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Portrait of author Áine McTiernan
Áine McTiernan

Head of Customer Success – US

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Harnessing spiky demand to grow global DTC brands

By Áine McTiernan on August 23, 2022 - 5 Minute Read

At this year’s eTail event in Boston, Peak’s Áine McTiernan sat down with Coty’s Sally Stuart, to discuss one of the biggest challenges facing DTC brands – and how Coty is overcoming it. In this blog, Áine summarizes some of the key takeaways from their fireside chat.

A world leader in beauty, Coty is home to some of the most iconic cosmetic, skincare and fragrance brands, so it understands a thing or two about retail. But there’s something else that sets it apart. Coty is taking a data-first approach, investing in technology to help it thrive as we move into the Intelligence Era. This fourth industrial revolution will see industry undergo a radical digital transformation, driven by breakthroughs in cutting-edge technology.

Volatility in demand is a major challenge

‘Spiky demand’ is one of the biggest challenges DTC (direct to consumer) brands are experiencing. Day-to-day, sales for different products can massively fluctuate from their expected baseline, sometimes up to 100 times more than predicted. Sally highlighted that, for Coty, there were various reasons for this volatility, but promotional activity, such as a new product launch, markdown activity or influencer activity, is the biggest driver. 

When demand spikes unexpectedly, it can result in unwanted stockouts, leftover inventory that needs to be liquidated and difficulty allocating inventory effectively. It also wreaks havoc in fulfillment and distribution centers. 

This has a knock on impact on how demand teams work. So much time is spent simply organizing the mass of data created from the spike that it’s near impossible for the teams to then have time to analyze it to make quick, data-driven decisions in response to demand change. 

Spreadsheets can’t do it all

Typically, demand planning teams spend a lot of time deep in spreadsheets trying to amend their forecasts, often based on gut instinct. While some attention is given to planned activity, most forecasting is based on a review of historical sales and often at an aggregated level, meaning for an entire category or sub-category of products rather than by individual SKU.

For businesses like Coty, with multiple brands and many products, it’s impossible to produce accurate forecasts for every product all the time. ‘Best sellers’ and ‘slow movers’ take most of the focus, so there’s little time for the products in between, ultimately impacting the bottom line. In her experience, Sally sees spiky demand impact longer-term strategy, too. 

The amount of manual work being done rifling through spreadsheets means your demand planning teams don’t have time to derive critical insights into the patterns behind the data. So questions like, ‘what products are frequently being bought together’ and ‘what product lines are growing over time’, aren’t answered.

Sally Stuart

Senior Director, Global DTC Ecommerce Strategy and Operations, Coty

The data exists, it’s all about how you leverage it 

Data savvy businesses, like Coty, are employing AI. Instead of viewing data in arrears, they’re using applications to deliver more complex “what if” scenarios that support decision making. Even in the most volatile situations, forecasts can be optimized, so what was once unpredictable and unmanageable, now brings these businesses competitive advantages.

Peak provides Coty’s DTC brands with an AI-driven demand forecast at a daily, weekly and monthly level that feeds their demand and supply planning teams. The teams access the forecast on the Peak platform using a dashboard that allows them to ‘slice and dice’ the forecast to dig into the data. 

Comparing Peak’s forecast to Coty’s legacy forecast, Coty has seen a 52% improvement in forecast accuracy. This has resulted in a more efficient fulfillment service, which is critical to meeting customer expectations and increasing the likelihood of repeat purchases. In addition, Peak and Coty are collaborating on using the forecast’s capability to conduct scenario planning for promotions. This should mean blanket discounting gets kicked to the curb and revenue targets are hit.

Sally now finds that the demand planning teams have more time for longer-term thinking. 

With tasks that used to take hours now taking a few minutes, the team has more time to dedicate to strategic planning activities. What's more, they have the insight of longer-term demand trends and a better understanding of buying behaviors, so they can make more informed decisions.

Sally Stuart

Senior Director, Global DTC Ecommerce Strategy and Operations, Coty

It was such a pleasure to share the stage with Sally at eTail. We’re looking forward to continuing the Coty x Peak journey! 

If you want to find out how we could support your demand planning team, take a look at our Demand Intelligence applications.

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