Rashida Morisset and Nick Wyss, Regional Managers of North America and Europe in Expeditors' Retail and Fashion Vertical give insight into the myriad complexities of the cosmetics industry. We'll cover the changes in their products, new expectations of their customers, the sensitivity to move their products, and even touch on how social media can greatly impact legacy brands.
Chris Parker (host): Hello everyone and welcome to the Expeditors podcast where you can hear about front of mind topics and the logistics and freight forwarding industry through the lens of a global logistics provider. I'm your host Chris Parker and today we'll be talking about the wild world of cosmetics. We'll start with a primer on the cosmetics industry and how companies are modeled, apply a foundation of knowledge around their customers, add some dimension by understanding trends and changing expectations of those customers, and finally, we'll define the penalties cosmetics companies face when their unique products are mishandled through the logistics process. To save me from making any more makeup puns are two folks from our retail and fashion vertical, Regional Manager of North America, Rashida Morisset. And Regional Manager of Europe, Nick Wyss. How are you two doing?
Rashida Morisset: Good. How are you Chris?
Chris Parker: I am doing well. Nick?
Nick Wyss: I'm also good Chris. How are you?
Chris Parker: I am ready to learn about cosmetics. Are you guys ready to talk about it?
Rashida Morisset: Yes. So excited.
Chris Parker: Great.
Nick Wyss: I hope we don't makeup too much of it.
Chris Parker: Oh, dear. So let's go ahead and get some background on you two starting with you Rashida. What's your background and your career been like in Expeditors and how did you get into the retail vertical?
Rashida Morisset: Actually, this year is my 10th year at Expeditors.
Chris Parker: Congratulations.
Rashida Morisset: Thank you. I got my pin and I'm excited about all of that and hopefully one day everyone will see it in person. Prior to joining Expeditors, I was actually a customer. So I worked on the retail side and Expeditors was my logistics provider. So I've been working in the retail industry for many years prior to joining Expeditors, so coming in this role just seemed like a great fit. And I've been in this role for the past three to four years, maybe. And it's just amazing how much the industry has continued to evolve and certainly last year we celebrated all of that innovation and transition.
Chris Parker: Yeah. Absolutely. And it's such an exciting space too, retail. There are just so many varied products in there and there are all sorts of different needs and requirements to get them moved. I imagine it's a lot of fun or maybe also high stress, perhaps.
Rashida Morisset: Right. And the sector is so diverse. My background was on the fashion accessory and cosmetic side, but there's so much entering the market. New products, new industries renewing this whole fitness craze. But in addition to that, some of the legacy businesses like grocery. When we think of retail, we think of everything from gas stations, restaurants to grocery stores. So, it continues to evolve and change and that's what's fun and exciting.
Chris Parker: Yeah, for sure. Nick, what about you? What's your background? How did you get into the retail industry? What's your career been like with Expeditors and before?
Nick Wyss: I'm actually coming up on only five years in Expeditors and not quite as long as Rashida. But I've been in the industry quite a few years before that with a few other freight forwarders, always on the logistics side. And been fortunate to work in the US, work across Asia, and to work across multiple locations in Europe and I think just on top of the variety of companies in retail that Rashida talks about I think, the disruption that we're going through right now that really put our hard hats on and enjoy the ride and participate in this incredible pace of change that we're going through. I think that'll only increase.
Chris Parker: Yeah, absolutely. And something that I always like to ask folks and I'll ask you two is, what gets you excited about the retail industry? I mean, Rashida, you kind of covered in that there's such a diversity of products and stuff coming out but what else gets you fired up every day? Why do you care about retail?
Rashida Morisset: What's the trend that I'm the most excited by, I tell this quick story that when I first started out within retail, I worked in a corporate office and I was supporting a luxury department store that we actually work with right now and I remember that the store was only open from nine to five.
Rashida Morisset: They took some time off for lunch in New York City. And pretty much any opportunity to visit the store you have to do on your own time. What I'm excited about within retail is how the consumer has become once again, the center of commerce. And there's innovation and excitement about enhancing the customer experience and meeting the customer where they're at. And that is constantly evolving. We see it started... Amazon was revolutionary in that regard, but now we... In the advent of, or while we're still during COVID, we see curbside delivery, buy online pick up in-store. There are so many ways to meet the consumer where they're at and that will continue to evolve and change as the consumers do as well.
Chris Parker: Nick, what about you, what gets you fired up about retail?
Nick Wyss: I think the biggest excitement right now is around the disruption in technology is as well so we've seen physical and man-made disruption, but the opportunities that technology is bringing into this space are scary on one side but fascinating on the other.
