NEW YORK -- Beauty is taking its first, unsure steps into cyberspace.
Long after the apparel and accessories industries went on line with computerized Quick Response inventory management systems, the cosmetics industry is in the initial stages of plugging in.
Two years ago, the talk was about manufacturers putting bar codes on their packaging, allowing outgoing products to be scanned at the checkout counter and generating sell-through data for the computers that keep tabs on inventory and automatically fire off orders to manufacturers for replenishment.
Now the discussion for many companies has progressed to the testing stage. A number of firms have either begun testing new systems with their department store partners or are contemplating the first hookup.
Some firms that produce cosmetics for the mass market have a head start on prestige manufacturers, because discounters like Wal-Mart and drugstore chains have been tracking inventory for years.
The heart of the computer network, called Electronic Data Interchange, is seen by many industry executives as the key to the future. It is valued not only for the mundane benefits of inventory management and reorder generation, but for the flow of precise sales information, helping marketers make more accurate sales forecasts.
"There is no question that technology is going to change the way that we operate,"said Fred Langhammer, executive vice president and chief operating officer of Estee Lauder Cos. He said the computer feedback will allow manufacturers to be "smarter and more efficient," not only in knowing what to sell to the stores, but what quantities to produce in factories.
Langhammer described Lauder's progress as in the "starting phase of an orderly implementation plan" that he estimates will take three years. The Lauder organization is hooked up to select groups of doors within the major department store chains.
The firm's electronic effort has been spearheaded by John Corrigan, senior vice president of global information services.
Dan Brestle, president of the Clinique division of Lauder, noted, "The key is having the right merchandise in the right store at a time when the customer is there." "If anybody wants to stay in business, they have to be on EDI," said Alfonso Lopez, president of Tsumura International, based in Secaucus, N.J.Tsumura manufactures a broad array of products, ranging from Ninja Turtles toiletries, to the Vitabath line, to Pierre Cardin's fragrances. The number of active stockkeeping units totals 1,200.
During the last three years, the company has hooked up to 40 retail accounts, representing an estimated 10,000 doors, and expects that figure to rise to 75 to 80 by the end of the year. The nature of the stores also is wide-ranging -- from Wal-Mart to Dayton's.
Lopez said the amount of volume Tsumura did on EDI last year totaled $155 million to $160 million. The projection for this year is $175 million.
As expected, the system speeds Tsumura's inventory turn, Lopez said, and saved the company over $100,000 in overtime labor and temporary help. The system eliminates or lessens the cost of administration, postage, paper and data entry errors.
Then there's the accuracy of the information. "From September onward, I can track on a weekly basis how each Christmas sku is doing at Wal-Mart," Lopez said. "It gives us an incredible tool to read with total accuracy the performance of each sku. It allows us to forecast everyday products more accurately. We can manage the business 1,000 times better."
Lopez, however, said there are some points in the system that need watching. One is reorder point -- the inventory level that triggers an order for fresh goods. If it is set too low, inventories can be exhausted before the replenishment order arrives at the store.
"You could be running out of stock with some stores," Lopez said.
Another issue that concerns him is the rate of inventory turn, one of the system's chief attributes. Lopez says he worries that a particular retailer will not understand that merchandise moves at different rates, depending on the season. "A retailer might say that I am not generating the turn I can produce during the Christmas holidays," Lopez said, adding that he hasn't encountered that problem yet.
Cosmair Inc. may have a unique experience because it is a major leader of the prestige market that has already experienced EDI through its mass market divisions.
"One of the great benefits for the future is having the knowledge of who are the users of the product and how the business is growing," said Guy Peyrelongue, president and chief executive officer of Cosmair. "It's totally amazing, the amount of data you get. It makes for much better targeting."The L'Oreal cosmetics, fragrance and hair care divisions of Cosmair have been on line in the mass market for some time, over a year with Wal-mart, for instance. The firm's prestige divisions, including Lancome, are slated to begin testing next year.
Peyrelongue can look into both worlds, and the contrast leaves him with some reservations, he said. His chief concern is that manufacturers and retailers work closely together in carefully hammering out mutually agreeable parameters.
"In the nature of the business, the department stores are different from the mass market, and that has to be watched very carefully," Peyrelongue said, explaining that prestige marketing is far more intricate.
He underscored the need for care in defining accurate maximum and minimum inventory levels and suggested that calibration becomes difficult when it comes to seasonal and promotional merchandise that doesn't have the same track record as basic goods.
"It should be handled outside the system," he suggested. "We have suffered somewhat in some stores. Some shades have been out of stock."
He added, "This system does not signal out-of-stock situations. That has to be watched."
In order to guarantee efficiency, Peyrelongue said retailers have to understand that the attributes of department stores are also what makes them problematic for computer programmers. "The lines usually have many more sku's [than in chain drugstores and discounters]," he said. "There are more shades of foundations and eye makeup and more sku's of skin care because the lines have more specific products," Peyrelongue said, adding that what department stores offer is service and choice, which is"part of the excitement."
Also, the intensity of promotions and launches contrast sharply with the mass market, where the events are fewer because the chief means of promotion is via massive national advertising programs.
He pointed out that the Lancome division is planning three major launches in department stores in the first half. "We never could do that in the mass market," he said.
Another wrinkle is presented by promotions. "If you are not able to support products with gift-with-purchase or purchase-with-purchase promotions, you are not in the ballgame," Peyrelongue said. "It is very important that we work closely with retailers to develop guidelines."At Lauder, Langhammer noted there are many department stores differing in their regional characteristics, and the computer system will give manufacturers the added finesse to accommodate those regional differences.
Another benefit, Langhammer said, is a lessening of administrative work that will free the field sales force to spend more time on selling products.
"We are going quickly from a sell-in to a sell-through force," Brestle added.
With more accuracy in forecasting and more help pushing the goods across the counter, there will be less merchandise piling up in the warehouse due to overproduction.
Fewer returns will come back from the stores, as well, which Langhammer referred to as the "double whammy."
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye