A REVAMP AT REVLON TO CUT RETAIL RETURNS
NEW YORK — Revlon set in motion a package of new terms for its U.S. retailers on Monday that the company said is intended to lower merchandise return rates and encourage a more efficient supply chain overall.
The new terms, which Revlon said will also work toward accelerating market growth, follow points given in last month’s speech by Jeffrey Nugent at the Cosmetic Buyers Forum. Nugent, president and chief executive officer of the company, had promised retailers more of a partnership in getting products off the shelves.
The new terms of trade offer retailers a program by which Revlon will reward customers for meeting sell-through goals and ordering more efficiently. It’s a structure, Revlon said, by which both the risks and benefits of buying practices would be shared by the company and its retail customers. The terms will take effect January 1, 2001, with transitional steps to begin this month. In addition to the trade terms, Revlon also announced on Monday a commitment not to raise prices for its retail partners in 2001.
“We are changing the way we go to market to build a closer, more mutually beneficial relationship with our trade partners and to exercise the responsibility we have as the category leader to drive market growth for ourselves and our partners,” said Larry Aronson, president of North American sales, customer marketing and business development, in a statement.
Inventory buildups have plagued the company, especially in the face of the 17.4 percent drop in sales last year. In order to bring down return rates and promote more efficient product ordering, Revlon’s new bonus program will offer certain incentives to retailers who succeed at lowering their merchandise returns.
Under the new plan, if a retailer’s actual returns fall below targets, that retailer will receive 50 percent of the cost savings from Revlon. A flat rate allowance for damages will be instituted, intended to eliminate costly handling of damaged returns.
The program also deals with discontinued stockkeeping units. Revlon said it will be giving retailers a six-month notice of the discontinuation of any product, to allow time for inventory reduction measures. Starting 120 days from discontinuance, Revlon will provide retailers with a 50 percent markdown for all of the discontinued items they sell. Revlon will accept returns at 85 percent of their list price for any discontinued items that do not sell.
Another way Revlon is seeking to increase sell-through is to alter its policy for promotion allowances. Allowances will now be based on the previous year’s consumer sell-through volume by the retailers at Revlon’s list price, rather than shipments of Revlon products to the retailer. Once last year’s sell-through is exceeded, retailers will earn additional market development funds.
As part of the new terms, Revlon will also be passing on some of the cost savings it achieves through varying modes of delivery: warehouse, cross dock or direct store delivery, in the form of price discounts for retailers.
“Our new approach clearly encourages more efficient practices and procedures throughout the supply chain and is focused on maximizing sell-through to consumers,” said Aronson.
The plan also calls for the rollout of a new retail wall system of cabinetry and fixtures, that will be phased in over the next three years, starting first with higher volume stores and new or remodeled outlets. Other changes focus on retail coverage, returns, market development funds and logistical efficiency.
Following complaints that Revlon was out of touch with many of its smaller retailers, the new terms will increase retail coverage to allow for more in-store assistance and more frequent contact between the company and its retailers.
Similar trade terms will be introduced for retailers that only carry Revlon’s beauty care products, such as supermarket chains.