Chris Parker: Yeah, for sure. For sure. All right. Well, let's go ahead and jump into today's topic. Starting with kind of establishing a baseline right now for folks to understand, would you help me understand the cosmetics industry? How big is the world of cosmetics and what kind of companies kind of makeup in today's market?
Rashida Morisset: So globally, the industry is about $532 billion. So that's the latest estimate that we have and it encompasses everything from skincare to personal care, to make-up and all the other traditional things that we imagine. And I would say surprisingly, the U.S is still the largest market within that category. However, there's a lot of competition coming out of Asia, Latin America, and elsewhere.
Chris Parker: Yeah.
Rashida Morisset: The industry has historically been dominated by a lot of the legacy mega beauty retailers. So I would say there are probably about seven mega beauty companies that own quite a few of the brands that are out there within the market. So they've really been the ones to kind of lead the way to have the resources, to be able to be on the mass market shelves, as well as on e-commerce and things like that. And there's quite a lot of startups and emerging brands as well coming onto the market that's, maybe not challenging or certainly getting the mega beauty industry attention-
Chris Parker: Yeah, yeah. Shaking things up.
Rashida Morisset: And what we've seen with... Yeah, it's definitely shaken things up and a lot of it is intentional to get that financial investment, so we've seen a lot of mergers and acquisitions, but there's also a lot of independent beauty companies that are showing an increased focus on their unique customer and meeting their consumer where they're at.
Chris Parker: So shifting over to cosmetic customers, how have they changed over the last five years?
Nick Wyss: Yeah. And I think that goes with it a little bit, I think the biggest change has been some of the changes brought on by government impact and consumer impact, and consumer demand. So, whether it's the aspect of sustainability. Again, an environmental sustainability but also other aspects. Ethical sourcing, especially in that regard. So we saw the last couple of years what was happening when mica was being farmed out of India and the impact that had on the industry. And the reaction of the companies to support the young workers and help them get educated and build their lives.
Nick Wyss: The requirements that are coming in for visibility of supply chains are going to also drive a lot of behaviors within the industries so, there's a lot of shifting going on. Shifting towards the sort of products, the natural side of perfumes and cosmetics, the shifting towards how we source them.
Rashida Morisset: Going back to what I think is exciting about retail and the fact that the customers are now at the center of even your product assortment. There was a time when there were some... And there probably still is. There were some trendy people sitting in a dark room trying to determine what the trend would be, a year from now, 18 months from now and-
Chris Parker: The scent of the year or something like that.
Rashida Morisset: Exactly. Exactly, the scent to the year, the makeup of the year, the color of the year. And while that still happens a lot, it's still very much driven by consumers. It's still very much driven by how diverse the consumer base is that we're marketing to. I think of some of the Instagram followers that... Or sorry, I'm dating myself, TikTok followers now, that some of these younger folks are looking at and they're really defining the trends and saying, it's kind of leading the way in some of the things that Nick mentioned that they want products that are clean of artificial and harmful chemicals. And they're looking for a more diverse range of products for a variety of skin tones and needs and things like that. And we're seeing more and more focus on animal free and more cruelty-free. So I think it's really the consumers who are pushing the way forward and forcing companies to provide products that meet their unique needs.
Chris Parker: A word that I've seen a lot too is this push for sustainability. Is that just related to the packaging of cosmetics products or is it related to the manufacturing of these products?
Nick Wyss: It's on all aspects. I think the packaging is one aspect especially that relates to the goods being shipped. Removal of air that increases the carbon footprint, if there's a lot of air so that certainly, but much more other aspects of the manufacturing. Generally manufacturing is considered in scope one, or scope two of the company's carbon footprint but actually the scope three which is the... Including the logistics, can often be up to four times more polluted than the own operations. So there's a lot more emphasis going across the entire supply chain.
Chris Parker: Yeah. Wow! Incredible. Rashida, you were bringing up that there's definitely been a focus more on the consumer. How have cosmetics companies been responding to these changes and expectations by the consumer?
Rashida Morisset: Yeah, and I want to comment just even on sustainability-
Chris Parker: Sure, please.
