Practice Case

Beautify

Client goal

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

Situation description

Beautify is a global prestige cosmetics company that sells its products mainly inside high-end department stores such as Harrods and Shanghai No. 1. It also has a presence online with specialty retailers like Sephora. Beautify produces a number of makeup, fragrance, and skin care products sold under several different brands.

In department stores, beauty consultants play a critical role with consumers:

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

These consultants are hired directly by Beautify or through specialist, third-party agencies that find new recruits 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. For example, this may mean a consultant might be part of the Chanel team in a store. However, consumers are shifting more to online shopping, and too many beauty consultants are left working in empty department stores.

McKinsey study

Beautify’s president and COO engaged McKinsey to help evaluate if training the majority of beauty consultants to use virtual channels to connect with customers could be profitable for the company.

Helpful hints

  • Write down important information.
  • Feel free to ask the interviewer to explain anything that is not clear to you.

Question 1:

Beautify is excited to support its current staff of beauty consultants on the journey to becoming virtual social media-beauty advisors. Consultants would still lead the way in terms of direct consumer engagement and would be expected to maintain and grow a group of clients. They would sell products through their own pages on beautify.com, make appearances at major retail outlets, and be active on all social media platforms.

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

Question 2:

One of the key areas that Beautify wants to understand is the reaction of current and potential new customers to the virtual social media-beauty advisors.

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

Question 3:

The discussion about virtual advisors has been energizing, but you’d like to ground the discussion in some analysis. You’ve always found it helpful to frame an investment in terms of how long it will take to turn profitable, such as 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 overall increase in incremental revenue—the team assumes that Beautify will gain new customers who enjoy the experience as well as increased online sales through those engaged, but it will also lose some to other brands that still provide more in-store service. The team assumes this will happen in the first year.
  • In that first year, Beautify will invest €50 million in IT, €25 million in training, €50 million in remodeling department store counters, and €25 million in inventory.
  • Beautify expects a 5% annual depreciation (loss in value) of the upfront investment (e.g. infrastructure depreciates in value) each year
  • 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 €1.3 billion.

How many years would it take until the investment turns profitable?

Helpful hints

  • Don’t feel rushed into performing calculations. Take your time.
  • Remember that calculators are not allowed - you may want to write out your calculations on paper during the interview.
  • 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.

Question 4:

Beautify is now considering how AI could help enhance customer experience (as an alternative or in addition to the Beauty Consultants). The team generated the following data on how some top competitors are using AI. The competitors’ AI chatbots are called Clarice, Lena, Jaki and Lola, and the data shows how various metrics have changed since they were introduced. What does this information tell us about the potential benefits of using AI chatbots, and what would you recommend Beautify does next?

Metrics on Beautify’s top four competitors’ AI chatbots​

Helpful hint

  • Take some time to look at the information and note any observations you have.
  • Challenge yourself to identify trends that are not immediately obvious from the data.