In the bustling world of health, beauty, and wellness retail, staying ahead of the curve is not just a strategy – it’s a necessity. With customers demanding more personalized experiences and seamless transactions, retailers are faced with a myriad of challenges. From managing promotions to balancing complex product assortments, the road to success can seem daunting. And it doesn’t help that previously successful merchandising and supply chain planning strategies are now glaringly failing.
In this blog, we’ll delve into the obstacles faced by health, beauty, and wellness retailers when it comes to retail planning and explore the transformative role AI plays in overcoming them.
Riding The Waves Of Ever-Volatile Demand
One of the biggest challenges for beauty retailers is predicting and managing demand fluctuations. Demand for beauty products can vary depending on factors such as seasons, holidays, promotions, fashion trends, customer preferences, and even social media.
Especially during seasonal shifts and holidays, sales can fluctuate significantly, requiring retailers to adapt their orders to accommodate heightened demand. Given the prevalence of imported goods, anticipating spikes in demand poses a unique challenge. Failure to order popular products in advance from overseas suppliers could result in missed sales opportunities, while excessive caution may lead to surplus inventory. Hence, precision in forecasting becomes imperative.
Social media is another culprit. A single post by a popular influencer can instantly convert inventory of your beauty product to deadstock. Retailers therefore need to be agile to respond to such demand changes to achieve profitability.
According to a research conducted by Shareablee, Health and Beauty is the most watched video category on Youtube and draws the 2nd highest amount of social media action only after Fashion and Apparel.
With the complexity of demand patterns for beauty products, it becomes challenging to forecast demand accurately and avoid overstocking or understocking. Overstocking can lead to high inventory holding costs, markdowns, and waste, while understocking can result in lost sales, stockouts, and customer dissatisfaction.
To cope with demand fluctuations, beauty retailers need to use data-driven AI/ML based forecasting methods that predict accurate demand at channel category and store nuances.
So it is not a surprise that McKinsey notes that using ML and AI in demand forecasting and supply chain management can reduce errors by up to 50% and reduce lost sales and product unavailability situations by 65%. This can lower warehousing costs by up to 10% and administration costs by up to 40%.
Learn how machine learning improves retail demand forecasting
Managing inventory across channels and stores is becoming increasingly inhumane
Inventory management presents a significant challenge for health, beauty, and wellness retailers in today’s landscape. Not only is accurately predicting demand notoriously difficult, but aligning supply chain planning decisions without jeopardizing retail success adds further complexity. Numerous factors contribute to this challenge, each requiring careful consideration and strategic handling. Let’s address these factors individually to better understand their impact.
Dealing with product diversity
Beauty and personal care items vary widely in size, color, shape, and formulation, necessitating diverse storage, handling, and display requirements. For instance, certain products may necessitate storage in cool, dry environments, while others benefit from attractive or interactive displays.
Additionally, beauty products exhibit distinct life cycles, margins, and turnover rates, influencing decisions regarding inventory replenishment and allocation. Supply chains need to adjust to this new reality.
As Omni-channel as it could get
Furthermore, in today’s dynamic environment where health, beauty, and wellness retail is evolving towards customer-centricity and omnichannel experiences, consumer expectations have soared.
Customers demand superior quality, abundant availability, and a diverse array of beauty products, alongside seamless, personalized shopping experiences characterized by convenience and speed. They anticipate multiple channels and options for browsing, purchasing, and receiving products, including online platforms, physical stores, and click-and-collect services.
The prevalence of online sales in health and beauty sectors often surpasses that of other industries, underscoring the necessity for real-time monitoring of product availability. A shortfall in any item can result in the loss of an entire customer order.
While most customers show Omnichannel buying behavior, visiting store is central to decision making
To meet these heightened expectations, beauty retailers must integrate their inventory seamlessly across various channels and locations, optimize allocation and distribution, and offer tailored services to enhance customer satisfaction and loyalty.
The rise and rise of complex promotion mechanics
Health and beauty retailers operate in a cutthroat market where promotions dominate, comprising a whopping 80% of goods.
Innovative sales tactics like “buy one, get one free” and “buy one, get two” are commonplace, demanding a unique approach to inventory management.
