Walking down the aisle of your favorite beauty retailer or drugstore, you may have noticed that there are more goods out of stock than usual. Not only that, the goods on the shelves seem to have gone up by a dollar or two. What you see is the impact of the global supply chain crisis.
Everyone, from politicians to brand founders, newscasters to uncles at the holiday table, has been talking about it for months, but consumers are finally beginning to feel the trickle down effect. The problem is multifaceted. This is not just a matter of raw material procurement, employment, manufacturing or import – it is everything, all at once.
In order to accurately analyze the global supply chain shortage (and its causes) and how it will affect the way you buy beauty products in 2022, we interviewed several industry experts.
What happened to the global supply chain shortage?
The problem of global supply chain is very complex. It began with the covid-19 pandemic in the autumn of 2019. Although we don’t feel the impact of the pandemic directly in the United States until March 2020, many manufacturers can see what will happen before that.
“We just don’t know how long we can last,” morrishane Collins, global sales director at Godrej North America, told popsugar. The closure of the plant led to an increase in orders, and when the plant was finally able to resume operation, they had to increase production to cope with the accumulated influx of orders. “Suddenly, once this fine-tuning mechanism fails, everyone wants to rejoin,” said Rohan widdison, founder and CEO of beauty manufacturer new laboratories, which produces products covering skin care, make-up, hair care and Australian body care.
Manufacturers are rapidly increasing production to meet demand, which puts unprecedented pressure on freight forwarders transporting goods, and the number of ships is limited. “There is too much demand and insufficient supply,” said Britt Martin, head of marketing and supply at Novi, which employs a team of scientists, sustainable packaging experts, contract manufacturers and suppliers. This creates an unstable environment for freight forwarders (the process of transporting goods by ship). It seems that it is not difficult enough to ensure the limited space. Large companies can directly purchase and retain multiple cargo containers, and then they use these containers to ensure that their delivery arrives on time, even if the transport container is not full.
“Manufacturing delays, increased costs, and then in some cases, just unavailable. There are a lot of these problems happening at the same time, which is almost a perfect storm.”
In order to solve this problem, many companies have regarded air transportation as a means of transporting products – but air transportation has always been much more expensive. Brands that follow this path will have to spend extra costs somewhere to make a profit, and this may only be the retail price of their products. Not to mention, during the pandemic, air cargo companies faced the same downtime and delays as freight forwarders, which meant they further raised prices to meet demand. Liah Yoo, founder of Korean beauty company krave beauty, said that the company’s air freight price has increased nine times since 2019. However, the advantage of air freight is that it at least provides guaranteed arrival time – something that freight forwarders can’t get.
The delay is more than that. Martin explained that even if the brand does have a place on board, they will encounter detention problems when unloading at the port, which can be said to be a traffic jam. Many ships lined up waiting for unloading, but there was not enough space or enough crew to help. According to Yoo, shipments from South Korea usually take two weeks. Now, it may take about three months to arrive. This means that sold out products will not be replenished soon.
Global supply chain shortages involve every stage of production – not just finished products on the way to shelves. The industry has encountered problems in the procurement and distribution of raw materials, access to major ingredients (think: glycerol, emulsifier, oil) and packaging components (including every small piece from pumps and bottle caps to labels). “Manufacturing delays, costs increase, and then in some cases, it’s just not available,” widdison said “There are many such problems happening at the same time, which is almost a perfect storm.”
In other words, although this problem is global, its impact on different countries is different. It is still much easier to delay the import and export of all goods from the United States and parts of Europe. On the other hand, the delivery time in the Middle East is longer than usual (and the waiting time in the region has been significantly longer). “We don’t want our customers on the island to lose access to products,” Collins said, but in the end, they just need to be on the shelf somewhere.
How does global supply chain shortage affect beauty
So what does that mean? Like the question itself, the answer is complex. The main problem consumers will face – and may have begun to face – is that goods are out of stock for longer. The problem with brands – except for the obvious: not making money – is that ordinary consumers don’t understand all the competing orders that happen behind the scenes, and the products from point a to point B. ” You can’t live without products – it’s not a consumer choice, “Collins said. As shoppers, we don’t want to go to the store to replenish our preferred shampoo or facial cleanser, but we find it unavailable.
Sorry, the supplier is temporarily unable to supply this product to retailers signed on the shelves of CVS stores in Queens, New York. (source: Lindsey Nicholson / Universal images group via Getty Images)
This leads us to another major impact of supply chain shortages: rising prices. As companies have to overcome a long list of obstacles, price increases are inevitable. The brand has been experiencing cost increases at all levels, and this situation will only last for a long time, and then we can see that the market price rise is only to pay for logistics costs.
The brand did not make rash decisions. “I’m impressed by how the brand has stepped up its attempts to take responsibility or bear additional costs,” Martin said. Collins added: “we squeeze as hard as we can inside, and when we get to the point where we can’t squeeze… They’re inevitable.” But how much? Widdison predicts that the prices of many beauty products will range from $1 to $3 per piece.
In some cases, this is not as simple as adding a few more dollars to the overall price. For brands of major retailers such as Sephora, ulta beauty, Nordstrom and target, price increases may not be allowed for a variety of reasons. “Retailers do everything they can to stop it,” Collins said. Especially when it comes to specific price categories. For example, if a brand is promoted to target at an affordable price of $20 or less, it can be priced beyond that range even if it is increased by $1.
Demand will play an important role in this decision. If a product is hot and in demand, the price may rise. “If you’re in a very competitive industry, I think these brands will have to wear it in the short term to see what 2023 will look like,” vidison said.
Larger beauty groups may be able to cope more easily with price changes by consuming costs in profits, but not for smaller independent brands. “This will affect the financial situation of enterprises,” Yoo said. “Not only the top line – business income – but also the bottom line.”
How can beauty brands cope with the global supply chain crisis?
In most cases, brands are doing their best to reduce the burden on consumers and maintain their familiar shopping experience. In some cases, it will be easier to face consumers directly and cut middlemen (and the attendant costs) for beauty retailers. In other cases, switching from the traditional imported to a different pump nozzle made in the United States can promote production. You can shrink the label by one centimeter to help reduce costs.
Where possible, changing one ingredient and purchasing more at home are the solutions that many companies have been looking for, but even those have limitations. “These materials come from some parts of the world and there is no other choice,” vidison said.
Melissa Gonzalez, a former Wall Street executive and chief marketing and retail executive of the lion’esque group, said she saw more and more customers reluctant to open new physical stores or create new brands for fear of disappointing consumers. Instead, they are attracting their audience in other ways. “Maybe it’s more like a lifestyle or market environment. Having such an experience is not just relying on a brand supply chain,” she said. Therefore, build a brand beyond product development.
Another factor that brands must consider is how the demand for certain products will change over time. According to Gonzalez, if they are not careful, there may be a risk of oversupply in the industry. Once the voice for something dissipates, it is difficult to take action in the future. This is especially true for trendy categories and timely release products, such as limited edition, holiday and even seasonal products.
Some brands no longer give priority to the creation of new products to maintain their current product portfolio, but even this can only last for a long time. “That’s what beauty is all about: you can’t have beauty without innovation,” Collins said.