{"id":21581,"date":"2017-11-12T18:45:06","date_gmt":"2017-11-12T23:45:06","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/is-fast-beauty-the-next-fast-fashion\/"},"modified":"2017-11-12T18:45:06","modified_gmt":"2017-11-12T23:45:06","slug":"is-fast-beauty-the-next-fast-fashion","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/is-fast-beauty-the-next-fast-fashion\/","title":{"rendered":"Is Fast Beauty the Next Fast Fashion?"},"content":{"rendered":"<p><strong>Fast Fashion All Over Again?<\/strong><\/p>\n<p>The profound impact of the \u201cfast fashion\u201d effect in retail has been well documented [1]. Amidst a stagnant retail economy, brands including Zara, H&amp;M and ASOS have fueled massive growth via a first-to-market strategy. Underlying these brands\u2019 success is extreme compression of their supply chains [2]. Massively shortened manufacturing lead times allow consumers to purchase trending runway looks off-the-rack \u2013 often, before even the couture designer has commercialized the original design. As seen in <strong>Figure 1<\/strong> below, the supply chain lead times of these fast fashion players significantly outstrip traditional retailers such as Gap and Ralph Lauren, both of which have struggled as of late [3],[4].<\/p>\n<p><strong>Figure 1<\/strong><\/p>\n<figure id=\"attachment_21569\" aria-describedby=\"caption-attachment-21569\" style=\"width: 304px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-21569\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1-300x145.png\" alt=\"\" width=\"304\" height=\"147\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1-300x145.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1-768x371.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1-1024x494.png 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1-600x290.png 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/atlas_Hk3M8Hcb-@2x-1.png 1280w\" sizes=\"auto, (max-width: 304px) 100vw, 304px\" \/><\/a><figcaption id=\"caption-attachment-21569\" class=\"wp-caption-text\">Source: The Atlas citing Various articles, https:\/\/www.theatlas.com\/charts\/Hk3M8Hcb-, last updated 5 months ago, accessed November 9, 2017.<\/figcaption><\/figure>\n<p>The beauty industry has not (yet) been disrupted as significantly by such \u201cfast\u201d players, owing to several historic differences in beauty vs. fashion\/apparel retailing:<\/p>\n<ul>\n<li>Beauty products tended to be replenishment purchases, meaning consumers were more likely to repurchase a favorite product repeatedly than to constantly seek out new trends<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>In the absence of regular runway shows, as seen in the fashion world, trends in beauty had historically been less observable and thus more difficult to copy-cat by fast players<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>Finally, the majority of beauty brands distributed via unowned retail channels, meaning most brands lacked a direct-to-consumer connection, reducing opportunities to respond directly to new buying patterns<\/li>\n<\/ul>\n<p><strong>How Should a Beauty Incumbent React?<\/strong><\/p>\n<p>Digitization across the beauty value chain has massively disrupted the industry, and allowed a host of nimble \u201cfast beauty\u201d players to challenge incumbent organizations [5]. The trends laid out above have begun to reverse, necessitating swift organizational change. The remainder of this post will focus on how one such incumbent, Estee Lauder Companies (ELC), should react to these new forces.<\/p>\n<p>As seen in <strong>Figure 2<\/strong> below, companies within the Estee Lauder Companies portfolio (including brands such as MAC, Clinique, Estee Lauder and Bobbi Brown) have historically seen lower inventory turnover metrics vs. beauty peers. Although ELC\u2019s selective distribution has historically been cited to explain their slower inventory turn, supply chain also plays a role.<\/p>\n<p><strong>Figure 2<\/strong><\/p>\n<figure id=\"attachment_21571\" aria-describedby=\"caption-attachment-21571\" style=\"width: 300px\" class=\"wp-caption alignnone\"><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/EL-supply-chain2.