A doubling in online conversion rates. A sharp increase in customer loyalty. Triple-digit growth in turnover. Figures reported by brands like e.l.f., Estée Lauder and Trinny London hint at something extraordinary happening to the beauty market.
In the words of Jacqui Owens, Head of Beauty at Google UKI, there has been “a seismic shift to online purchases and exploration”. Hardly surprising perhaps, given the lockdowns of 2020 and 2021, but there is more to it than mere availability. By embracing the new technologies of artificial intelligence (AI), augmented reality (AR) and virtual reality (VR), beauty brands are bringing the personal experience of shopping in-store authentically into the digital realm – and customers love it. Here we look at some of the stand-out examples of beauty brands embracing AI, AR and VR and consider how the technology might evolve in the coming years.
Phygital is the new buzzword for anything that bridges the gap between the physical and digital world. For beauty brands, the future is phygital. Apps that apply make-up virtually to your face have been available for a while now, but AI has brought a level of realism that is changing the game. Trinny London pioneered this with its innovative and award-winning Match2Me service, which highlights the perfect shades for each user’s unique combination of skin, hair and eye colours.
Other brands have followed suit. No7, for example, launched its Foundation Shade Finder, which uses AI to analyse a customer’s skin tone in real-time, matching it against millions of samples to provide them with their personal No7 foundation shade. AR then comes into play to enable customers to “try on” various options virtually and instantly.
Where this technology scores against older make-up apps is in the accuracy achievable from the vast volumes of data that can be processed by AI. Customers feel confident in the authenticity of the results.
Consumer confidence is crucial in building brand loyalty and the authenticity offered by AI contributes significantly to that. Virtual try-ons offer the opportunity to go further in building customer relationships. Trinny London again broke new ground in 2020 by launching its Virtual Appointments. Responding to the constraints of lockdown, the brand offered customers one-to-one online sessions with its make-up artists.
“These have proved to be hugely popular with customers, who have valued the engagement, the education and ultimately the conversion to online,” said Mark McGuinness-Smith, Trinny London’s Chief Operations Officer. He added that the initiative was also popular with make-up artists, as it meant they could continue to work during lockdown.
“Technology allows us to engage with people in ways we couldn’t previously,” said McGuinness-Smith, referring to the effect that the company’s digital initiatives have had on customer relationships. Communicating and interacting via multiple digital platforms is exactly what the new generation of consumers, the Millennials and Gen Zs, are used to and expect. According to PowerReviews, 52% of Millennials and 63% of Gen Z use social media to discover new products.
Brands are enjoying success from launches and trials now taking place on the “digital shelf”, supported by omnichannel digital messaging. This allows customers to spend more time interacting with a brand, building that relationship and ultimately leading to more positive shopping experiences.
Shop where you want
The convenience of online is being reinforced by AI and AR to bring the personal experience of shopping in-store to the digital realm. Brands are creating a digital “metaverse”, a three-dimensional online environment into which customers can immerse themselves for a while.
Before Christmas, digital-first beauty brand Charlotte Tilbury blazed the trail with its Shop with Friends function, a virtual, 3D Beauty Gifting Wonderland where customers can meet in real-time from wherever they are and shop together. Friends can try on make-up and chat, guided by stylists and influencers as they explore the virtual store.
In the words of Charlotte Tilbury herself, “It combines all the sparkle and retail theatre of our stores with the ease and portability of the digital universe to unveil a truly immersive Charlotte Tilbury experience.”
Shop with Friends is part of the brand’s virtual reality shop, which launched a year earlier. According to Chief Growth and Technology Officer Corinne Suchy, “By launching this new feature within our virtual store, we are truly operating as an omnichannel business to bring our customers rich and immersive experiences whenever and wherever they meet the brand.”
Build your own influencer
The role of influencers in consumer marketing is big and set to get bigger, as technology gives brands more control over their brand ambassadors. Until now, there has been some wariness over the use of influencers in the beauty market, due to cost and reliability. This might explain why figures from Brand Equity show that only 34.1% of beauty industry advertising budgets went on digital advertising, compared to 53.1% for the market in general.
But now brands are building their own computer-generated influencers – avatars that are perfect in every way. Their cost is controllable, they always turn up, they always say the right things, they always look fabulous, and they’re never photographed falling out of a club at six o’clock in the morning!
The virtual influencer is symbolic of the power of digital marketing. More than 50 appeared on social media in the 18 months to June 2020 and today there are over 150 plying their trade, according to virtualhumans.org, which documents the virtual influencer industry. But, rather than paying independent companies to have their virtual influencers promote their products, brands are taking to creating their own.
