Beauty Store Business magazine - March, 2019

Logistics First

When’s the best time to hire a logistics company? Experts say as soon as possible– and here’s why.

The business of bringing a beauty product to market is full of excitement, from branding, product development and marketing to surveying retail options, generating consumer interest and making the sale. And then, there’s the other side of the beauty business; getting the product to the customer. Although, this side of the business can seem dull and secondary, it shouldn’t be overlooked. Before a brand even considers generating sales, logistics must be in place for it to have any chance of managing growth.

“Logistics is the last thing thought about,” says Linda Gillette Parodi, founder of Parodi Professional Care, maker of skincare products for professionals in the beauty industry and beyond. “It’s like, ‘Oh my, I’ve got the product. ... Where am I going to put it? How am I going to ship it?’”

She adds, “Logistics is the most important thing in any business; even more important than sales. It’s not something to take lightly. You can have the best marketing, the best chemist with the best product or design–the best everything–but if you can’t get the product to the customer, everything was in vain. I highly recommend that brands think logistics first.”

Logistics includes everything from inventory management and warehousing to packing, shipping, shipment tracking and more. These are all processes that impact customer experience, customer satisfaction and brand perception. Products packaged negligently can leave customers unhappy. And packages that don’t arrive on time can be a customer service nightmare. “Every week, I’m involved in some type of log meeting or conversation about getting our products to our distributors or customers, inventory coming in and going out, and making bundle packs. It’s a big part of weekly conversation,” Parodi explains.

For owners of nascent beauty businesses with small budgets, hiring other companies to manage logistics can seem gratuitous when they can simply fulfill orders from their home kitchen, basement or garage. They understand that at some point, they may need to partner with logistics specialists to keep up with sales; but the question is, when exactly is the right time?

“I get asked this question a lot, and I always provide the same answer: As soon as you can afford to or as soon as logistics starts to take over so much that it has a negative effect on your ability to run your company,” says Rachel Whittaker, founder of Indie Beauty Delivers, a company that offers entrepreneurs a competitive edge with guidance in logistics and other processes. The company also helps U.S. brands enter the U.K. market and pairs them with compatible logistics partners in the U.K. and Europe. Whittaker adds, “I mean, why would you be picking and packing orders when you can be out getting new retail partners, formulating your newest product or designing a marketing campaign?”

The expense involved in hiring a logistics company is a legitimate concern. The point here is not that small brands should hire a logistics partner before they can afford to, but that they should consider hiring one as soon as they can afford to, according to Whittaker. Small brands may believe they are saving money by doing it all them- selves, but her question remains: What is it costing them?

  • Sustainable Growth: Outsourcing logistics can position your brand to act when opportunities arise, Whittaker notes. For instance, an unexpected retail deal with Sephora. If you’re working with a logistics company, you are prepared for that opportunity. If you are doing logistics in-house, taking on the opportunity could topple your small business.
  • Worthwhile Efficiency: Logistics firms have the technology and other resources to help brands maximize their efficiency. Matt Hohenshil, vertical manager of beauty at TPS Logistics, which has about 15 clients within the health and beauty sector, says that visibility alone–on both the inbound and outbound side–can improve efficiency and lower costs. It also can “drive creative programs to get products to the end consumer a lot faster and cheaper. We’ve seen our clients typically save 15 percent to 20 percent on freight, and efficiency goes up by 20 percent on average,” he adds.
  • Noteworthy Expertise: One of the hidden benefits of hiring a logistics partner is the expertise that comes with it–especially for new brands on the rise. Logistics specialists can guide small brands through the logistics process, connect them with other necessary partnerships and resources, and help them avoid costly mistakes. “Requirements are constantly changing, such as new routing guides, new approved carrier documents and so forth,” says Hohenshil. And not just at the retail level; regulations regularly change nationally and internationally. Tapping the vigilance, connections and expertise of logistics specialists can save a small brand’s time, money and reputation.
  • Maximized Budget: Handling logistics in-house carries hidden costs. There may be savings in using FedEx, UPS or some other shipping agent, but for many brands that option still requires paying employees to pick, pack and ship the products. Whittaker adds that small brands have small volumes, which limits their leverage to negotiate costs for delivery, packaging and so forth. These are areas in which they should see instant reduction in costs when they begin working with a larger organization that gets better rates. If a brand was to tally the total price of doing logistics in-house–including the time taken from business-building tasks, the time required to research and manage requirements and regulations, the cost of paying workers, etc.–would the final bill rival the cost of paying an outside agency? “I think it all comes out the same,” says Parodi. It’s worth it for brands to explore the costs of outside logistics to determine whether they’re actually saving money doing it in-house.

