Supply Chain Keys to Developing Ecommerce in Cosmetics

Introduction

In the age of Amazon, cosmetic companies face the challenge of developing their e-commerce businesses. The strategy to continue to grow and capture market share in this highly competitive market is essential. Consumers are eager to shop for cosmetics online, and companies that are slow to adapt may be left behind.

Developing e-commerce in cosmetics is not without its hurdles, though. A perfect supply chain is the key enabler of the successful adaptation to the online market. As cosmetic companies evolve their supply chains to support e-commerce, there are a few keys to consider.

1. Visibility

Without the right data infrastructure in place, it's impossible to run an effective e-commerce business. This is especially true for companies trying to develop complex omni-channel retail strategies. Being able to track orders in an OMS (Order Management System) is essential. Having the data infrastructure in place and being able to see it is a prerequisite for the successful adaptation to e-commerce.

2. Improving Demand Forecast

E-commerce is on the rise, and being able to predict demand per channel is necessary for effective planning. Since there's no precedent for the high e-commerce volumes that we see today, eliminating bias in the demand forecast method and ensuring the level of aggregation is correct are two common issues that can be corrected. Diagma specializes in helping correct these types of demand forecast issues, in addition to simply having visibility to the right data, as discussed in the first point.

3. Network Design to Support E-commerce

Consumers are demanding faster delivery in the online world. Having the correct supply chain infrastructure to achieve your service speed targets is a must. Optimizing network flows and stock positions to quickly meet demand is not only required to keep consumers happy but also an investment into your company’s future position in this industry.

4. Consumer Experience

There are important differences in the consumer experience between purchasing cosmetics in physical stores versus online. Including the right SKUs (Stock Keeping Units) in the online catalog—without overwhelming consumers—can help them feel they have options. The packaging for online sales can also contribute to a satisfying consumer experience. However, having nice packaging can chip away at margins. Having the right packaging while optimizing costs is crucial. The appropriate supply chain infrastructure to support e-commerce packaging is also required.

Conclusion

Although there are many similarities between running a thriving e-commerce business and a traditional retail business in cosmetics, specific challenges arise when evolving to a more online-centric business. Using the keys discussed can help ensure that your supply chain is developing in a direction to support a thriving e-commerce business well into the future.

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Keywords

• Data Infrastructure
• Omni-channel Retail Strategies
• Order Management System (OMS)
• Demand Forecast
• Network Flows
• Stock Positions
• Consumer Experience
• SKU (Stock Keeping Units)
• Packaging Optimization

FAQ

Q1: Why is data infrastructure so important for e-commerce in cosmetics?
A1: Data infrastructure is essential because it enables the effective tracking of orders and helps manage complex omni-channel retail strategies, providing the necessary visibility for successful e-commerce operations.

Q2: How can companies improve their demand forecasts for e-commerce?
A2: Companies can improve their demand forecasts by eliminating biases and ensuring correct levels of aggregation. Specialized firms like Diagma can help correct common demand forecast issues.

Q3: What role does network design play in the e-commerce supply chain?
A3: Network design is crucial for meeting service speed targets and keeping consumers happy. By optimizing network flows and stock positions, companies can quickly meet demand, ensuring a good consumer experience and future industry positioning.

Q4: How can companies balance packaging quality with cost optimization for e-commerce?
A4: Companies should include the right number of SKUs in their online catalog to offer variety without overwhelming consumers. They should also focus on making packaging appealing yet cost-effective, supported by the appropriate supply chain infrastructure.