Charlotte Tilbury’s VR shop features a Magic Charlotte avatar. Prada created Candy to promote its perfume of the same name. More beauty brands are expected to launch their avatars this year. For Gen Z consumers, buying in to a computer-generated role model is second nature and as the technology grows increasingly sophisticated, it will soon be difficult to tell the difference between an avatar and a real human being.
Beautiful for the planet
A by-product of this immersive, interactive, virtual, physical metaverse is that it helps brands to meet sustainability goals. With customers able to try before they buy in a very real online setting, there is less speculative purchasing, fewer returns, less waste, and less energy consumed down the supply chain. Such issues are becoming increasingly influential in consumer choice. If brands can show that they’re not just keeping their customers beautiful but keeping the environment beautiful too, they are more like to gain customer approval and loyalty.
The “seismic shift” to online over the last two years has resulted in a 40% increase in online beauty sales globally. Contrast this with the 8% fall in overall cosmetics sales over the same period. The theory that social isolation is not good for beauty products has been challenged by the performance of the online beauty market, which has bucked the trend in spectacular style.
The pandemic saw e-commerce capture a growing share of the Beauty market – up to 22% from 14% in 2019, according to the L’Oreal 2020 Annual Report – and it’s digital technology that is driving the trend. Innovations that were launched out of necessity at a time of social isolation have established a firm foothold and are now setting the strategic agenda for Beauty sales into the future.
ILG clients are set to win big at the 2021 CEW Beauty Awards. With 359 entries across 33 categories, this year’s event was the biggest CEW Beauty Awards so far and the lucky finalists have recently been revealed.
Congratulations to all brands voted for by CEW members, but we particularly wanted to toast our clients, Charlotte Tilbury, Trinny London, This Works and The Inkey List on being shortlisted as potential winners. These are the nominations:
Charlotte Tilbury – Best British Brand – Mass & Prestige
Charlotte Tilbury – Best New Eye Make Up – Prestige
Charlotte Tilbury – Best New Lip Make Up – Prestige
Trinny London – Best New Face Make Up – Prestige
The Inkey List – Best New Targeted Skincare – Mass
The Inkey List – Best New Hair Product – Mass
This Works – Best New Body Product – Prestige
This Works – Best New Wellbeing Product – Mass & Prestige
As CEW’s preferred logistics provider, ILG distributed the demonstration kits for the awards in June for CEW members to trial and vote for their favourite products across the categories.
Look out for news of the winners on 24th September. Find all the results and discover more about the CEW Beauty Awards here.
Until then, keep the champagne on ice!
CEW members were able to test a wide range of fabulous beauty products and use the online event hub to discover essential background, including ‘how-to’ videos, one-to-one discussions with brands, info on product ingredients as well as webinars and panel discussions.
As CEW’s preferred logistics partner, ILG has the not-inconsiderable task of collating thousands of products from different manufacturers, assembling into pre-determined pack variants and despatching to the homes and businesses of CEW members across the UK in time for the event kick-off on 13th June.
Despite the complexity of the project, our beauty fulfilment experts were well prepared when deliveries from 173 different brands started to arrive at one of our Gatwick warehouses. Once we had the full stock of items, we set to work sorting tens of thousands of creams, cleansers, moisturisers, oils, masks, serums, mists, gels and mascaras into 650 separate demonstration kits. Even more challenging, products had to be assembled into five different variants of kit, each with a predetermined checklist of between 60 and 70 constituent items.
Despite some eye-watering deadlines, we’re pleased to say that hundreds of product demonstration kits loaded with spectacular beauty products were successfully delivered and trialled by CEW members.
Find out more about the CEW Beauty Awards here
Let’s get one thing straight: despite what you might read in other blogs, the tech revolution is not bringing about “the biggest transformation we’ve ever seen” in the logistics industry”, nor are we witnessing “an unprecedented pace of change” – Tom Ashley, Chief Operations Officer, ILG
The train, plane, combustion engine, electricity, telephone… all these innovations brought about much bigger and more rapid leaps forward for logistics than new technology is doing, or will ever do. But, as in sport, the days of breaking the big barriers are gone; it’s the fractional improvements that give competitive advantage today.
In this article, we’ll go through the main ways tech is impacting the fulfilment and delivery industry, including:
- Shaving seconds off order processing
- Streamlining the pick and pack process
- Automating last-mile deliveries with real-time tracking systems
- Anticipatory shipping – using data to anticipate demand
- Using Blockchain to avoid supplier disputes
5 ways in which new logistics technology provides fractional improvements & efficiencies:
- Shaving seconds off order processing
How late can your customers place their orders for next day delivery? Every second it takes for an order to come through to the warehouse is a second lost.
Client integration systems like Fusion, which we use at ILG, connect to the client website and share order information in real-time. So when a customer places an order, we see it within seconds. This gives us more time to pick and pack the order, which means clients can push order cut-off times later and later.