Retailers are inevitably impacted by a brand’s logistics. Whittaker explains that there are actions a retailer can take to identify potential logistics red flags when considering new brands.

  • Learn About Infrastructure: Retailers can ask the brand about its logistics infrastructure, such as how it stores and delivers its products. Doing so can alert the retailer to potential negligence in this aspect of the brand’s business.
  • Know Your Expectations: Provide detailed expectations, including any customizations required prior to delivery, as well as any fines that may be applied for mistakes. In this way, the retailer gains insight into how well prepared the brand is to meet requirements.
  • Residual Stock: Inquire about the brand’s residual stock. This can help the retailer gauge whether the brand will be able to accommodate unexpected requests for large volumes in a timely manner.

“For retailers, if they’re working with someone who is using a logistics partner, that is a relief for them,” says Parodi. The partnership saves the retailer both time and money. Logistics companies can generally get the product to the retailer faster; seize consolidation opportunities that save the retailer time; process large orders with ease; and work with the retailer’s methods of choice, such as using a preferred carrier, adds Hohenshil.

It’s worth noting that retailers can work seamlessly with brands that manage logistics in-house, too. This is particularly true of brands that have made logistics a chief function of their business, rather than a secondary undertaking. A retailer’s perceptive questions when considering new brands is key to forging these ideal partnerships.

Experts share their recommendations for finding the ideal logistics partner for your beauty business.

Linda Gillette Parodi, founder of Parodi Professional Care
“Every logistics site will tell you what they think you need to hear,” Parodi says. Therefore, you need to know what you want in a logistics partner. In the end, Parodi went with Bold 3PL Logistics in Kansas, which was a start-up at the time and was availabile to take her calls, answer her questions and be an effective guide. Here’s what she looked for in a firm:

  • She sought a company that wanted to work with small businesses and was equipped to manage small volumes–in other words, a place where her company wouldn’t get lost.
  • The firm needed to have programs to manage her inventory.
  • Fees, combined with her small orders, needed to make sense for her budget.
  • She was looking for a location in the center of the U.S., so that her orders could get to everyone in no more than three days.
  • Her partner had to ship consistently without problems and take responsibility for issues. Parodi says that she has lost shipments of $7,000 to $10,000, but later found her products popping up at places such as Amazon.

Matt Hohenshil, vertical manager of beauty at TPS Logistics
Finding a logistics partner that has a history of working with beauty brands is essential. “Do they currently handle health and beauty clients? Are they understanding of the retail world, or are they just going to try and fit the beauty brand into their current asset-based model and force that upon the brand, which typically does not work?” Hohenshil says.

He adds that businesses may want to consider whether the company is asset- or nonasset-based. Nonasset-based logistics companies are not attached to any one mode, supplier or carrier. As a result, they can be extremely flexible in how they deliver results. Whittaker builds upon this insight with the following advice:

  • Find a firm that already delivers to the retailers you are currently working with and are targeting.
  • Look for one that can offer the full range of services you need now and in the future.
  • Visit the company and make sure it feels right.
  • Look for a firm with great IT solutions.

Rachel Whittaker, founder of Indie Beauty Delivers
You might find a company with red flags such as being dirty, disorganized or unclear; having confusing charging structures; or lacking testimonials, Whittaker says. She adds that brands also should make sure the logistics firm is clear about when and how often it reviews charges.

Additionally, brands should keep in mind that they aren’t the only ones evaluating potential partnerships. “When you approach a logistics firm, they are looking at you just as much as you are looking at them,” she says. “Logistics firms need to make money, and so they need to feel a confidence that you are going to move some product and generate some revenue. You need to impress logistics firms with your professionalism and future plans.” Here’s how to do so:

  • Provide details about volume, such as how many pallets of stock will be stored, order volumes, average units per order and a list of retailers you are working with.
  • Offer links to your website and social media platforms to give them insight into your brand.
  • Detail your growth plans and ambitions.
  • “And a few samples never go amiss,” she adds.