ll return the product to you, using your returns process (which you’d rather them not do). Depending on your return policy, you may accept already opened products. But that means you can’t resell them. Inventory you can’t use is wasted capital.
Depending on the types of cosmetics you sell, the FDA may consider them drugs as well. The government regulates skincare products like sunscreen and foundations with “SPF” on the label as cosmetics and drugs. As a drug, the expiration date is printed on the packaging.
What this means to you is that you have a definite timeline to sell these products. You’ll need to make sure you get them from the producers with as much lead time as possible. If a customer receives a product that’s past the expiration date, they’ll likely make use of your return policy.
If you sell natural or organic products, these have a shorter shelf life, due to a lack of preservatives. Keep that in mind as you use demand forecasting to set or adjust your inventory levels.
Emphasize Storage and Transportation to Maintain Cosmetic Product Quality
Make sure that your products are transported in cool containers. You don’t want them sitting somewhere in transit where they can get hot. Heat degrades the quality of many products, not just cosmetics.
The same goes for your warehouses. Cool, dark areas are the best places to store your products. Humidity controlled storage is highly recommended. Due to the special considerations of the cosmetics industry, a third-party logistics partner that specializes in cosmetics may be a viable option.
Makeup- six months to two years depending on the product. Creamy products sit on the shorter end of the spectrum, as well as anything that goes on or near the eyes.
Skincare products- nine months to one year, with the exception of cleansers, which are two years.
Haircare products- two years, which is the simplest of the categories.
Cosmetic Supply Chain Visibility Gives Your Customers the Answers They Want
Your customers want to know more about the products they’re using on their bodies. More and more, the beauty industry is becoming synonymous with good health. Much like the wellness trend that swept through the food industry. Your cosmetics supply chain has to worry about:
Sustainable production methods
It’s only through a transparent supply chain that you can answer these sorts of questions. You may not manufacture your own products, but your customers are sure to pay attention if anything perceived as negative comes to light.
3) Natural Beauty Ingredients Matter More to Your Customers
As we mentioned above, your customers are paying more attention to the impact their choice beauty products can have on their health. Thanks to the Internet, a study published this morning can go viral by this evening. By the end of the week, all of the major beauty sites will have blogged about it, making sure that anyone who cares will know the latest research.
Natural beauty products require more consideration. Well, more than cosmetics already demanded. They have a shorter shelf life than their conventional counterparts and are more sensitive to their environment. If you don’t already offer natural products, you may be able to easily add them through ordering from your existing suppliers.
Many cosmetics companies offer natural versions of their most popular products at a small price increase. When offered side by side, many people will pay a slightly higher price for a product they feel is better for their health.
Your Customers Care About Ethical Sourcing of Natural Ingredients
You’re the retailer and when your customers choose to boycott products because of ingredients, you’re hit first. Then it ripples through the supply chain back to the manufacturer. Some natural cosmetics ingredients come with a high-risk factor.
Selling and promoting ingredients that are tied to unfair labor practices like low pay and child labor reflects your company’s values. Or at least that's the conclusion many of your customers will draw.
Corporations are doing what they can to improve the supply chain for these critical ingredients (like cocoa), but your customers are demanding visibility now. Understanding your products at this level requires a strong relationship with the product manufacturers and your suppliers.
Data is the Key to Effective Cosmetics Inventory Management
While there are some things you can’t predict (like a Twitter fight), data and analytics can help you tighten up your demand forecasting. You can turn intelligent inventory management into a competitive advantage that increases your net profits. The complexity of the cosmetics industry (not to mention its fast pace) will require you to stay as connected as possible to your operations.
Assessing your business in these different areas (marketing, product lead time, and supply chain visibility) can help you build an agile and sustainable cosmetics retail business.
Written by Ruthie Bowles
Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.