Rashida Morisset: I think that's part of the overall initiative for more corporate social responsibility, that includes sustainability, that includes fair labor, social justice, environmental, and really the consumer is driving a lot of these changes and the retailers or the manufacturers are meeting that need. But some of the ways that we've seen that they met this need is, I would say just this past month in terms of Pride Month, it's great to see so many companies responding and celebrating and supporting that. I would look to in terms of the diverse ray of products that are on the market and the focus for there to be more inclusive shades so that it's not just limited, there's a wide variety. I think Fenty was the first brand in a while that debuted a wide assortment of colors for various skin tones. So there are about 42 different skin tones that they came out with. Don't quote me on that, I'm quite sure that I'm probably wrong on that.
Rashida Morisset: There's a wide array of skin tones. There's a focus on products and makeup for men. Not only in terms of skincare but also makeup and grooming. So there's quite a lot of ways that the companies are meeting the consumer and there's been a significant pivot that happened during COVID because we weren't wearing foundation. We weren't wearing lipstick. It was more of a DIY set. How do you give yourself that home manicure, that home pedicure, that home facial? And some of that we'll see what their lasting power is but it's just a great way in terms of how companies have met the needs of consumers and met the needs of the times, really.
Chris Parker: As we were talking about the impact and kind of shifting products here, cosmetic stores, I remember in the old days were all over the place and are all over the place. But I imagine there was this big shift to e-commerce to kind of satisfy the buying patterns and needs and behaviors of customers. What other impacts did the pandemic have on cosmetics that I guess consumers might not be aware of or they don't necessarily think about?
Nick Wyss: I think there's a couple of things on that, Chris. First of all, as you said traditionally where you'd get cosmetics that's changing a lot, right?
Chris Parker: Sure. Of course. Of course.
Nick Wyss: So you've seen a lot of companies, maybe a fashion and apparel company let's call it that now has cosmetics and perfumes as well. It's not the usual suspect of where you get it and now with e-commerce coming into its own, we're seeing a big uptake in sales where we thought beauty would be one of the slower uptakes into e-commerce. Especially because of COVID it's really shifted.
Nick Wyss: One of the... Let's say glaring outcomes of the COVID situation though it's really been around travel retail. That's been one of the biggest consumers of cosmetics and perfumes across all markets. And since the airports were closed down, flights were taken down then a lot of that business has just dried up. So the companies that were heavily involved in that have been very heavily impacted by that. One of the biggest aspects of that has been the Chinese consumer. Go back to what Rashida said earlier about the US being one of the major consumer sales points, let's call it. But they're also selling to a lot of Chinese tourists in pre-COVID times.
Nick Wyss: So, a lot of the Chinese shift was to try and entice those sales into China because the Chinese weren't able to travel. So that's had a dramatic impact. If we look at what's happening in the Hainan region in China, where they're trying to sort of push up the domestic travelers in China. So that's really having a big impact so, a) not as much challenge to buy travel retail so pushing up the e-commerce side and really how do we cater to the next Chinese or what will happen with the Chinese in a post-COVID environment? Will they find it in China and... Or will they still continue to travel around the world and buy it?
Chris Parker: What else is on a cosmetic company’s mind? What are they thinking and doing right now as all of this continues to shift and ebb and flow and whatnot?
Nick Wyss: Yeah, it's certainly challenging times in that regard because they've got to try and keep ahead of those old ways of selling to the consumers, but there's a lot of things, again back on the technology side. Artificial intelligence, virtual reality, how you can sort of see what's happening with the cosmetics without having to put it on I mean, I can remember, I'm blessed to have two young daughters 16 and 19 and their habits have certainly shifted in the last 12 months.
Chris Parker: Absolutely.
Nick Wyss: Not only for the reasons Rashida said that they weren't needing to wear it under masks but just how do they experience and how do they look towards cosmetics and perfumes. So I think technology plays a very large role in how the future of the cosmetics industry will evolve.
Chris Parker: Mm-hmm.
Rashida Morisset: And also I would just add to that as Nick mentioned his daughters and I kind of touched on it, there's a lot of influencers out there who are really leading the way and defining the trend and people who may just be your next door neighbor that you may not realize have a million TikTok followers or something like that. So you have one at home Nick. So a lot is going on in that space. And then I also think just some of the challenges with kind of meeting this consumer where they are and getting the product to them and just making sure it's intact. Retailers have done a good job of expanding their return policy and making sure that in the event, especially during COVID, if they can't try it on in store that there's a way to try it on at home and they have a very generous return policy. So there are various ways that we're watching the industry evolve to meet the consumer where they are.
Chris Parker: Absolutely.
