Post #11: Distribution

How does the cosmetic company deliver its beauty goods?

For this post, we’ll be looking at L’Oréal’s distribution channels and strategies. As we know, L’Oréal operates at an international level with hundreds of standardized products as well as exclusively regional products. So, they need to have an effective supply chain management in order to have all involving parties (suppliers, retails, transportation, distribution) be on the same page and working at peak efficiency.

An overview of L’Oréal’s distribution system. It is estimated that L’Oréal has over 100 distribution centers, scattered all over the world. That’s a lot, especially when it comes to aligning all the centers to follow the same goal as well as having control over the rate the product processing and shipping. L’Oréal use a wide range of distribution channels from hair salons to retail stores to selective stores to e-commerce to authorized online retailers. Despite the increasing demands and pressure of fulfillment, L’Oréal has strived to reshape its distribution centers in order to be more sustainable and eco-friendlier, having succeeded in 19 “Carbon Neutral” distribution centers and reduced carbon emissions in other centers. Just like how L’Oréal created sustainable products, it also duplicates its idea for all its supply chain management, in order to be align with its sustainability goals.

Onto the levels of distribution. L’Oréal operates using two intensity levels of distribution: exclusive and selective. Exclusive distribution refers to granting either one or a few exclusive retails the authority to sell the products; so, L’Oréal uses this type of distribution for its products under their L’Oréal Luxe and Active Cosmetics divisions as these products has a higher perceived value and are more towards the expensive prices. Selective distribution refers to allowing few specific retails to sell the products, still maintaining a positive brand image and value; L’Oréal utilizes this level of distribution for products under the Consumer Products and, in a way, L’Oréal Professional division. Products under Consumer Product divisions are those for the mass market, where mainly mass retails and drugstores offer, whereas L’Oréal Professional products are offered at select hair salons.

Finally, a look into L’Oréal’s marketing channels. L’Oréal mainly operates using an indirect marketing channel, since most of their products are sold through an intermediary such as retail stores, salons, department stores, or authorized online websites. However, L’Oréal does engage in a direct marketing channel through their L’Oréal Paris USA website, where you can purchase their products and use various helpful tools to aid in finding the right product. Overall, L’Oréal heavily relies on the indirect marketing channel, as a vast majority of their products (as well as their brands’ products) are sold to customers at various locations through intermediaries, something that is both an advantage and disadvantage. For a large, global beauty company such as L’Oréal, they can not keep track of all their products, nor do they have the capabilities (yet!) to shift onto a more direct channel or have a balance between indirect and direct. I believe that L’Oréal has its main focus on innovating the world of beauty via introducing products or technology rather than structuring its marketing channel to be more direct with its consumers, which gives them a competitive advantage as we can see with their recent AI system, Perso.

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References:

`Grewal, D., & Levy, M. (2020). Chapter 15&16. M:Marketing, McGraw Hill Education

· BeautyTomorrow. (2019, May 16). How L'Oréal's Supply Chain Network delivers 7 billion products a year. Retrieved July 28, 2020, from https://beautytmr.com/how-lor%C3%A9al-s-supply-chain-network-delivers-7-billion-products-a-year-9b87d18b15aa

`Rahn, D. (2017, November 13). L'Oréal: A Gorgeous Supply Chain Makeover. Retrieved July 28, 2020, from https://digital.hbs.edu/platform-rctom/submission/loreal-a-gorgeous-supply-chain-makeover/