On Tuesday morning more than 40 beauty industry experts from small businesses, private equity, media, marketing and retail firms attended a Zoom meeting led by RéVive Skincare CEO, Elana Drell-Szyfer, to discuss the state of the beauty industry in the wake of the coronavirus. Below, a recap from the meeting by Tengram’s Robin Lamb, which includes meeting participant feedback on brick and mortar replenishment orders, business in China; recovery of travel retail; messaging and transparency with employees.
Domestic Beauty Retail Climate
- Up until last week, when it appeared consumers were stocking up at brick and mortar retailers, demand at physical retail has fallen 100 prestige as prestige and luxury stores closed across the U.S.
- Pessimism surrounds when retail orders will resume. While e-comm buyers are taking a “week by week” approach, many brick and mortar buyers have halted orders
- Some expect replenishment orders related to e-comm sell-through (which is so far holding up), but overall expectation is that retailers will look to shift inventory from stores and store-focused distribution centers [DCs]to fulfill e-comm orders from inventory on hand
- Blue Mercury: Still placing orders as recently as last week
- Nordstrom: Pulling inventory from stores; all but one of their DCs is open
- Ulta: Has a mandate to reduce inventory levels
- Third party dot-com (Dermstore, Skinstore, Net-a-Porter): Orders still coming in
- Mood on China in the near term is more optimistic, especially cross-border. One view is that demand will be back above previous levels within two to three weeks, but that there will be supply constraints given lack of international shipping and friction re-initiating supply chains for Western goods
- There’s been significant reductions in freight routes (air esp.); ocean freight feels ok so far, most haven’t seen increases in costs yet, but that is expected as demand rebounds
- Potential for Chinese luxury consumer to want ‘revenge’ for time lost; those serving this market are preparing now for this anticipated surge in demand
- Travel Retail: What is lost is lost – even if there is a return to something close to previous levels, the lost sales will not be recovered, creating a cash hole for brands
- Cross-border E-Commerce: One lesson may be that selling goods through highly-engaged digital communities (such as the cross-border ecosystem in China) may be a more robust and lower risk model, which could expedite Western markets adopting similar models to those found in cross-border e-commerce in China
- New Processes: Hold daily team meetings to triage issues and eliminate any inefficiencies caused by new remote working models
- Risk Management: Brands are at the epicenter of this downturn and must actively engage all key stakeholders (lenders, suppliers, vendors, 3PLs, employees, etc) to distribute the ‘pain’ and to get them to understand that we’re all in this together and our survival is in their best interest
- Cash Management: Many companies will not survive the cash cliff that most brands are facing. Pro-active and aggressive cash management is essential.
- Cash Coming In: When will existing receivables be paid when everyone is stretching their payables? How healthy are e-comm sales and what can you do to protect spend that supports those sales? What’s the likelihood that your warehouse will remain open and do you have a backup plan if it closes?
- Cash Going Out: Which payments are essential to near-term operations? Who do we have cover to not pay (e.g. rent)? What are the cash implications of PTO payouts vs. forced PTO vs. furlough? How do the raft of new regulations impact what we can do with employees (talk to your payroll provider)? What message can you deliver (and who should deliver it) to calm your key partners and ensure they stay close? When is the right time to launch in this climate and should any Q2 launches be delayed to maximize impact and conserve cash? Are you still ordering goods?
- Apply for SBA loans.
- Negotiate for looser terms with your asset-based lender.
- See if you can get cash relief on any other sources of debt financing.
- Do you have investors who will support you through this?
- Consumers are looking for “simple luxuries” or “small pleasures” and finding joy in small moments
- People are thinking more about—and are anxious about—their health and wellness
- They say in a recession, creativity flourishes: people are becoming more tech savvy, virtual desksides
- All the big magazines have sent lengthy letters to marketing companies that they want to carry on as normal where they can
- Digital becoming more and more of a focus for companies
- Social Impact
- Brands are finding ways to donate to those on the front lines
- Other brands are donating free services, such as access to home workouts, recipes
Employees + Staff Advice
- Executives need to take a ‘high-touch’ approach with all communications to employees to put their minds at ease
- Similarly, employers should over-communicate with departing employees to make sure they remain in the wings and ready to re-join if/when the opportunity arises
- There’s a tremendous amount of talent out there right now – if anyone wants to do something creative, search/recruiting agencies are eager to find a solutions (e.g. new remote formats for clienteling or customer service)