Nick Wyss: Yeah. And I think that's actually a great point Rashida because that influencer is coming in different shapes, sizes, nationalities, ethnicity, everything is changing in that regard. I can certainly, not to date myself but if I look at the face of many of the cosmetics brands, 25, 30 years ago, it's completely different now how they market and we've talked about the Chinese consumer, we've talked about the world for cosmetics, but we can't underestimate, for example, what Korean and Japanese companies coming into this space are doing. Not only within their markets, not only within the Chinese market but also in the U.S and across Europe. Whether it's K-pop and I know Chris you love your K-pop. So if we look at how that's evolving, it's changing the dynamics a lot on the consumer influence.
Chris Parker: All right, let's move over to these cosmetic companies as a customer of logistics and freight forwarding. What kind of customers are they?
Rashida Morisset: They're complex. Becuase the interesting thing is that many cosmetic companies, they're not only wholesalers, they are retailers and they're manufacturers. So they have a global footprint. They not only import goods but they export goods as well, to meet this growing global demand. The product requires a lot of expertise, a lot of insight because many of them are highly regulated. There's quite a number of government agencies to make sure that what we put in our skin, what we put in our bodies, it's safe. So I would say these companies are really looking to capitalize on the latest trends. They're looking for insight on, not only government regulations in terms of the oversight of the product, in terms of the oversight of health and skincare but also if there are some dangerous goods, they're looking for insight on that. And more and more we're seeing even more luxury items. I know Nick, you're seeing a lot of that especially within the luxury market as well, right?
Nick Wyss: Yeah. I mean you mentioned it there with the complicated products, right? So things like CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora), so exotic animals, and fine fish and wildlife impact of CITES management. It's really making it more complex.
Rashida Morisset: And we're talking about lotion, you know? When you think about it. We are talking about skincare.
Nick Wyss: Yeah, yeah. Exactly. Yeah. And then outsourcing is a major topic for many companies, many retailers, but also in this model, I mean you talked about it, they often own their manufacturing but they don't do it exclusively and that shift is changing so, source and diversification is a big topic within these companies.
Chris Parker: With the way that they’re modeled, I mean, it sounds like vertical integration, right? How does that change their supply chains and what kind of requirements do they have?
Rashida Morisset: So I think a lot of the sourcing diversification like you said, these companies were historically vertically integrated, where they control the manufacturing, to some extent, they control distribution and point of sale.
Rashida Morisset: Now that we're seeing more diversification, more complex products that can't be done in-house, they definitely have needed to understand their vendors more. To understand where commodities are coming from, to manage vendors abroad. To understand the regulations and the impact of new items, new fragrances. And also, as we saw in the last US administration, that there was a lot of impact on trade. There was a lot of focus on, with the trade wars, a lot of these goods that were imported had a significantly higher duty impact than they did in the past. So there was a focus on managing that and mitigating that and how can they manage that risk that was brought upon them.
Nick Wyss: It's been shifting over the last five, six years and I think it only continues to increase in how much impact that's having, as these companies manage that diversification. On the sourcing side as you said, but also on the consumption side. So that really brings a lot of challenges. Hemisphere challenges. Northern hemisphere, Southern hemisphere, also getting from a standpoint of the consumer as we've talked about earlier.
Chris Parker: Yeah. Absolutely. Okay. And so what are the logistics and transportation needs of these customers?
Nick Wyss: Yeah, I think many of those things, duty mitigation, managing the increases in tariffs, customs brokerage. We talked about some of the complexities earlier. Whenever there's an Incoterm, a new version of the Incoterms coming out, I normally run it by the cosmetics and perfume companies, because if they don't have all of them then maybe they started to use a few more of their own. It's really quite complex so. The customs brokerage picture is quite complex. And then just managing that whole duty-free piece as well and then the impact that has.
Rashida Morisset: And I would just add that for every retailer especially now, there's a big focus on data visibility and insight. And how we can provide actionable intelligent information throughout all the products and services. From a brokerage side I know we were able to provide customers with the impact of some of the challenges that 2018, 2020 trade wars. Once we received a new update, we were able to provide our customers with the impact of that update. Not just say that something is coming in the pipeline, but here's what it means to you.
Rashida Morisset: And we were able to provide them with additional information with our sourcing profile so they can figure out their options if that was feasible at that point to change manufacturing. And just in terms of the visibility piece working closely with overseas vendors so they have insight as to where their product is. Ultimately, a lot of these companies are moving more and more of their sales to the digital space and that's a difficult space to compete in. You have to move quickly, you have to have insight and you have to capitalize on the latest trend. So I think by us providing these customers with data, insight, and visibility, we're able to help them do that.