That’s a major selling point, as is the ability to show customers the progress of their order and tracking information in real-time.
- Streamlining the pick and pack process
The biggest cost in a warehouse is the time people spend walking around. Innovations like Pick-to-Light have sped up the picking process. Orders can be batch picked in large quantities and then sorted through a lighted put wall into individual customer orders. The key benefit of this will be the increased flexibility it gives logistics partners to respond to spikes in demand without having to hire in auxiliary staff; for example, on Black Friday, when we might have 10,000 items to pick and pack for one client alone.
Robotic pick and pack systems
But there is a significant opportunity for time-saving by using robots to bring items to the packing station, thus saving those wasted walking hours. While full automation in the warehouse is not currently viable, developments in robotic systems is leading us to a situation where we can implement semi-automation, or so-called ‘cobots’, working with warehouse staff to streamline the pick and pack process.
Hot-spotting and task grouping
Further efficiencies in the warehouse will be achieved through ‘hotspotting’ – using smart relocation to place the most popular products closest to the packing zone – and interleaving tasks so that staff can be organised to carry out more than one task per visit to any given area of the warehouse.
- Automating last mile deliveries with real-time tracking systems
There’s a lot of talk about autonomous vehicles but realistically it’s going to take decades to integrate driverless cars and lorries into the current road transport system. Where automation is already making a difference is in last-mile deliveries.
The last-mile delivery challenge has always been a sticking point for carriers and customers alike. Unpredictable delivery times historically meant customers having to wait in all day, taking time off work and, in some cases, finding it’s all been a waste of time because the delivery has been delayed.
Today the information available to customers via real-time tracking systems has transformed this experience. Now customers can see where their delivery is at any time of day and predict the time of delivery to within an hour, rather than a day or half day as used to be the norm. And this is improving all the time.
Carriers we work with, like DHL and UPS, are also developing the use of drones to add even greater predictability to last-mile deliveries. Don’t look to the skies, though. Last-mile delivery drones are rolling along the pavements to deliver goods between the final hub and the customer. They don’t fall ill, get lost, pick up parking tickets or crash, they can gather and share data as they go and as they become more ubiquitous and efficient, they will represent a major cost saving.
- Anticipatory shipping – using data to anticipate demand
We’re all aware of the influence of seasonality on sales. Christmas, Easter, Mother’s Day, Valentine’s Day, Black Friday… retailers are well aware of these pronounced spikes in the sales curve but accurately predicting the numbers is an inexact science. Then there are the influences that don’t appear on the calendar? The weather, for example. Rain drives people to online shopping; but in what numbers? And what sort of shopping?
Using Big Data and machine learning to identify the more subtle patterns in consumer behaviour can help us to be more accurate and efficient in our ordering patterns and in the way we manage our supply chains. In short, we can predict demand and prepare for it.
Amazon call it ‘Anticipatory shipping’. They are using Big Data to predict customer demand, based on their buying habits coupled with external influences like the weather, and to move stock closer to the end user, ready to complete the last-mile delivery the second the purchase is completed. So customers barely have to wait for their purchases to be delivered. The ultimate goal is ‘zero fulfilment time’.
- Using blockchain to avoid supplier disputes
Relationships along the supply chain are critical to the success of any business that relies on logistics. When missed deliveries happen or goods arrive damaged, it can be difficult to determine or prove exactly where the problem occurred and thus who is liable.
Blockchain technology will help to overcome this problem by providing detailed data on each step of the chain in a secure form that shows stakeholders, without any dispute, whether or not any given supplier has fulfilled their contractual obligation.
You don’t have to understand logistics tech to embrace it.
Some logistics technology – take Blockchain for example – can still leave a lot of people scratching their head. However, the beauty of it is that you don’t necessarily have to understand it to benefit from it. Those tiny margins that new technology is providing are the key to gaining competitive advantage in today’s commercial world. If it works, use it.
Here at ILG, we are constantly monitoring the tech space and looking to implement new and improved logistics processes to enhance the way we have flourishing brands grow. If you have questions about the ways logistics tech could help bring your brand to the next level, contact the ILG team today – either by calling 020 8970 7120 or by filling in one of our quick enquiry forms on our contact page.
The fulfilment expert’s guide to sustainable, stand-out packaging
Impending legislation (coming in 2022) is forcing businesses to reconsider their choice of packaging. This presents an opportunity to investigate ways to improve your product delivery, as well as meeting your sustainability obligations. Could you raise the quality of your packaging? Might there be more economical despatch options?
At ILG we specialise in matching our clients’ packaging to their brand values, including some very high-quality packaging for our Fashion & Beauty clients. Over the years, we’ve worked closely with our packaging partner Lightning Packaging Supplies, together with its Bunzl stablemate Woodway UK, to bring exciting brands customised and perfected packaging solutions.
