luxury beauty brands - pos production models

Preventing the erosion of your luxury beauty brands

Choosing the right production model for point-of-sale materials


In order to maintain brand consistency globally, luxury beauty brands need tight control over all their point-of-sale materials and merchandising. Many achieve this by producing POS centrally; however the lack of local input raises its own difficulties.

Here’s the dilemma for luxury beauty brands: do you manage point-of-sale (POS)

production at the centre so that you can ensure all brand guidelines are fulfilled accurately

and fully even though this could impact negatively on local requirements and speed to

market; or do you have your local teams with specialist local knowledge produce your POS,

but end up worrying constantly about the quality of the POS experience?

Real life isn’t this simple, but it does raise some interesting points. This paper looks

into what luxury beauty brands need to consider when producing POS that will ultimately

help increase consumer intimacy, sales and market share.


“I don’t want to be sold to when I walk into a store ... Build an amazing brand experience and

then it will just naturally happen.” 1 This was the belief of Angela Ahrendts, Burberry’s CEO

2006 to 2014, when she decided to turn an ageing British icon into a global luxury brand.

Ahrendts understood all too well, that consumers are no longer just interested in the

product but rather the whole luxurious experience associated with luxury brands.

“With the experiential luxury sector consistently outperforming other sectors of luxury

goods, luxury brands are challenged to become purveyors of self-expression and lifestyle.

They cannot compete based on their product offerings alone.” 2

This has been partly fuelled by the younger generation seeking superior and exclusive

lifestyle experiences, resulting in a growth in the luxury travel sector with hotel bookings

up 9% in 2014 and the cruise market growing by 5%3. Its impact on the luxury beauty sector

is simple: product is no longer enough.

POS is therefore key in delivering the consumer an all-encompassing brand experience.

However, providing this experience consistently and to increasingly complex levels to

maintain the same level of consumer brand intimacy is extremely difficult and the risk of

failure is high. Tight central control ensures brand guidelines are followed but it’s important

that feedback on local specifications are taken into account so that the value local teams

can add is not lost.

POS experience is key

1 | Welcome 2 | Atmosphere 3 | Touch and feel 4 | Advice 5 | Checkout

Identification and orientationInitiate a relationship

AmbianceShop and counter layoutSignageGrooming and uniform

StagingAccessInformationTesting

Payment and deliveryRegistrationInvitation to come backSatisfaction check

Needs and habitsAnswersObjectionsOffer additional sales and servicesCustomization

Source: A.T. Kearney analysis. Beauty: Only as Deep as the Customer Experience

Five steps in the beauty shopper’s point-of-sale journey


Mario Ortelli, senior research analyst at Sanford C Bernstein, wrote in a March 2013 report

that the European luxury goods sector will continue growing over the next five years at

around double GDP rate, averaging about 6 - 7% annually4. Some 38% of that growth will

come from emerging markets. And if purchases made by consumers from these markets

while travelling overseas are allocated back to countries of origin, then the emerging

economies account for 60% of all projected European luxury sector growth.

Amazing opportunities - and risks

100%

90%

80%

70%

60%

50%

EM38%

EM44%

EM50%

40%

30%

20%

10%

0%2007 2012 2017

Australasia

Japan / 5K

Western Europe

North America

MEA

Eastern Europe

Latin America

Asia Pacific ex Japan / 5K12%

25%

17% 16%

23%19%

14%

14%17%

15% 19%

19%5%

5%6%

7%6%

6%18%

17%16%

Source: Euromonitor. Credit Suisse: Global Beauty Industry report 2013

Globalisation of beauty brand sales


Luxury beauty brands have amazing opportunities for growth. But profitable and growing

markets attract attention and bring threats from new and nimble competitors as well

as from established companies who respond promptly to the opportunities available.

Growing or at least maintaining market share across different markets is now therefore a

priority. To succeed they must reinforce their distinctive brand ethos and understand “the

strengths and opportunities of their different retail channels in driving sales, brand affinity

and customer loyalty. They have to unite all their individual retail channels under a strong

brand value proposition.” 5

Luxury beauty brands are especially vulnerable because the production of POS materials can be hugely complex.

In most cases, the brands are distributed to a diverse range of outlets, such as

department stores, franchises, independent specialist luxury stores and brand-owned

stores. Each different retailer will have different specifications for floor set-ups, shelving

and booths and when duplicated across all the markets where the brands are present,

in some cases up to 130 markets6, POS and merchandising management becomes

very difficult.

