In the latest webinar produced by WWD, “Digital Identities,” Robert Pernice, director of global market development, Beauty, Intelligent Labels at Avery Dennison, joined WWD executive editor Arthur Zaczkiewicz to discuss technologies that can help propel the success of beauty brands and retailers in these unprecedented times.
The goal of the webinar was to introduce a new concept for digital in a unique item-level digital identity that can drive retail and operation successes for beauty brands and retailers during and after COVID-19. “Digital has long been important for beauty,” said Pernice. “The most common applications are ones you’re familiar with that help people make shopping decisions. But purchases are also transacted through digital e-comm platforms, and the compelling influence of digital before COVID-19 has only been amplified by the pandemic.”
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Avery Dennison, the global material science company and technology leader, specializes in a wide variety of labeling and functional materials. The company’s Intelligent Labels business offers digital identity technologies that provide tracking and inventory solutions, authenticate product history, and help provide a richer consumer experience.
“You know the title of this presentation refers to unprecedented times,” said Pernice. “I guess by definition all times are unprecedented, but some are plagued by chaos and it creates deep uncertainty, and even existential fear — and this is clearly one of those times.”
Pernice pointed to two main challenges facing retail beauty that had been exacerbated by COVID-19: seamless shopping and supply chain visibility. According to Pernice, these were issues that companies were facing even before the pandemic but have undergone amplification and acceleration. To make his point, Pernice referenced data from McKinsey & Co., which found 92 percent of companies thought their business models needed to change due to digitization.
“COVID-19 had no seamlessness to it at all, but rather it was a violent takeover of physical beauty retail by digital,” said Pernice. “Beauty stores will regain importance, and we’re already seeing evidence of this in China as things recover. But even now, digital-exclusive brands are necessary [and] they’re looking to align themselves with brick-and-mortar partners like Ulta and Sephora because even though they were digital natives they want to have a physical presence.”
With this in mind, stores will have to adapt to these fulfillment techniques. “Certainly ‘buy online, pick up in store’ was gaining traction within beauty, but how about ‘buying online, pickup at curbside’?” he said. “The bottom line here is beauty purchasers now have a heightened expectation of this seamless physical-digital shopping experience. And this expectation will only deepen with and after COVID-19.”
A large part of this change will be a need for integrity in the supply chain with flexibility and visibility as a given. Even prior to COVID-19, Avery Dennison’s data found inventory accuracy was a large challenge for the beauty industry with nearly 50 percent of retailers showing inventory distortions.
“We’ve learned [that] omnichannel beauty retailers have struggled mightily to swap the physical inventories for the digital and for the digital demand that occurred with COVID-19,” said Pernice. “But even in less chaotic times, beauty retailers are going to continue to struggle to satisfy the appetite of shoppers for a seamless and instantaneous omnichannel product availability if inventories aren’t accurate. The lack of end-to-end, item-level visibility and supply chain visibility has is created three challenge areas: flexibility, security and sustainability.”
The pandemic has also provided a large shift in consumer behavior, especially in the beauty industry. As we enter a recession, Pernice said these changes in the beauty industry will mean new demand, more mass and less prestige. In fact, data from McKinsey & Co. shows a 55 and 75 percent decline in prestige cosmetics and fragrance purchasing compared to last year. Consumers have also shown an affinity for do-it-yourself beauty routines while they have been quarantined at home and have increased purchases within the self-care category.
The clean beauty movement has put an added focus upon the integrity of ingredients and considerate environmental footprints. And at the same time, social changes have become visible and necessary as inclusivity becomes a non-negotiable demand from consumers.
As in other categories, consumers are also shopping online for beauty more than ever before. And as people buy more online there is more need to have proof that a product is authentic. Beauty consumers today are savvier and they look at how products have been handled, where it has come from, and what ingredients were used.
“Beauty supply chains were already vulnerable, with respect to maintaining the flexibility to provide new products, fresh assortments and novelties without creating worsening conditions within the supply chain or in retail,” said Pernice. “What is interesting is it’s the need for supply chain and product flexibility, driven by social change. Ensuring beauty products are authentic, safe and have been purchased through approved channels are probably the most significant and serious challenges for supply chain visibility.”
Pernice also noted that the beauty industry has some of “the highest counterfeit products in the world, particularly in color cosmetics.” And while statistics are hard to find, he said “counterfeit beauty products can create very serious health and safety risks.”
Inventory excess has been a legacy problem across the beauty industry. When supply and demand are not matched using data, excess products can turn to waste as they expire before being sold. The byproduct of overproduction and expiration dates. According to Pernice, this issue creates not only a loss of sales but also could have a devastating impact on brand identity and reputation.
“Now with retail stores closing and product demand changing so dramatically, excess inventory has increased even more,” said Pernice. “Your customers want to know you’re protecting people in your supply chain. Supply chains have become front-of-mind, and there is a demand for racial justice and equality from the supply chain to the boardroom.”
The solution, Pernice said is adding digital identity at the item level. Specifically, item-level RFID digital identity.
“It’s an Avery Dennison considered belief that a digital transformation for beauty lies in the addition of a unique digital identity at the item level,” said Pernice. “This digital identity is created when the lipstick or palette or whatever item is manufactured, and (we use the term born-digital) and the identity travels with it from source, to the factory, and through the supply chain to retail and beyond. And this is what really makes it work: the digital identity is accessed to communicate information about the individual product’s presence, authenticity, location, or even to transfer bespoke information to consumers.”
To illustrate the benefits of RFID and digital identity technology, Pernice shared case studies from Ralph Lauren, Lululemon and Grupo Boticário. In the case of Grupo Boticário, the company experienced improved visibility of products back in-store with a 50 percent increase in identification of hidden stockouts and was able to drastically reduce out of stock products at a decrease of 97 percent.
Put simply, “an item-level RFID digital identity makes possible a more flexible, secure, and sustainable beauty supply chain enabling seamless and absolute product availability through any retail channel,” said Pernice.
For more information, contact Robert Pernice for a consultation at: [email protected]