From our years of experience, we’ve subsequently come to identify a new way of thinking about packaging. This article will go through our primary findings, as well as the key considerations you should be making about your brand’s packaging.
- Why you need to think carefully about your packaging
- What the new 2022 packaging legislation will mean
- Sustainable alternatives to plastic packaging
- How to save cost without compromising quality
- Key questions to consider when choosing your product packaging
Why now is the perfect time to think more carefully about your packaging
Now is the perfect time to consider how you could improve your product packaging, for three main reasons:
- The rules on acceptable packaging are changing – both in terms of consumer expectations and legislation. It’s impossible to have missed the bad publicity about single-use plastics – dubbed ‘the Attenborough effect’ after the TV naturalist’s influential campaigning against the dumping of plastic in the oceans. Public sentiment is now being backed up by official legislation, both in the UK and European Union, which will soon force businesses to find alternative ways to package their goods.
- The increasing possibility of finding sustainable cost efficiencies. A lot of businesses are pursuing false economies by choosing cheap, stock options that may be cheaper to buy but actually cost more to despatch because they are bigger than necessary. While sustainability may be the driver forcing businesses to reconsider their packaging, it is a good time to find out whether you could be packaging your goods more efficiently.
- Consumers expect more from the ‘delivery experience’. Especially in the wake of COVID-19 and the shift to more online (rather than in-person) sales, brands everywhere are having to up their game across all parts of the sales process. Seamless delivery, memorable packaging and considered aftercare play no small role in delighting your customers, so they return to buy from your brand time and again. If you want to learn more about this, check out our article on how Coronavirus has turned Europe into an online market.
What is the new packaging legislation?
Extended Producer Responsibility (EPR) legislation will come into force in 2022, placing a financial responsibility on businesses, with a lump sum being charged for full net recovery of the waste they produce. The amount will vary depending on the material, percentage of recycled content, whether the packaging is functional, socially and environmentally acceptable/responsible and fit for use.
At the same time, the UK will introduce its pioneering Plastics Tax, with the aim of shifting demand towards the use of recycled material. While some plastics are less harmful and more recyclable than others, the Plastics Tax will not distinguish between different types of plastic. They will all be subject to the tax.
Whether or not the UK remains in the EU, the EU’s own Single Use Plastics Directive will inevitably affect businesses shipping goods to or from the EU. This directive will begin by focusing on the most common single use plastic items, like plastic straws and cutlery, but by 2025 the impact on all plastic items will be felt.
Sustainable alternatives to plastic packaging
The new legislation will have a major impact on the choice of packaging, such as bubble wrap and plastic containers. Products such as Geami are offering a sustainable replacement for bubble wrap. Geami is a latticed paper product, which provides a cushioned layer of protection inside the package.
In place of solid plastic containers we are seeing a return to glass, which is more recyclable. This is interesting because glass is not insurable as a packaging item and has been avoided as a result, but new solutions are making glass a viable option again. And efficient, made-to-measure packaging will offer better protection for the glass contents.
So there are alternatives to plastic in all packaging applications and they provide a more pleasing unboxing experience than plastic and bubble wrap.
How to save cost without compromising quality
Among the key drivers behind packaging choice, security is placed above all else, followed by brand. In other words, vendors want their goods to arrive intact and give a good impression of their brand to customers. A common tendency is to choose a stock packaging product and then to make it secure by packing it with an abundance of padding to stop the product rattling around and getting damaged. This might solve the security problem but does it represent your brand?
By spending a bit more on the box and choosing packaging that is made to measure, you can not only enhance your brand perception, you can cut down on the need for padding, which in turn will reduce the volume of the package. So for a slightly bigger outlay on the box, you save money on the overall packaging and on the delivery cost, improve the unboxing experience and cut down on all that bubble wrap.
Key questions when choosing your packaging
While the natural tendency is to approach packaging with cost in mind, there are some other key considerations that we recommend you prioritise. Start by asking yourself:
What message are you looking to present with your brand?
You will make a better choice if you shift your focus onto your company’s goals and the message you want to send to your customers. If you’re trying to give the impression of your brand as simple and no-nonsense, then the packaging should reflect that. If the message is ‘ultra luxury’, ‘fun and memorable’ or ‘homemade and quaint’, you’ll need to make very different choices.
What products are you distributing?
Your packaging preferences will no-doubt be influenced by what products you’re selling. How big are they? What do they weigh? How much protection do they need? This will determine the size of the package, the shape, the security (ie padding, waterproofing etc).
How much customisation will be required?
There is a significant trend in the e-commerce industry for the increase impact of personalised experiences. Gift labelling/wrapping, engraving, delivery notes, etc. are all becoming more and more common. If you know that your fulfilment requirements involve a level of personalisation, you may want to consider making the packaging simpler in other aspects, to cut down on time and costs.
