American beauty corporation Revlon recently shocked the business world by filing for Chapter 11 bankruptcy protection in the US. Peter Jones, Managing Director and Founder at Prological Consulting talks through some of the marketing, supply chain and operational mistakes that led to the decline in market share for the 90-year-old beauty giant.
After a period of instability and supply chain challenges, Revlon has filed for chapter 11 bankruptcy in the United States. For the ninety-year-old beauty giant, the filing represents a final lifeline, as it attempts to rectify debt with creditors by borrowing over $370 million.
Related: Beauty giant Revlon files for bankruptcy amid supply chain struggles
Under Chapter 11 bankruptcy protection, the company is able to continue trading whilst it attempts to correct crippling fractures in its supply chain, in a desperate move to retain some of its once sizable, indeed, dominant market share.
For Revlon, some key mistakes in their supply chain have created a domino-effect, costing the company many of its suppliers, customers and creditors. Growing pressure from incumbent brands has heightened competition for materials, as those with healthy liquidity can pre-pay creditors and benefit from large orders and scaled economies.
For Revlon, cumulative debt has meant some of their raw material suppliers are no longer sending shipments, cutting production and leaving the company only able to fulfill 70% of orders, against an industry standard of around 95 per cent.
Also, labour shortages due to the Covid-19 pandemic has slowed manufacturing, resulting in late product shipments and fines from retailers, as well as mismanaged inventory and failed forecasting.
What went wrong?
Known as a trailblazer, Revlon was once the most radical company in its space.
In 1970, it was the first American cosmetics company to feature an African American model, icon Naomi Sims, in their advertising. In the 1980s, its radical campaigns featured diverse, not yet famous, new models like Claudia Schiffer, Cindy Crawford, and Christy Turlington, who would later become synonymous with the highest of high-end fashion.
In the 1990s, the company’s ‘Colorstay’ range of makeup gained notoriety for its patented formula which promised to stay on all day: a new frontier in cosmetics.
When business was booming, Revlon’s strategy was to expand sales through mass market department stores, as well as buying expensive advertising. Like other legacy brands, they invested in magazine editorials which drove shoppers into stores, where sales would be converted through personal selling and glossy displays. As a strategy, this worked well into the 2000s, but failed dismally thereafter.
The democratisation of beauty
In the 2010s, the narrative around beauty shifted dramatically, beauty became celebratory, more diverse and more personalised.
Instead of being told of this season’s ‘must-haves’ by a beauty advisor in a department store, women began doing their own research online.
Blogs, forums and other digital communities emerged, where consumers would connect over their love of products, share beauty secrets and seek advice from other ‘real women’, taking the power away from brands who struggled to dictate the narrative around ‘what beauty should be’.
Suddenly, brands like Revlon were seen as conservative, dated and out of touch. Then, with the continued rise of social media and blogging, celebrity brands began to emerge, leveraging existing fan bases for exposure, and diverting traditional advertising spend into product innovation and supply chain advantages.
Unfortunately for Revlon, they missed the market transition, and with this the new opportunities, and have been suffering ever since.
Even the most innovative companies fall prey to supply chain disasters
New York-based beauty manufacturer Glossier, best known for its billion-dollar valuation, sprung on to the beauty scene in 2014, providing direct to consumer products aimed specifically at millennials.
Their pastel packaging, crowdsourced products and disruptive campaigns solidified their position as the fastest growing beauty brand of all time.
The brand’s low-maintenance, accessible and affordable ethos provided a lucrative antidote to the over-lined lips, perfectly angled eyebrows, and single brand loyalty that had been taken for granted by Revlon and other legacy brands since World War II.
Capitalising on the e-commerce preferences of millennial shoppers, they owned the conversation around accessible beauty.
However, in an attempt to become omni-channel, Glossier spent big on aesthetically stunning bricks and mortar stores, contrasting designs of traditional beauty outlets, which would later ruin their supply chain.
Their boycott of third-party retailers like Sephora and Ulta, as well as their failed international expansion saw the brand begin to fall almost as quickly as it rose. In 2020, Glossier closed their retail stores in the USA, and in January 2022, they laid-off a third of their corporate team.
A cautionary tale for all sectors
Supply chain failures are impacting almost every sector, made worse by the Covid-19 pandemic. Earlier this year, Australia Post struggled so much under the weight of online orders and increased numbers of isolating staff that it stopped taking e-commerce collections twice in eight weeks.
In June, the International Monetary Fund cited supply chain failures as a main factor in their downgrade for global economic growth for 2022 from 4.9 per cent to 4.4 per cent. For retail and distribution, supply chain issues are here to stay.
What can be done?
The Australian Retailers Association predicts supply chain issues will continue, likely through to 2023 and beyond. Globally, we will see increasing pressure on pricing and margins, and only those who have a resilient and agile supply chain will survive.
To design quickly and deliver great customer outcomes requires sophisticated adaptive analytics, automation, optimisation and agility. Although many retailers are investing in personalised customer interactions, very few have truly mastered the ability to deliver these consistently at scale, which will separate the winners from the losers.
To apply the tale of Revlon to all sectors, while an all-day red lipstick may look bright and powerful, to be successful as a business now requires a lot more than it once did.