The problems which arise from the long-distance management of the POS experience

across these different outlets are compounded by other factors such as, the high number

of seasonal promotions throughout the year, responding to local cultural events and

practices, and local economic and market conditions.

Getting the best from both local and global production approaches is extremely

challenging and relies on good access to shared information and co-operation

between teams.


Who What

GLOBAL TEAMSBrand guidelines

New product development

POS forecasts

Orders

Orders

POS specifications

Customer forecasts

Production

Shipment

Brand control over all POS items for all occasions

Multiple markets in multiple countries

Multiple suppliers in multiple markets

Multiple POS formats and specifications

LOCAL TEAMS

SUPPLIERS

RETAILERS

The complexity of POS production


Speaking at the ProcureCon Marketing Conference in June 2013, Nicolas Meauzé, POS

Category Leader for Pernod Ricard, explained that his company had traditionally found it very

difficult to control local POS spend and to maintain brand integrity. He had found retailers in

some countries using items that did not stick to the core brand colours, designs or lettering

and even using a wide and inconsistent range of supporting items such as glasses.7

A centralised approach

The advantages of centralised production of POS are then typically seen as maintaining

good brand control and ensuring that production quality is high. By using a limited number

of trusted suppliers who know and understand the brand as well as the central team, there

is also the opportunity to reduce costs through negotiating quantity discounts and to

maintain clear spend visibility and hence good financial control. These are important benefits.

However there are also downsides: imposing centrally-produced POS without allowing any

feedback from local markets may result in a loss of trust between central and local teams.

And if the central team does not engage fully with the various local teams, a great deal

of valuable local market information will be lost and, in turn, sales and marketing benefit.

The ability of the local teams to react quickly to local opportunities is also limited by the

restrictions imposed by the central team’s long-term rigid planning, required for so much

seasonal activity.

All these factors could result in local teams producing their own POS. These items may not

meet brand guidelines, potentially damaging the brand image, and local teams won’t feel

predisposed to report their activity, so the global team will have no visibility over spend or

brand implementation.

POS production models


A local approach

The ability to quickly respond to commercial opportunities is definitely one of the key

advantages offered by the local production of POS. In addition, the involvement of the

local teams will mean that the characteristics of the local market are taken into account.

The team is likely to be more knowledgeable and to feel more involved and committed to meeting the global brand guidelines.

However, local production brings its own challenges. The drawbacks are essentially the

converse of the benefits claimed for central production, namely poor brand and quality

control, lack of spend visibility and relatively high pricing resulting from the low aggregation

of orders. Furthermore, the complexity of much POS material means there’s a high risk

of incorrect POS built on account of poor handling of design and implementation.

The bottom line is POS production needs to be managed well to avoid the risks posed

by both models. Fortunately there are now approaches which can facilitate achieving

the benefits offered by adopting both central and local production models and ensuring

the attendant risks are properly managed and reduced.


A luxury beauty brand is in a difficult position in that it needs to forecast as accurately as

possible its POS requirements for the next 12-18 months while simultaneously being able

to respond rapidly to changing market conditions, perhaps following a shift in consumer

sentiment, changing economic circumstances, a new trend developing, and so on. If a new

retailer enters the market then a brand may lose its share if a competitor signs up with the

retailer first. A dip in sales may point to a problem with the quality of the in-store experience,

but as the POS will have been produced well in advance, it will take a significant amount of

time to adjust the retail environment. These are some of the weaknesses of relying on long

term forecasts.

At the same time, it’s critically important to be able to maintain brand integrity through

the POS experience. Succeeding provides the consumer with an experience that makes

the difference between an ordinary shopping trip and an exceptional and personalised

participation, which will turn him or her into a loyal consumer.

Seasonal promotions and launches play a particularly important role in the strategy of luxury beauty brands and add to the challenge of maintaining this brand consistency and experience through the retail environment.

Moving towards new solutions


Some approaches

It’s evident that both production models offer significant commercial advantages,

so what can brands do to ensure they benefit from all of these?

Training is essential, not only so that local teams understand fully the brand ethos, but

also so they recognise the importance of maintaining brand integrity through POS and

merchandising. That’s the overt benefit but the secondary, implicit, benefit is in showing

the local teams that they’re valued. Training can sometimes be seen as an unproductive cost

centre but such an approach is short-sighted as it can quickly lead to additional direct costs,

such as in faulty or excessive POS production spend. However, more importantly, the lack

of training will lead to increasingly poor co-operation between local and central teams and

poor local contributions. The brand will then find its returns spiralling downwards.

