Digital: Shaping the Beauty Industry’s Future

No industry has been immune to the seismic shifts caused by the growth of the digital landscape. Fashion in particular has been a subject of heavy transformation in the recent years driven by digital. Beauty in comparison to apparel has remained relatively traditional. But there are opportunities which beauty brands can no longer afford to ignore; given the intensifying competitive landscape and the battle for the customer’s loyalty.

Following is our point of view on some of the most significant trends and opportunities in the beauty industry and how brands can equip themselves to steer in the digital economy.


1

Digital will spur fast fashion demands in the beauty industry

It's no secret that fast fashion has revolutionized the fashion industry. Even though its roots are in the affordable clothing segment, the beauty market is fast catching up.


Kiko, a Milanese cosmetics company, has adopted the principles already used to great success by “fast-fashion” clothing chains such as Zara, by constantly changing the line-up of products in its stores. Following a similar strategy is Memebox, a Seoul-based e-commerce startup who introduces new collections in a matter of months by leveraging data gathered from search queries on their e-commerce store and apps, sales, customer feedback, and social networks.

H&M, in addition to catering to the seasonality of colour cosmetics, recently launched a 700-piece beauty collection to keep up with today’s consumers, encourage them to visit their stores and respond rapidly to the latest trends.

The modern beauty industry is built on this kind of instant gratification. Rapidly shifting trends mean consumers regularly buy new items, regardless of the season. As the beauty market grows and new savvier players emerge, beauty retailers will need to take the necessary steps to be more agile and flexible to rapidly adopt to changing market trends and consumer demand.


What's needed to make this happen?
Real-time analytical capabilities.To enable brands to deliver products that resonate with their shoppers as and when they’re trending, consumer insight is key. With the right technology in place, brands can view and evaluate the real-time insights required to guide the design, merchandise and inventory allocation process.







2

Brands will augment their services in the form of digital applications both in-store and online

Retail stores and ecommerce will grow in importance. However, integration of these channels will be key in providing a seamless experience to the customer.

Brands such Burberry have already begun the process of integrating their retail stores and e-commerce systems to facilitate omni-channel functionalities such as click and collect, and buy online, return at any store.

E-commerce growth has been continously strong in beauty. As a direct-to-consumer channel, it has in many ways disintermediated retail stores, urging retailers to create a more cohesive collaboration with manufacturers, by mastering a set of new demands such as consumer targeting, online category management and vertical synchronization. However despite this, the store is not dead. E-commerce penetration in beauty only accounts for 6.5% or 7% (up from 4-5% of total sales 2-3 years ago), which means 93% of sales are still happening in the store.

While slow to catch up with the digital revolution, beauty brands are now starting to rethink business models by integrating digital with offline to provide shoppers interactive digital displays, in-store kiosks (to order out-of-stock items) and more. Take Japanese beauty retailer Shiseido for an example. The beauty retailer uses "cosmetic mirrors", which scans a shopper's face and gives makeup suggestions through a virtual preview. The touch screen also allows shoppers to make adjustments and get results in real time for quick decisions right on the spot. Shoppers also have the option to print before-and-after photos along with product information and a shopping list of the makeup they want.

ULTA Beauty, America’s largest beauty specialty store, uses a mobile inventory app to provide associates with real-time inventory visibilityacross all channels. If a shopper asks about a specific product color, the associate can instantly check if they have it somewhere in the store, a nearby store, or when new inventory will arrive. This connected inventory between stores and e-commerce businesses is also made availabile to website visitors for easier fulfillment options.

Beauty brands can no longer operate using a single channel. To keep up with growth plans such as geographic expansions, the creation of a new brand or the addition of a new business channel, an integrated system is crucial for centralized real-time view of customers, orders, sales and inventory.


What's needed to make this happen?
A single vertically integrated platform.
Managing each channel separately results in siloed data - leading to data replication and redundancy, siloed analytics and siloed information among departments of the same organization. Operating as a forward-thinking brand in today's market relies on synchronizing data and processes across all channels to improve customer experience, deliver faster inventory turn and enable future growth.







3

More retailers will look at personalization as a way to enhance the shopping experience

While brand loyalty is fleeting in the new consumer-centric economy, superior service and personalization will differentiate the winners from the rest of the pack.