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-21571 size-medium\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/EL-supply-chain2-300x208.jpg\" alt=\"\" width=\"300\" height=\"208\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/EL-supply-chain2-300x208.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/EL-supply-chain2-600x416.jpg 600w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/EL-supply-chain2.jpg 660w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-21571\" class=\"wp-caption-text\">Source: Penny Morgan, \u201cEst\u00e9e Lauder\u2019s Strategies to Improve Supply Chain Performance,\u201d Market Realist, August 28, 2015, http:\/\/marketrealist.com\/2015\/08\/estee-lauders-strategies-improve-supply-chain-performance\/, accessed November 9, 2017.<\/figcaption><\/figure>\n<p>No brand within the ELC portfolio is positioned as a \u201cfast beauty\u201d player, and thus specifically optimized to quickly capitalize on emerging trends in the industry from a manufacturing perspective. As a result, the organization has had little need to re-engineer supply chains to optimize for quicker inventory turns, and more urgent speed-to-market demands. ELC has taken several steps to begin to develop these capabilities. For instance, the portfolio acquired two new brands in 2016, Becca Cosmetics and Too Faced, both of which distribute primarily through Sephora [6]. Sephora tends to be a more trend-driven selling environment than the department store channel. To make these new brand acquisitions successful, ELC will need to focus on optimizing supply chain from a speed-to-market perspective.<\/p>\n<p>Another way that ELC has responded to the \u201cfast beauty\u201d threat in the industry is to reposition legacy brands as being more trend-driven. For example, MAC Cosmetics has begun to explicitly draft off the success of other brands in the industry with a copy-cat strategy \u2013 for instance, the brand recent released a \u201cLip Duo\u201d product to rival the massively successful \u201cLip Kit\u201d popularized by Kylie Cosmetics. However, MAC\u2019s product release occurred months after the Lip Kit phenomena had already taken the beauty industry by storm. Earlier signal detection, coupled with a more responsive supply chain, would have allowed MAC to capitalize even more effectively on the rising tide of the Lip Kit trend.<\/p>\n<p><strong>How to Get Even Faster<\/strong><\/p>\n<p>Estee Lauder Companies should consider additional steps in order to remain competitive in the face of a rapidly digitizing beauty supply chain:<\/p>\n<ul>\n<li><strong>Social Media as Signal Detection: <\/strong>Platforms like Instagram have provided unparalleled insight into consumer demand, and provided a new way for brands to engage in micro trendcasting. Social web should be thought of as a external \u201cpull driver\u201d in the context of a digitalized supply chain, and ELC must design its analytics function appropriately to take advantage of these new beacons. [7]<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li><strong>Diversification Away from Legacy Channels of Distribution: <\/strong>ELC should diversify distribution away from the struggling department store channel, and focus on high-growth specialty beauty retail (e.g. Sephora, ULTA) and direct-to-consumer selling. While the former will inspire urgency to innovate in order to remain competitive in a trend-driven selling environment, the latter will facilitate an even closer customer relationship.<\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<ul>\n<li><strong>Acquisition of a Fast Beauty Brand: <\/strong>Finally, ELC should consider building or buying a true fast beauty brand, to compete with new market share stealers on their own turf. However, the organization will need to grapple with new questions: What new skills will be required to make such a brand successful? Is it possible to reverse-engineer learnings from this type of brand across the broader ELC portfolio?