Nick Wyss: I think maybe just one thing on that Rashida is a great point on the visibility and I think the role logistics companies have on the sustainability side, starting with providing good visibility. But just taking that forward I really believe that many of the beauty companies are leading the way now on their push for sustainability. Partly because of course they know it's the right thing to do, but especially because consumers are demanding that.
Rashida Morisset: Again just talking about some of the challenges of e-commerce. I think when you think of a beauty product, we're thinking about small items. More and more where we're able to support retailers who used to provide stores pallets worth of goods and move pallets worth of shipments that we're able to support them with their distribution needs and move these small packages to end consumers or small packages to stores because now there's a narrower product assortment, there's a smaller store footprint. So we're able to support our customers as they expand in new markets and as they diversify their product assortment.
Chris Parker: When you talk about how regulated that these products are and the materials I can go into it, it sounds like there needs to be a serious plan to address any kind of risk. What kind of penalties can these companies face without careful service and attention?
Nick Wyss: Yeah, of course, I mean the one big aspect is just reputation, which will have a very long-term financial impact but just on the goods that could be impacted. Fines of course. And often can see destruction of goods if something's not handled properly.
Chris Parker: Yeah.
Nick Wyss: And of course, I think the damage to the reputation can be fatal to companies, so they really need to pay attention.
Rashida Morisset: We talked a lot about social media. If an influencer is not happy or there's something... I remember maybe it was a year ago, there was some controversy about a product line. An influencer went and told her 35 million followers that there were some issues. Certainly, a company has to address that. So I think more and more as we're globalizing our reach, as we're expanding our reach and companies are playing within the social media space, there has to be some integrity of the product, safety within the product, and alignment between the product values and the influencers that they choose to work with.
Nick Wyss: I think actually that it's a great point you mentioned. I think it gets a little bit also more subjective but we shouldn't underestimate the fact that the beauty companies for 15, 20 years have always been very careful with their packaging. So if you had a little bit of damage even to outer cartons, you were under severe scrutiny but certainly, never want to affect the inner packaging. And I think that's been around, but let's say the response rate from an influencer, the speed of response, and the depth that that impact can have on an organization has become more severe.
Chris Parker: Right. Right. And it can just spiral out too. That stuff is... I mean, it's called viral for a reason.
Rashida Morisset: Mm-hmm.
Nick Wyss: Exactly.
Chris Parker: All right. So my final question to you all is, how have the trends that we've talked about changed the way that freight forwarders service the cosmetics industry?
Nick Wyss: There are a few things. Rashida talked there about visibility.
Chris Parker: Sure.
Nick Wyss: And cosmetics companies haven't always looked at things like order management because they often control the production. They often push those pallets as Rashida said, they just pushed them out because they were needed at all times. And they started to get into more finite challenges, let's say of understanding the order and managing the order. So things like order management are very critical. There's a lot of crossover between the healthcare industry and the retail industry when it comes to cosmetics and perfumes so, there are elements there within. Things like good distribution practices are also starting to cross over more and more to the cosmetics industry. And regulations, CITES, HAZMAT handling, compliance in general. Those are... I would say megatrends that need to be responded to on an evolving and constant basis.
Chris Parker: Yeah. Well, thank you so much for talking me through this and the big wide world of cosmetics. I really appreciate the time that you've taken it. If folks wanted to get into contact with you to talk more about what you do in the fashion retail vertical or talk cosmetics, how can they get in touch with you?
Rashida Morisset: Email, LinkedIn, any way. We are available, just reach out. At your local Expeditors person.
Nick Wyss: Absolutely. Just like you said, Rashida. LinkedIn or through your local contacts. We would love to hear from you. I think one thing we didn't talk too much about in the beginning, but Rashida and I learn what we do from talking with customers.
Chris Parker: Mm-hmm.
Nick Wyss: Spending time with customers. They're in the goalmouth, they're seeing what's going on and we want to support you, we want to support other companies so, we look forward to sharing ideas, having feedback, just please reach out.
Chris Parker: Yeah. And Rashida is on TikTok.
Rashida Morisset: No, I'm not, but I should be.
Chris Parker: All right. Take care guys.
Rashida Morisset: Thanks.
Nick Wyss: Thanks very much.
Chris Parker: Thanks for listening to today's episode. If you've got any questions or want to learn more about today's topic, check out the show notes for more information. And before you go, make sure you're subscribed to whatever podcast app you're using so you won't miss the next episode. To learn more about Expeditors, you can find us on LinkedIn, Facebook, Instagram, and Twitter, or simply visit us at expeditors.com. Take care, and I'll see you next time.