Regional conferences and meetings can therefore help keep costs down and be used

as an opportunity to meet and evaluate local suppliers of POS materials. This would give

local teams the chance to explain brand guidelines fully and give training where required.

It is also recommended to establish processes that enable local teams to evaluate local

suppliers’ standards and quality. A list of globally approved local suppliers will reduce the

risk of faulty or poor quality POS and would enable local teams to work with reliable, quality

assured suppliers, when tactical opportunities with short production times arise.

For some companies, establishing regional warehouses and working with local teams

on a regional basis is a solution. It can help improve response times when last minute

POS is required, as well as allow for the storage of permanent and centrally developed

collateral to be complemented by locally produced material taking account of local needs

and cultural factors.

Another option is to set up an interactive cloud-based platform, such as ProProcure’s

Geneus, which is accessible to local and central teams, as well as suppliers, and responds

in real time.


RAPID PRODUCTION RESPONSE TIMES

RAPID PRODUCTION RESPONSE TIMES

VISIBILITY OVER SPEN

D

VIS

IBIL

ITY

OVE

R SP

END

CENTRAL TEAM LOCAL TEAMS

SUPPLIERS DISTRIBUTORS

Retailers’ specifications

POS guidelines

Best practice and local intelligence

shared

Co-operation enabled between

all teams

Visible to central and local teams, such a platform lists all retailers’ specifications worldwide

allowing suppliers to understand the details and complexity of different retailers’ formats.

Specifications for POS materials and displays can be immediately downloaded ensuring that

all users have the same version of the guidelines. This could also allow global teams to learn

rapidly of new proposals and to consider and authorise them as appropriate, therefore

facilitating rapid production in response to local market opportunities.

Such a tool would also enable both local and global teams to share best practice in terms

of production and local specifications, which other markets could benefit from. Finally,

this system can be very valuable in managing oversight of local spend as well as

improving co-operation.


This brings us back to the dilemma introduced earlier. Essentially the issue can be restated:

how can a luxury beauty brand ensure that absolute brand consistency is maintained in all

retail outlets while at the same time drawing on the special skills and experience of its local

teams to ensure that it can respond rapidly and efficiently to changing local circumstances?

The issue is ultimately one of balance, reflecting the differing circumstances of different

brands, but ensuring that the luxury beauty brand is able to draw on the benefits of both

local and central POS production approaches to produce efficiently, time after time and in

location after location, that unique, luxurious, and personalised POS experience on which

global success is built.

Solving the dilemma


1. Can Apple’s Angela Ahrendts spark a retail revolution? January 6, 2014

www.fastcompany.com/3023591/angela-ahrendts-a-new-season-at-apple

2. 5 lessons that luxury brands can learn from technology firms – April 21, 2015

www.luxurydaily.com/5-lessons-that-luxury-brands-can-learn-from-technology-firms

3. Luxury Goods Worldwide Market Study Fall-Winter 2014: The rise of the borderless

consumer, Bain & Company

4. Led by China, new markets to continue to drive luxury growth, says report - March 7, 2013

www.businessoffashion.com/articles/global-currents/china-luxury-markets-growth-

bernstein-report

5. 5 lessons that luxury brands can learn from technology firms – April 21, 2015

www.luxurydaily.com/5-lessons-that-luxury-brands-can-learn-from-technology-firms

6. Key Figures, L’Oréal website, July 2015

www.loreal.com/group/our-activities/key-figures

7. Pernod Ricard – procurement gets to grips with global brand collateral - June 25, 2013

www.spendmatters.com/uk/pernod-ricard-procurement-gets-to-grips-with-global-

brand-collateral/

References


ProProcure tackles the lack of co-operation that commonly exists between procurement

and marketing in global and multi-national companies.

Technology is at the heart of the business. Geneus, the marketing spend management

platform is built to seamlessly integrate with existing business systems and successfully

manages client’s POS complexity giving complete visibility over costs, providing an

unrivalled aggregation solution and ensuring brand compliancy.

For the last 14 years, ProProcure has worked with a number of luxury brands, including

Perrier-Jouët, Mumm, and Martell.

About ProProcure

ProProcure LimitedEuropa Court, Marsham Way, Gerrards Cross, Buckinghamshire. SL9 8BQ United Kingdom

+44 (0) 870 380 1717 | [email protected]

If you wish to discuss the contents of this paper or to find out more about ProProcure, please call Edwige Riou on +44 (0) 870 123 5143 or email [email protected]

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