L'Oréal's CX - baking in the supply chain elements

Den Howlett Profile picture for user gonzodaddy October 7, 2018
When we talk about the customer experience we often concentrate on the front-facing stuff. What about the supply chain? L'Oréal is a great example of how you win by thinking front to back with the customer at the center.

loreal lipstick
We have had plenty to say about L'Oréal's road to digital, focusing mostly on the front facing customer experience. For example, noting the recent Facebook partnership for augmented reality, Derek duPreez had this to say:

The first fruits of that competitive differentiator are about to be seen as L’Oréal partners with Facebook to offer a ‘try before you buy’ experience for customers. In the traditional beauty retail space, the most common way for customers to experiment with new make-up is to visit a bricks-and-mortar store and try samples. While for many that might be an enjoyable Saturday afternoon pastime, for others it’s a time-consuming exercise that leads to them sticking to what they know works for them. That in turn limits the potential for firms like L’Oréal to roll out new products.

On the other hand, if customers can use Facebook camera functions to ‘try on’ new looks and styles without the fuss of having to sit in a make-up chair in-store, then there’s more incentive to experiment with new offerings. This in turn should lead to an uptick in conversion to sales.

Most recently and in the run-up to Dreamforce, Jon Reed spoke with Dwight Moore, Salesforce Retail Industry Product Marketing Lead who name-checked L'Oréal on the topic of data management as a part of the customer discovery and personalization experience:

L’Oreal increased their reach by 33 percent by leveraging the DMP. So we were able to help them find 33 percent more people in their target audience through this technology. So it’s really a powerful, and I think that’s a trend we’ve seen over the last two years.

What we haven't discussed is how 'going digital' touches the supply chain. For that analysis, we need to turn to Lora Cecere, Founder and CEO of Supply Chain Insights who has just released a detailed case study covering L'Oréal's supply chain. Cecere has ranked L'Oréal as:

...a Supply Chains to Admire winner for four consecutive years. The award, based on beating the industry peer group on rate of improvement on the key metrics of growth, operating margin, inventory turns, and Return on Invested Capital (ROIC) while outperforming their peer group, is tough to achieve. We complete the analysis each year.

The analysis is interesting across multiple dimensions - not least the comparisons drawn between L'Oréal, Estée Lauder and Revlon, all of which we have profiled. Earlier in the year, for example, Stuart Lauchlan said this of Revlon:

There’s an awful lot of digital work to be done at Revlon. The company is closer to 130-year-old Avon than to Estée Lauder or L’Oréal in terms of its readiness to adapt to an e-commerce world. To its credit, the firm does recognise this shortcoming and seems to be trying to put the necessary resources in place to address it. But there’s a lot of catch-up needed…

In Cecere's analysis, Revlon ranks 12 in her composite supply chain index while L'Oréal ranks 2.

At the beginning of this year, Lauchlan noted that Estée Lauder focuses on customer experience across multiple channels, making extensive use of social media, but there was nary a word about the supply chain element from the company's leadership. Cecere, on the other hand, notes the relative performance difference between L'Oréal and Estée Lauder in this graphic:

revlon estee lauder

While people will always argue methodology, there can be little argument about the extent to which L'Oréal has experimented with just about every buzzy technology as part of its ongoing journey. So what makes the difference? Cecere explains it this way:

L’Oréal’s global strategy embraces globalization with a keen focus on the customer. This case study is the best example we have seen of a customer-centric supply chain...

...Anticipating the shifts in demand, the company’s focus is increasingly digital. In China, for example, more than 40% of the company’s business through eCommerce. The company experienced a 34% growth in global e-commerce in 2017 and is expecting the trend to continue. This is transforming the ways L’Oréal addresses the business. More than 38% of L’Oreal’s advertising budget is now being spent on digital. This is how the company activates the markets and to ensure alignment, the supply chain team works closely with the digital marketing teams.

With a keen focus on the customer, L’Oréal senses and uses customer sentiment. The Company's senses consumer preferences to change and align their portfolio to deliver personalized products for purchase anytime and anywhere. This has pushed the company to hyper-connectivity with the final consumer. And, to meet the expectations of eco-friendly customers, the company has developed a method of assessing the environmental impact and the social contribution of each product they launch. If a conceptualized product does not exceed the results of an already launched similar product, it won’t be launched. This approach has fundamentally shifted L’Oréal’s response to the market.

(My emphasis added.)

My take

There's much more to learn from the detailed case study and I encourage readers to check it out. But for me, the most important lesson here is that 'going digital' is not just about the customer front-end experience or the in-store inventory matching needs but an entire customer journey/experience that includes supply chain elements the customer does not see but which are vital to outcomes. That has to be supported by an innovation led culture that puts the customer at the center. In that sense I can do no better than quote Cecere's conclusion:

L’Oréal has the most effective global-regional-local governance model we have ever seen. The company empowers an entrepreneurial culture within regions. They ask each region to know their customers, and empower the supply chain teams to collaborate with their commercial and digital marketing teams.

Says it all.

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