Research shows that personalized content can increase the average order size by more than 20%. And yet, few companies do personalization right. The challenge lies in building an omnichannel landscape where data from different touchpoints can be collected and used for analytics.

Consider the case of IMAN Cosmetics, the premier line of makeup and skincare for women of color. The company developed an app that determines a user’s “color signature” by leveraging a patented color-matching technology to analyze the color of the user’s eyes, hair, skin and lips. After an analysis, the app offers customized product and look recommendations to match the user’s complexion and style. Beauty brand L’Oreal Paris follows a similar strategy by collecting information to refine the consumer experience on their website. This way, as shoppers browse the site, they are automatically served with relevant products and how-tos related to the information they enter.

Looking ahead, beauty brands need to preempt the expected growth of online sales and implement a suitable platform that can collect and evaluate data from various devices. Be it desktops, smartphones, tablets, point-of-sale systems, retailers will need to utilize all the data they can in order to offer a competitive and more seamless customer experience across all channels.

However, knowing individual interests and preference alone is not enough. The future of personalization relies heavily on context. This way, brands are able to deliver the right offer at the right time, increase the likelihood of a successful cross-sell and use the same data to personalize in-store experiences using mobile technology.


What's needed to make this happen?
A single view of the customer.
With a unified view of the customer, brands are able to leverage buying patterns, behavioral data and contextual insights for a truly personalized offering.







A Digital Core for the Beauty Industry

In order to adapt to the on-going digital shift, beauty brands need to radically rethink their core system so that it can identify and respond to changing consumer demand in real-time, synchronize sales channels and deliver a personalized service. A 'Digital Core' comprised of SAP's latest, innovative retail technologies will help deliver a consistent, relevant and exceptional shopping experience across all touchpoints.

SAP Fashion Management

A single platform to manage your wholesale, retail, e-commerce and manufacturing operations and gain global inventory visibility in real-time.

SAP Hybris Commerce Suite

Synchronize commerce across multiple channels on a single platform for centralized order management and streamlined inventory distribution - tightly integrated with SAP backend technologies.

SAP Customer Activity Repository

Powered by SAP HANA's game changing in-memory capabilities, SAP Customer Activity Repository combines your customer, sales and inventory data in real-time to enable personalized, contextual engagements.

Everything you need to run your Beauty and Cosmetics Brand

Our digital core solution is designed to create a powerful foundation that can give you a single view of customer, inventory, and products to power multiple omni-channel functionalities.

  • Global Inventory Visibility

    Get immediate inventory visibility covering wholesale, retail and e-commerce for unprecedented, global merchandise insights at any given time. Leverage this knowledge for optimized inventory planning across all channels, and make sure your customers get their favorite items wherever and whenever they want it.

  • Sell and Service Customers Everywhere

    Offer the best possible customer experience by combining order management with commerce to bridge sales and service thereby empowering your customers to view and manage their interactions with your brand all the way down the order line.

  • Store and E-commerce Connectivity

    Leverage one platform to plan and execute omni-channel strategies such as order orchestration, order allocation and returns management to deliver products on time as well as how, when and where customers want them. Use both retail stores and distribution centers for fulfillment, enabling customers to purchase products online and pick up in-store or return to any store.

  • Single Version of Truth

    Consolidate your data landscape and achieve a single view of customers, products and orders. Your business will be suitably equipped to keep up with the pace of change and digital disruption, and have the ability to offer a seamless, more convenient shopping experience.

  • Personalized Brand Experiences

    Consolidate customer data to provide contextual, personalized and consistent experiences across all channels based on preferences, interactions, predictive analytics and business rules from a single tool. React and respond to trends immediately, such as what’s selling right now, to optimize your omni-channel strategy, regardless of channel or touchpoint.

  • Real-time Analytics

    SAP Fashion Management runs on SAP HANA technology with in-memory processing capabilities, which allows applications to run analytics directly on transactional data and respond in real-time. Combined with SAP Hybris, the integrated solution will help drive conversions and engage visitors with personalized messages, search results, promotions, recommendations, product reviews and more to deliver relevant and timely offers that shape the customer journey from discovery to advocacy.

View Demo

View first hand of how your Wholesale, Retail and Ecommerce can function seamlessly to provide a great omni-channel experience to your customers.