secure store supply in china luxurious cosmetic market
TRANSCRIPT
LVMH Perfumes and Cosmetics SSC
Secure Store Supply in China Luxurious Cosmetic Market
LVMH Perfume & Cosmetic
2013 Asian Logistics and Maritime Conference
Nov 7th, 2013 Hong Kong
1
A world leader in luxury, LVMH Group possesses a unique
portfolio of over 60 prestigious brands. 2012 total sales
revenue is 28,103 million Euro. The group is active in 5
sectors:
Group Introduction
2
* Wine & spirits
* Watch & Jewelry
* Fashion & leather goods
* Perfume & cosmetics
* Selective retail
LVMH has a strong growth since its creation in 1987.
Today, more than 100,000 employees, 77% of whom are
based outside France, share the group’s value.
3 3
LVMH P&C China Brands & Sales by Channel
ACT 2011 Mix % ACT 2012 Mix % R1 2013 Mix %
Department stores 1,677,293 79.2% 1,858,063 75.7% 2,208,771 75.5%
Sephora 317,242 15.0% 425,736 17.3% 478,174 16.3%
Boutiques 11,998 0.6% 32,570 1.3% 70,742 2.4%
E-Commerce 2,166 0.1% 3,539 0.1% 2,700 0.1%
Brow Bar 9,051 0.4% 13,030 0.5% 20,500 0.7%
Agency 99,378 4.7% 123,022 5.0% 139,116 4.8%
Other 1,485 0.1% 0 0.0% 6,293 0.2%
TOTAL NET SALES 2,118,613 100% 2,455,961 100% 2,926,296 100%
NET SALES FRENCH GAAP
TotalFull Year
In ‘000 RMB
Brands 2006 2007 2008 2009 2010 2011 2012 A 2013 R1
PCD 80 87 94 97 101 110 129 148
Guerlain 60 70 74 77 82 87 100 105
Givenchy 15 31 47 55 61 69 75
Benefit 2 8 22 28 36 45 56
MUFE 19 35 43 45 52 64
Kenzo 6
ADP 3 7 9 11 13
Fresh 1 8
Fendi
Total 140 174 226 287 316 348 407 469
2013
49 cities with 469 Counters
13 Boutiques
(8 new planned)
SELL-IN
PRODUCTION
STORAGE
SUPPLIERS
Sell out: from department store to consumer
true market demand, related to future sell in
STORAGE
ASSEMBLY
Customer Service CN:
• Marketing info
• Trend
• Sales
• launch
LVMH P&C Supply Chain Flow
SELL-OUT
Supply planning CN
CN
Warehouse
Supply planning SGP:
4
Sell in: From Company sell to department store
related to P&L, forecast, production, supply
planning
Manage China Supply with Growth with annual growth rate 15% - 20% for past 10 years
• 1 central warehouse, in house managed, serves 9 brands, whole China
• 1 shared service center (SSC) + 9 individual brands
• Each brand operates sales & marketing with brand unique strategy
• SSC serves as shared back office, support IT, supply chain, HR, Legal,
Finance
5
WHY?
• Out source transportation to two 3PLs
• Expand geographic distribution through 3PL network
• Keep long term cooperation to secure service
Challenges at the counter POS
6
New items
innovation with
continuous
discontinue/new
launch
Product variety
& category
management
Seasonality &
promotional
impact
Longer lead-time
from China
warehouse to
faraway cities
8 days
Key of Supply Chain Service: Manage Volatility and Secure stock at counter
• Warehouse: Enhance warehouse operation flow to meet next day delivery for counter replenishment order
• Importation: Pursue importation lead-time shortcut to reduce supply lead-time
• Planning: Monitor loss sales root cause analysis, alert report, forecast consumption
• Customer service: Initialize counter replenishment order optimization
7
Planning – Focus on Service & Stock Performance
8
Monthly evolution of unfulfilled orders ratio / Benchmark with other Brands Root cause follow up to draw action plan
Counter stock presence rate Stock quality monitor
Counter Replenishment Order Now & Future C
ou
nte
r PO
S
Ord
er
Past 60 days sell out
POS on hand Inventory
In Transit order
BC modification
Current
• By door Parameter (order frequency setting by volume & lead-time)
• Product life cycle (new/basic/phase out)
• Stock value by class & stock cover
• Presence rate & Out of Stock
Focus Store Service
By SKU level targe
t Lead-time Impa
ct
Predict
sales volati
lity
Coming Q1 2014
Booming sales for past 10 years But great challenge at retail decline in 2013
• Consumer: purchasing confidence decline
• Labor & Rental cost: significant increase
• New door opening: huge investment
• E-commerce: big impact and changed people’s way of shopping
10
Our Sales Target In ‘000 RMB
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
ACT 09 ACT 11 BUD 13 BUD 15
1,393,948
2,118,613
2,971,537
3,862,998
LVMH P&C Y09-Y15 Net Sales Evolution
ACT 09
ACT 11
BUD 13
BUD 1552%
40%
30%
11
THANK YOU & QUESTIONS?
12