Navigating this terrain requires retailers to juggle demand projections and orders with finesse, ensuring they don’t drown in excess stock while keeping shelves well-stocked for eager customers.
The current replenishment techniques that rely on excel based calculations and past-data modeling are proving inadequate in this fast-paced retail environment where supply chain is fragile. Retailers need to realize the complexity has greatly increased and leaving key ordering decisions to manual interventions can prove costly.
This is where AI-powered hyperlocal replenishment planning can help. By not just factoring for demand fluctuations through more accurate predictors of sales, but also accounting for supply chain factors such as lead time, minimum order quantity, shelf life and expiry date – AI powered replenishment is scarily accurate everytime. This can mean your team being more accurate in ordering for over 85% of SKUs.
Check out top 5 reasons why your store replenishment might be ineffectiveSuppliers galore, but not enough collaboration
As a beauty retailer, maintaining seamless communication with suppliers is paramount to avoid delays and frustration. The cosmetics and personal care industry moves at lightning speed, demanding swift responses for thriving businesses. With innovation at its core, there’s little margin for error.
Introducing new products presents its own set of challenges. From supplier onboarding to approvals, updating information, placing orders, processing payments, and sharing vital demand signals, every step requires meticulous attention.
Unfortunately, traditional collaboration methods often rely on manual processes, prone to errors and missed opportunities. It’s no surprise that nearly 80% of retail product launches end in failure without effective supplier processes in place.
Moreover, the costs associated with managing supplier information and the order-to-payment cycle are significant. Many retailers still rely on labor-intensive methods, with an estimated cost of nearly $1 million for health and beauty retailers just to maintain these records.
Furthermore, effective coordination with suppliers is critical for successful trade promotions. Failure to do so can result in significant financial losses, with retailers risking over $1.5 million in missed opportunities and operational costs. To mitigate these risks and maximize profitability, streamlined supplier processes and enhanced communication channels are essential.
Check out your potential savings with true supplier collaboration
Empowering Your Teams With The Power Of AI
In the ever-evolving world of health, beauty, and wellness retail, embracing AI-powered solutions can revolutionize your team’s approach. The true power of AI lies in its capacity to learn and adapt to the intricacies of your business, offering granular insights to optimize decision-making. Here are the key areas where AI can truly elevate your operations:
1. Demand Forecasting: AI-driven demand forecasting frameworks utilize advanced algorithms to analyze historical sales data, market trends, and external factors such as weather, promotions, social media influence. By accurately predicting future demand, retailers can optimize inventory levels, minimize stockouts, and reduce excess inventory holding costs. This not only ensures product availability but also enhances customer satisfaction and maximizes profitability.
2. Inventory Replenishment: AI-powered replenishment optimization enables retailers to transform from static and “one-size-fits-all” to hyper-local replenishment planning. Its ML-based demand forecasting accurately predicts real demand across store, channel and categories while intelligent algorithms optimize order plans for constraints such as shelf-life, lead-time, expiration date, minimum order quantity, minimum display stock, and standard ordering frequency constraints. Automated reorder triggers ensure timely replenishment of stock, reducing the risk of stockouts and eliminating manual intervention. By optimizing inventory levels across channels and locations, retailers can improve operational efficiency and capitalize on sales opportunities.
3. Supplier Collaboration: Smart and automated supplier platforms facilitate seamless communication and collaboration with suppliers, streamlining processes from product onboarding to order management. By automating supplier-related tasks such as order placement, invoice processing, and payment reconciliation, retailers can minimize errors, reduce lead times, and improve supply chain efficiency. Enhanced visibility into supplier performance and inventory availability enables proactive decision-making and fosters stronger partnerships.
Conclusion
In the fast-paced realm of health, beauty, and wellness retail, challenges like fluctuating demand and complex supply chains are ever-present. Yet, AI-powered solutions offer a transformative path forward. With AI driving demand forecasting, inventory management, and supplier collaboration, retailers can not only meet but surpass customer expectations, all while boosting profitability. In this ever-changing landscape, AI stands as the cornerstone of success.