By asking these questions, you will be able to specify your requirements much more accurately, which will enable a much more efficient solution. Your supplier will then be able to advise you on a selection of choices that fit your purpose and meet sustainability requirements. The final choice will then be easy.
Packaging serves a greater purpose than just protecting your products in transit. It contributes to your brand values, adds to your customer experience and conveys your approach to sustainability. So it deserves serious thought – and we are always here to help you come to your decision.
ILG can help you to determine and execute the perfect packaging solution for your e-commerce brand’s needs and values. If you would like time to discuss outsourcing your fulfilment or delivery, call ILG today on 020 8970 7120, or fill out our quick enquiry form on our contact page.
Shopping habits are changing, a trend significantly accelerated by the market disruption caused by COVID-19.
There is a crisis occurring on the high street as consumers turn increasingly to online outlets. In the early days of this revolution it was assumed that sectors like fashion and beauty, which traditionally rely on trying on items before purchasing, might not be affected. But then shoppers worked out that they could treat their home as the fitting room, ordering a selection of items and sending back the ones they don’t want. Now these sectors too are migrating to the Internet and leaving a vacuum on the high street, as evidenced by House of Fraser’s announcement this month that it is closing half of its retail stores.
The revolution is being driven from both sides. As fast as shoppers migrate to the Internet, brands are coming up with innovative approaches to win their loyalty in that space. Digital sampling, using Augmented Reality to allow customers to try before they buy, is becoming more sophisticated by the day. Influencers on social media are being enlisted like social sales reps to promote new launches. User data is being applied to personalise the offer to each individual customer.
For a beauty brand to stand out in this new digital marketplace, it needs to embrace all these innovations, as well as other emotive factors such as the ethics of animal-free products and recyclable packaging, and the optimisation of launch schedules to coincide with a much more flexible calendar than the traditional Christmas and other key dates.
Above all, it needs to be able to guarantee the same feeling of quality and impact on the doorstep as has been traditionally provided in the boutique.
Using 3pl to harness the D2C beauty boom
At ILG we are helping our Beauty partners to thrive in the D2C marketplace by enabling competitive advantage in the following ways:
- Brand differentiation
In order to create impact on the doorstep, your brand values must be maintained through the packaging of your products. We work very hard to make sure the outer packaging is sufficiently robust to protect the inner packaging, which delivers the wow factor. Charlotte Tilbury eye shadow, which won Most Photographable Packaging at the Vogue Beauty Awards, is a prime example. We also help our Beauty partners with their remarketing to customers, delivering branded messaging to stimulate additional sales or convey key messages.
Beauty is about as personal as a retail sector can get. Brands can enhance the customer experience through sophisticated digital technologies; for example, Trinny London’s Match2Me facility, which enables customers to try different products and tones before buying. Brands can also push products to customers through sampling, based on user data gathered through online purchasing behaviours. Your 3pl needs to have the flexibility and detailed product knowledge to fulfil individual sampling requirements.
- Ethics & demonstrating clear brand values
The inclusion of a Champion for Sustainability category in the Vogue Beauty Awards reflects the growing importance of ethical issues, such as recycling and the use of animal products, and the tendency among consumers to base their purchasing decisions on such matters. Beauty brands are responding, both by working increasingly with plant-based products and making a much more conscious effort to use recyclable packaging. Our packaging for Trinny London includes a protective bubble bag which doubles as a temporary make-up bag – just one of many examples of packaging being designed to be reusable.
- Delivery choices
Linked to personalisation is the importance of offering delivery that is appropriate to basket value. From a 3pl perspective, that means providing our customers with a range of carriage and delivery options, from standard services for low value items to express services for high value, prestige purchases.
With the impact of the Coronavirus pandemic, previous consumer priorities around delivery have been somewhat shaken up. Some users are happy to lower their expectations around speed in favour of safety and security. What this means for brands is that you may find your options opening up for a wider range of delivery priorities, making it more important than ever that you work with a delivery provider that offers flexibility.
- Flexible 3PL to fit your schedule
Working with key influencers to promote their products gives Beauty brands a much wider range of opportunities to peg new launches to significant occasions, such as an influencer’s birthday, record or film release etc. This requires your 3pl to have the capability to gear up quickly for big promotions. It also requires warehouse capacity, new packaging, staff training and, of course, the addition of a new line to the inventory. For a launch to be seamless, your 3pl needs to be able to take all this in their stride and maintain the standard associated with your products.
