Beautify

Client goal

Our client is Beautify. Beautify has approached McKinsey for help with exploring new ways to approach their customers.

Description of situation

Beautify is a global prestige cosmetics company, who sells its products mainly in the cosmetics area of high-end department stores (e.g., Harrod’s, Shanghai No. 1) but also has presence online and in specialty retailers like Sephora. Beautify produces a number of makeup, fragrance and skin care products, which are sold through several different brands.

In the department stores, the beauty consultant (BC) plays a critical role for the consumers:

• approaching ‘passive’ customers
• demonstrating their knowledge of the products
• actively selling the products
• maintaining a loyal customer base of repeat buyers

The consultants are hired directly by the beauty company or from specialized third-party agencies that find employees for a fee. Beautify is then responsible for selecting, training, and paying the consultants. Within Beautify, beauty consultants are managed independently by each brand in each country (i.e., a consultant would be part of the ‘Chanel’ team in a store). However, consumers are shifting more and more to online and too many beauty consultants are working empty department stores.

McKinsey study

Beautify’s President and Chief Operating Officer has engaged McKinsey to help evaluate if training most beauty consultants to rely much more on virtual channels to connect with customers could be profitable for Beautify.

Helpful hints

• Write down important information.
• Feel free to ask the interviewer for an explanation of any point that is not clear to you.

Beautify is excited about helping their current staff of beauty consultants develop into virtual social media beauty Advisors. These employees would still be leading direct consumer engagement and would be expected to maintain and grow a group of clients. They would sell products through their own page on beautify.com, make appearances in major retail outlets, and be active on all social media platforms.

What possible factors should Beautify consider when shifting this group of employees to a new set of responsibilities?

Helpful hints

• Take time to organize your thoughts before answering. This will help show your interviewer that you have a logical approach and can think in an organized way, regardless of the “accuracy” of the outcome.
• Develop an overall approach before diving into details.

One of the key points that Beautify wants to understand is their current and potential new customers reaction to the virtual social media Beauty Advisors.

Imagine you are a current Beautify customer, and you mostly shop in your local department store and enjoy the high-touch service of working with the in-store consultants. What features would make you consider switching to a mostly virtual sales experience?

Helpful hint

Consider the issues raised in the question, and group your thoughts around them. This will ensure that you are giving the most relevant answers.

The discussion about virtual Advisors has been energizing, but you’d like to ground the discussion in some analysis. One framing that you’ve always found helpful is to express the investment in terms of how long it will take until it turns profitable (when incremental revenues are greater than the cost of the project). You sit down with your teammates from Beautify Finance and come up with the following assumptions:

• With Advisors, you expect ten percent incremental revenue overall (the team assumes Beautify gains new customers who like the experience and higher online sales for those engaged, but also lose some to other brands still providing more in-store service). The team assumes this happens in the first year.
• In the first year, Beautify will invest €50 million in IT, €25 million in training, €50 million in remodeling the department store counters, and €25 million in inventory.
• All-in yearly costs associated with a shift to Advisors are expected to be €10 million, and will start during the first year.
• Beautify’s revenues are €1,300 million.

How long would it take, expressed in years, until the investment in Advisors turns profitable?

Helpful hints

• Don’t feel rushed into performing calculations. Take your time.
• Remember that calculators are not allowed - you may wish to write out your calculations on paper during the interviews.
• Talk your interviewer through your steps so that you can demonstrate an organized approach; the more you talk the easier it will be for your interviewer to help you.