Revlon needs to make digital more than just cosmetic to compete
- Summary:
- Revlon is putting the digital building blocks in place, but it's a long way behind rivals in its sector.
E-commerce is really now a very important part of the business. As I keep explaining to our teams, e-commerce is not the cherry on the cake. It becomes the new cake.
Other companies in the sector have similar long-standing commitments to digital, most notably Estée
Lauder which claims to be in the third decade of its own transformation, with total e-commerce sales of over $1 billion per annum.
But there are other firms that are playing catch-up and it’s into this camp that Revlon has arguably fallen. Only around 4-5% of sales come from online channels, although Chief Operating Officer Chris Peterson is quick to point to year-on-year digital growth of 32%:
We have made great progress with our digital engagement and commerce. Nevertheless, it will take more time before we realize the benefits of our investments in capability building that are intended to contribute to long-term growth…While online represents a small portion of our total sales, the online channel represents a significant growth opportunity for the company.
This comparative lack of digital success is not for want to trying, he adds, noting that there is a determined drive to create an in-house resource to tap into. The firm has been working with a third party provider, Sapient Razorfish, to try to accelerate its digital presence, but Peterson now says:
To ensure we have the people and technologies in place to win in digital, we have established a new digital organization design, are adding people and are making significant investments to upgrade our technology platforms for digital excellence. We're making good progress with the recruitment of new talent to build our digital center of excellence and expect to transition from Sapient Razorfish to in-house capabilities in the next few months.
This in-house digital division will have three main priorities:
- Nuts-and-bolts digital transformation projects, including content and e-commerce platforms.
- Enhancing the customer engagements across the social media platforms, where Peterson says there has been some success already.
- Developing a seamless experience for the customer to purchase its products online.
On this last point, Peterson says:
As we are building our e-commerce and online capability, that is allowing us to open up new product launch windows for new product development that we're bringing to market. So, you'll see a continuous stream of innovation from all of the company's big brands, including Revlon, Elizabeth Arden and Almay throughout this year as we go forward.
So, it's not that we've launched it and there isn't going to be anything coming. We've got a relatively continuous stream. Those new product launches are synced up from a calendar standpoint with our marketing campaigns so that we have a coordinated marketing calendar and a new product development calendar that work in concert with each other.
New ERP
At the back end, a new SAP ERP system went live last month, although there have been some issues that have had to be ironed out, says Peterson:
The system is designed to support new customer technologies and processes and to improve performance. While the overall implementation steps are on schedule, our production capabilities and inventory recovery have been slower than expected, affecting our current order fulfilment levels. We have taken immediate actions to address the situation, have implemented a robust service recovery plan and have communicated with our key customers. Once the recovery plan is complete, we expect the new ERP system to provide significant new capabilities and benefits for the company.
The unexpected slowness has had a knock-on effect elsewhere, he explains:
The implementation has impacted our customer service levels, but we have taken immediate action steps to address the situation, and we've got a robust service recovery plan in place. It's too early to say exactly what the impact is from this, but we've got a robust service recovery plan in place. Once the recovery plan is complete, we expect the ERP system to give us significant new capabilities and benefits that for the company.
To date, the situation hasn’t meant compensating customers, he adds:
We have not had to offer discounts or incentives to make up for the issues. What it's resulting in is, as we implemented, we came up, we started shipping to customers. But our customer service level is lower than what we would expect and what we are planning to ultimately achieve, and so our fill rate is lower than target. That's why we've taken immediate actions to address the situation and put a robust service recovery plan into place.
My take
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…