When innovations like online sampling technology are coupled with your products arriving in beautiful, well-branded packaging, you give your customers the same experience they’re used to when they go into a boutique or department store. When the fulfilment and delivery services are properly aligned with your brand, D2C enables beauty consumers to enjoy this experience from the comfort of their living room. And as consumers migrate to the Internet from the high street, the ability to deliver that experience to the doorstep becomes increasingly important.
ILG are proud to have worked with a range of exciting beauty and cosmetics brands on their outsourced fulfilment processes. Click here to find out more about our beauty fulfilment services, or contact the ILG team and discuss options for your brand’s 3PL.
Returns have always been a fact of life for retailers. Some have treated them as a selling point, others have tried to pretend they weren’t happening. Today, there are no two ways about it: returns must be taken seriously.
Online shopping has changed consumer behaviour. Shoppers expect the trust they invest by purchasing online to be reciprocated by a returns policy that gives them a quick, easy refund if they’re not happy with their purchase when it arrives. With some types of goods, notably clothing, shoppers are in the habit of buying numerous items with the intention of sending most of them back, just as they would if they were in-store taking items to the fitting room. The living room has become the new fitting room.
In a recent survey conducted by Trinity McQueen, 75% of respondents who had purchased clothing online said they had recently returned an item. And as shoppers become more attuned to sending items back, they become increasingly aware – and demanding – of the reverse logistics process.
Firstly, they expect returns to be free. Indeed, 47% of respondents in the Trinity McQueen survey said they would not shop with a retailer again if they charged for returns. Secondly, they expect the process to be easy. That applies to every stage of the journey, from finding returns information at the point of sale to knowing when the money has been refunded. Thirdly, they expect it to be quick.
Turning refunds into opportunities
Such customer expectations may look like nothing but trouble for retailers, especially those without a returns policy fit for the modern retail landscape. But for those prepared to accept the challenge as part of their overall value proposition, a situation that could be written off as costly, time-consuming and complex to administer actually presents retailers with an opportunity to gain a competitive advantage, boost brand reputation, build stronger customer relationships and gather valuable marketing insight.
For example, by gathering information on the reasons for returns, you can mitigate for those reasons and begin to reduce the scale of your returns requirement. The table below shows the top five reasons for returning goods in general.
This gives some useful insight as to what you need to address to reduce your returns, eg you might want to look at why so many faulty items are going out. But within each retail category, there is the opportunity to drill down further.
With this sort of detail coming back with returned goods, you can create accurate portraits of each individual customer and use them to personalise your marketing and improve the fit and suitability of their future purchases.
How to profit from returns
Once you’ve accepted that returns are part of the bigger retail picture, there are several steps you need to take to make sure you’re giving customers what they want.
- Cement your returns policy – Being clear about when and how you will accept returns is the foundation to putting in place a process that meets customer expectations and keeps costs to a minimum. Look at your competitors’ policies and those of retailers in other sectors to see where you might be able to deliver more. Build the returns policy into your business plan and make sure you are making the necessary allowances to resource it sufficiently.
- Communicate clearly – According to the Trinity McQueen survey, 74% of shoppers expect to find returns information on the retailer’s website. As you’re now using your returns policy as a selling point, it’s important that you communicate it to customers. The more they have to go looking for it, the more likely they are to give up and shop elsewhere. Communication is very important throughout the sale and return journey. You need to make sure that every link in your reverse logistics supply chain is properly informed of its role, while customers want clear guidance about which returns label to use, they want to be able to track their return and they want to be notified of a refund once their item has been returned.
- Facilitate returns efficiently – With goods coming in from diverse and unpredictable sources, then needing to be sorted, assessed, prepared for disposal or resale, and refunded, reverse logistics are a lot more complex than the supply stream and need to be resourced accordingly. A third party logistics partner who can demonstrate experience and expertise in handling returns can be a major asset in this respect. As well as handling the receipt of goods returned to the warehouse and all that that entails, they can make sure every transaction is updated on your system and offer advice on making the process easier for your customers. The Trinity McQueen survey reports that 60% of shoppers would be less likely to shop with a retailer again following a difficult returns experience. They want to receive returns labels with their item, or a downloadable label sent by email, they like resealable packaging and they want to be able to track their returns because they feel reassured by having evidence that they have sent the item back.
- Use the data to improve your service – Returns present a valuable opportunity to gather customer feedback. When a customer buys from you and is happy with what they receive, you may never hear from them again. But with returns, customers are actively extending their relationship with retailers and you can use this to gather insight about their preferences. Knowing what items they return and why will enable you to build a more accurate picture of each customer, allowing you to personalise your marketing and hone your offer. This should help to reduce the need for returns in the long term. So make sure you include some sort of data gathering mechanism in your returns process.