<\/li>\n<\/ul>\n<p>(Word count: 793)<\/p>\n<p>[1] Paula Rosemblum, \u201cFast Fashion Has Completely Disrupted Apparel Retail,\u201d <em>Forbes<\/em>, May 21, 2015, <a href=\"https:\/\/www.forbes.com\/sites\/paularosenblum\/2015\/05\/21\/fast-fashion-has-completely-disrupted-apparel-retail\/#581fb4a7e3eb\">https:\/\/www.forbes.com\/sites\/paularosenblum\/2015\/05\/21\/fast-fashion-has-completely-disrupted-apparel-retail\/#581fb4a7e3eb<\/a>, accessed November 12, 2017.<\/p>\n<p>[2] Oliver Wyman, \u201cFast Fashion: Staying On-Trend with a New Style of Supply Chain,\u201d <em>Oliver Wyman,<\/em> 2015, <a href=\"http:\/\/www.oliverwyman.com\/content\/dam\/oliver-wyman\/global\/en\/2015\/aug\/2015_OliverWyman_Fast_Fashion_screen.pdf\">http:\/\/www.oliverwyman.com\/content\/dam\/oliver-wyman\/global\/en\/2015\/aug\/2015_OliverWyman_Fast_Fashion_screen.pdf<\/a>, accessed November 12, 2017.<\/p>\n<p>[3] Stephanie Hoi-Nga Wong, \u201cRalph Lauren\u2019s \u201880s Empire Struggles to Adapt to Modern Fashion,\u201d <em>Bloomberg, <\/em>February 2, 2017, <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2017-02-02\/ralph-lauren-s-80s-empire-struggles-to-adapt-to-modern-fashion\">https:\/\/www.bloomberg.com\/news\/articles\/2017-02-02\/ralph-lauren-s-80s-empire-struggles-to-adapt-to-modern-fashion<\/a>, accessed November 12, 2017.<\/p>\n<p>[4] Nicholas Rossolillo, \u201cWhy Gap Will Keep Struggling in 2017,\u201d <em>The Motley Fool<\/em>, December 16, 2016, <a href=\"https:\/\/www.fool.com\/investing\/2016\/12\/16\/why-gap-will-keep-struggling-in-2017.aspx\">https:\/\/www.fool.com\/investing\/2016\/12\/16\/why-gap-will-keep-struggling-in-2017.aspx<\/a>, accessed November 12, 2017.<\/p>\n<p>[5] Janna Zittrer, \u201cCosmetics companies take cues from fast fashion to find success,\u201d <em>The Globe and Mail, <\/em>March 21, 2017, <a href=\"https:\/\/beta.theglobeandmail.com\/life\/fashion-and-beauty\/beauty\/cosmetics-companies-take-cues-from-fast-fashion-to-findsuccess\/article34360651\/?ref=http:\/\/www.theglobeandmail.com&amp;\">https:\/\/beta.theglobeandmail.com\/life\/fashion-and-beauty\/beauty\/cosmetics-companies-take-cues-from-fast-fashion-to-findsuccess\/article34360651\/?ref=http:\/\/www.theglobeandmail.com&amp;<\/a>, accessed November 12, 2017.<\/p>\n<p>[6] Chantal Fernandez, \u201cEstee Lauder vs. L\u2019Oreal: Who\u2019s Winning Beauty\u2019s Arms Race?,\u201d <em>Business of Fashion, <\/em>January 31, 2017, <a href=\"https:\/\/www.businessoffashion.com\/articles\/intelligence\/estee-lauder-vs-loreal-whos-winning-beautys-arms-race\">https:\/\/www.businessoffashion.com\/articles\/intelligence\/estee-lauder-vs-loreal-whos-winning-beautys-arms-race<\/a>, accessed November 12, 2017.<\/p>\n<p>[7] Stefan Schrauf and Philipp Berttram, \u201cIndustry 4.0: How digitization makes the supply chain more efficient, agile, and customer-focused,\u201d <em>Strategy&amp;<\/em>, 2016, <a href=\"https:\/\/www.strategyand.pwc.com\/media\/file\/Industry4.0.pdf\">https:\/\/www.strategyand.pwc.com\/media\/file\/Industry4.0.pdf<\/a>, accessed November 12, 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fast fashion players like H&amp;M and Zara massively disrupted the world of apparel retailing via compressed supply chains. Will beauty be the next category to experience this type of shock?<\/p>\n","protected":false},"author":10085,"featured_media":21582,"comment_status":"open","ping_status":"closed","template":"","categories":[186,2029,3326,597,17],"class_list":["post-21581","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-beauty","category-digitization","category-fast-beauty","category-fast-fashion-uncategorized","category-supply-chain","hck-taxonomy-organization-estee-lauder-companies","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Is Fast Beauty the Next Fast Fashion? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/is-fast-beauty-the-next-fast-fashion\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is Fast Beauty the Next Fast Fashion? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Fast fashion players like H&amp;M and Zara massively disrupted the world of apparel retailing via compressed supply chains. 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