Treat returns with the same importance as deliveries
Consumers have become accustomed to using free returns services as part of their whole buying process and, with online shopping, they judge a brand as much on the quality of its returns experience as on the quality of its goods and deliveries. The ingredients of a successful returns policy can be summed up in 5 points:
- Make it free
- Make it easy
- Make it quick
- Communicate it clearly
- Use the feedback to improve
A return is the final touchpoint between customer and brand in the retail journey and so leaves the longest lasting impression. Get it wrong and you could lose a customer for life; get it right and they’ll come back to you time after time.
Tom Ashley, Chief Operating Officer
Continuing our series in which ILG Head of Projects and Development, Lee Simmons and I address the key questions customers ask about outsourcing their fulfilment operations, I’m going to turn my attention to the crucial matter of stock management.
There are two aspects to warehouse stock management: the physical and the systemic. When items arrive into the warehouse they are assigned a location both physically and within the warehouse management system (WMS). The number one goal, to prevent over selling, missed sales opportunities and disappointed customers, is always to ensure that the physical stock on the shelf matches the record in the WMS, which in turn matches your system. There are a number of things that warehouse managers do to try and ensure this match 100 per cent of the time.
Cycle counting involves counting a set number of items on a weekly or monthly basis. For example, if you have 120 different stock keeping units (SKUs) and want to count your stock in full twice per year, then you would agree a frequency of 20 per month, five per week, one a day. You can liaise with your fulfilment partner to agree the best times to do this. You don’t want to schedule a stock take right in the middle of your big season delivery but it might make sense to do it during your quieter months and before your big sale, to make sure your stock matches.
Stock control strategy
Every warehouse will have its own strategy, which will involve auditing goods receipt paperwork, counting units below a threshold, counting high value items etc. Whatever strategy your warehouse partner prefers, you may choose be involved in the process.
Taking stock is a high-maintenance process, which should be agreed at the start of any new contract. It involve ‘freezing’ the stock, effectively meaning that all orders are removed from the system so that a complete reconciliation can take place. Make sure you outline in advance who is paying for what and what the impact will be on your business. Will the stock take be completed over a weekend or during normal work hours, and will there be a delay to orders?
Many of our clients require an audited stock take, which is something most fulfilment companies should be au fait with and will work directly with the auditors to support you on.
What goes where?
The layout of warehouse stock follows very different principles to that of retail stock. In a retail environment, it makes sense to position all the same styles and sizes in the same location to make life easier for the customer. In a warehouse, the starker the difference between products, the quicker the items can be identified and picked. Rather than having to hunt through the whole style to find the correct size, you’ll find just one colour or one size in the location. This might come as a bit of a shock when you first go and see your stock.
Sorting your stock system
These are the decisions that govern the physical control of warehouse stock. When it comes to systemic stock management, the first decision you need to make is whether or not you want to split your stock by channel. Throughout my time working at ILG I have seen this done in lots of different ways and there really is no right or wrong answer. It’s just a case of what works for you and your business.
The simplest stock model is one account linked to one pot of stock. However, in our experience there is often a need to split e-commerce from wholesale, or new stock from archive or old. A good way around this is to set up separate accounts, which may just split the stock but may also go as far as invoicing separately.
What’s hot and what’s not?
Finally, it is important that you share information on fast and slow moving lines with your fulfilment partner. This will enable them to store fast moving lines closest to the packing station, while slower moving items can be boxed up and consolidated. Fulfilment houses thrive on throughput rather than large amounts of storage, so anything you can do to keep stocks to an efficient minimum will be in everyone’s interest.
Lee Simmons, Head of Projects and Development
The arrival of goods at our warehouse from your supplier marks a complex transition point. To ensure that this receipt of goods happens smoothly and without mishap, we follow a tried and tested procedure. It involves a number of events that happen at the warehouse before the client’s system is updated and stock made ready for sale. As the starting point for any investigation in the event of a stock discrepancy, it is important for us to follow this process, for clients to understand it and also to play their part. So below we have set out the key considerations that you need to be aware of with regard to the receipt of goods into the warehouse.
While your logistics partner is providing a service and charging for it, there is a commitment required on both sides, as specified in the service level agreement. This might include the presentation of product, specific labelling, supplier manifests and notification methods. In order for your partner to receipt goods quickly and get product to shelf as efficiently as possible, they will need to be prepared in advance to take the delivery and this will involve some form of process between you and your manufacturer.
Be sure to get a commitment from your supplier on when goods will be available within your enterprise resource planning system (ERP). Stock on the floor of a warehouse remains invisible until it is checked in and this will be an area that most logistics partners will charge for, so it is important to get a level of commitment that can be measured and reported on to ensure service levels are maintained.
As soon as stock arrives in the warehouse it must be reconciled against a purchase order or Advance Shipping Notification (ASN), so the delivery can be checked off. All logistics partners will require a document so they can inspect the delivery and confirm that the goods received match the delivery expected. We will ask for this information in advance of the stock arriving so that we can plan suitable resource to check off the delivery as soon as it arrives and prepare the necessary space for storage.
Location location location
All third party logistics companies will have some sort of location set-up within their warehouse. While they can all be different, they ultimately provide the same thing: when goods arrive and have been checked off they will be booked into a given location.
This location will be a specific area, or shelf, or tote bin, which will become the product’s home until it is either sold or moved for any reason. The location will be the first point of an audit trail and this is where the warehouse operative will be directed to, if asked to pick, count or inspect the item.
Your logistics partner’s commitment
Your partner is your eyes and ears and their product knowledge on the shop floor is invaluable. It’s not uncommon for our customers to not see their products and so they rely on us to keep an eye out for any significant changes, such as new packaging or a different code. Your logistics partner should help to identify any changes and ensure that these are brought to light.
A good example of this was a delivery we received containing cameras. We were expecting the delivery but, upon arrival, one of our members of staff (an expert on the contract) noticed a tiny change to the packaging. On further investigation, it turned out that this consignment contained a new model of camera that should not have been sent to us, as it had not yet been released for sale. Needless to say this was reported to our customer and we ended up preventing what could have been a big problem. Our customer certainly appreciated our efforts.
Incidents like this underline just how important it is for your logistics partner to have an intimate knowledge of your products. And it illustrates how an efficient goods receipt procedure provides genuine added value.
Tom Ashley, Chief Operating Officer
For any business that produces goods for the consumer market, the importance of quality control (QC) cannot be overstated. Notwithstanding the considerable cost savings involved in handling returns, a well-planned QC process is a vital component in preserving your brand reputation. This is particularly important for our Fashion and Beauty clients, whose customers expect nothing short of perfection from their very high quality products.
In an ideal world, products would go straight from the manufacturer onto the warehouse shelves without any problems. Alas, it doesn’t always happen that way in the real world. Products arrive late, are coded incorrectly, poorly packaged and sometimes even damaged or faulty. It’s essential not only to catch these issues but also to have the facility to rectify them as quickly as possible.
How your warehouse can help
Your fulfilment partner can play two vital roles when it comes to quality control: firstly, as the last checkpoint before goods go out to your customers, it can be briefed to catch any quality issues; secondly, with the right skills and knowledge, it can put things right, saving time and money.
Having delivered high quality fulfilment services for the Fashion and Beauty sector for many years now, quality checking and rework have become essential parts of our offering. We pride ourselves on knowing our clients’ products very well but we acknowledge that we can never know your products as well as you do – no fulfilment partner can and that’s important to bear in mind. That’s why we encourage our clients to work with us to enable us to carry out quality checking and rework to their high standards.
Pass on your knowledge
The more you can share knowledge with your fulfilment partner, the better they will be at managing your QC. Make time to impart all the knowledge you have, all the faults you’ve picked up on and all the tips you have to make things easier and, most importantly, faster. The faster an item can be quality checked the less it will cost and the more time you will have to sell it.
If you’re preparing to outsource for the first time, consider documenting out your current QC processes in advance. There will be some generic things to look out for but there may also be checks which are specific to a product. All this information will be helpful.
Samples save headaches
It also pays to have a robust sampling process, which includes any outer packaging and labeling. This will capture most issues before they have a chance to be blown up across an entire collection. It can certainly help to avoid real world problems like one we recently had to deal with.
We received 20,000 units of a client’s product into our warehouse but when we tried to scan the barcodes none of them were recognised by our system. Further investigation revealed that the supplier had added an extra digit to the barcode – an apparently tiny mistake with huge repercussions. It meant that none of the items could be scanned and, more serious still, the barcodes on the style sheets that had been shared with retailers were all wrong. Having caught the problem with our QC process, we assembled our rework team to produce and affix the correct barcodes, which was greatly appreciated by our client.
While we can add bags, barcodes etc at the warehouse, as a general rule it is always cheaper and quicker to have these jobs carried out (accurately!) at source. Not only does it hugely slow down the goods receipt process (which Lee will talk about in next month’s post) but it will generally be charged at a higher per unit rate.
Rework and kitting
Our rework and kitting teams offer valuable efficiencies for clients who sell a range of goods that are made up of shared components. For example, one of our clients is a watch brand whose customers can specify different details of the watch they want, eg strap designs. We are able to assemble orders on demand, giving our client greater flexibility on their stock holding.
We are able to offer this service to high-end clients because we work closely with them to gather the knowledge and skills we need. Our clients trust us to send out their products to their clients at the level of quality that is expected of their brand. That is a major responsibility and one that requires an investment in good people. But it’s a challenge that we are always happy to take on because our commitment to quality and our partnership approach are what set us apart.