WHAT DOES TRACEABILITY IN THE COSMETICS INDUSTRY MEAN AND HOW CAN IT HELP TO FIGHT COUNTERFEITS?

Unique digital product identities empower cosmetics companies to mitigate financial impacts by capturing real-time data at every node of the supply chain

The cosmetics industry is a colourful landscape of buzzwords. For example, we have all seen headlines about why forward-thinking brands are embracing clean beauty, sustainability, environmental, social, and governance (ESG) initiatives, and transparency.

COSMETICS INDUSTRY: TRENDING TOPICS

Indeed, these trends offer tangible benefits to consumers, companies, and the environment, and it is encouraging to see them becoming part of mainstream business.

One common thread that connects these trends and, arguably, is the most critical driver of business value in today’s cosmetics industry is traceability.

What is traceability in the cosmetics industry?

Traceability is the ability to identify, follow, monitor, and verify individual products as they make their way through the supply chain, from manufacturing to the final consumer. Companies achieve this by endowing every product with a unique digital identity.

To date, approaches to traceability have been characterized by ‘one up, one down’ track and trace, which means that you can see the last place a product was and the next place it is supposed to go. But this approach is outdated and far too narrow.

Instead, we should regard traceability as a powerful business tool that does much more than ‘follow items’ and boost operational efficiency. By leveraging unique digital identities for every product, modern traceability solutions help mitigate risks and create an impressive array of value for brand owners and their supply chains. It is the equivalent of creating a ‘digital twin’ for every product that contains real-time data about the item’s history, production, hierarchy, and movements through the supply chain.

Here are a few top-of-mind examples that cosmetics companies should consider.

Fighting counterfeits: protecting products, people, and brand

Counterfeit cosmetics products are a real threat to consumers and brands. Fake goods bypass quality control processes and regulatory oversight, which means they can contain harmful substances. They mimic the originals, undercutting sales and harming brand reputations.

Traceability is the first and best line of defence against counterfeits, which the Organisation for Economic Co-operation and Development (OECD) said accounted for 2.5% of world trade in 2019. Unique digital product identities empower cosmetics companies to mitigate financial impacts by capturing real-time data at every node of the supply chain, ensuring that only genuine products are making their way to consumers. In the same way, traceability also helps detect diversion and theft, safeguarding consumers and protecting margins.

Furthermore, unique digital identities are a means to establish direct communication with consumers and encourage them identify, report, and remove counterfeits from circulation. The same ‘digital traceability infrastructure’ that enables data collection along the supply chain allows brands to invite consumers to be part of the authentication process.

For example, while at the store or after receiving an online order at home, the customer can interact with a trigger on the package (e.g. a QR code or an NFC chip) to verify that the product is genuine. If the code is fake, then the product is fake, and the brand is informed in real time and the customer alerted.

As online and unauthorized sales channels proliferate, ‘crowdsourcing’ product interactions helps cast a much wider net in the fight against counterfeits and makes brand protection strategies pre-emptive, not reactive. It also tells consumers that they are an important member of the ‘brand community’, which engenders trust and increases their equity in a brand.

Powering transparency, honesty, integrity, and trustworthiness

Transparency means the whole supply chain is visible, from raw materials, production, and packaging to distribution into retail channels and post-purchase. A lack of transparency in complex supply chains that move billions of products can cause significant consumer and brand risks.

Transparency is impossible without traceability, which creates a full, shareable, fact-based profile of every product item and its supply chain journey. By enabling transparency, traceability therefore provides the means by which brands support their claims (e.g. product provenance, sustainability, ethical sourcing) and tell the world, ‘We are what we say we are’.

In this way, traceability and transparency are strategic concepts. Today, more and more cosmetic companies are adopting transparency in their business strategies and mission statements because of its significant benefits for operational efficiency, consumer engagement, brand protection, and profitability. Examples include the following:

• Enabling broader and more granular data collection to better understand ESG performance and to enable more accurate reporting
• Providing granular data to consumers, including the origin of materials and proof of sustainable and ethical sourcing
• Using traceability and transparency to build trust-based relationships with consumers and to differentiate products across markets
• Guiding consumer behaviour on recycling and capturing more accurate data on recycling rates (supporting a response to new green taxes)

Optimising brand engagement

Traceability is the most cost-effective tool for acquiring, connecting with, and retaining consumers. Here are four reasons why:

1. Sharing product information that consumers demand. Consumers demand information. Every product and unique digital identity can be ‘loaded’ with data that consumers can access anywhere. For example, a quick scan of a QR Code will show an indelible product provenance, building consumer trust and confidence.

2. Creating compelling customer experiences. By using traceability data with other resources (e.g. a website or app), companies can curate experiences such as virtual try-ons, contests, videos, unique online content, and encourage storytelling about their brand. Every engagement can be hyper-personalised and hyper-targeted based on traceability data, and products can even ‘broadcast’ contextual information to specific locations or events.

3. Communicating directly with consumers. As noted in our overview of how traceability combats counterfeits, unique digital identities enable direct communication with consumers. People can connect to social media, a website, an app, a survey, or other forums where they can start a conversation with a brand, ask questions, and give feedback.

4. Gaining valuable insight into customers. An effective brand engagement strategy creates a world for customers. And as they navigate and participate in that world, they share information. Where are they buying products? What do they like or dislike? What inspires them? What engagement activities resonated the most? This intelligence can inform every facet of a business, from how the supply chain works to building better brand engagement strategies.

Conclusion

Traceability with unique digital identities benefits cosmetics companies and consumers alike. It provides the foundation for all those buzzwords — from clean beauty and sustainability to transparency, ESG, and beyond — and unlocks critical areas of business value and consumer confidence.

• For brands, traceability creates greater operational efficiencies, mitigates supply chain risks, and creates opportunities to burnish their reputations and engage with customers. Every single product becomes a data-generating asset that connects disparate supply chain networks, creating an integrated value chain and bridging silos of data to enable insights and analytics to optimise the supply chain and maximise brand performance.

• For consumers, traceability allows them to confirm that products are safe, authentic, and demonstrably rise to a brand’s claims of purity, sustainability, and transparency. It creates pathways to product information and interaction. The purchase used to be the last part of the product-consumer journey; now it is the beginning of a new realm of possibilities that people are demanding from brands and their products.

As the cosmetics industry and consumer expectations continue to evolve, it is clear that simple ‘one up, one down’ track and trace does not safeguard products, protect brand reputations, or entice consumers. It is also clear that brands must do much more than put products in stores and hope people will notice and purchase them. Traceability will fuel the evolution of the cosmetics industry, enabling new ways to interact, incentivise, and inspire.

Antares Vision Group will present its solutions dedicated to the cosmetics industry at Cosmopack, the leading international event fully dedicated to the entire supply chain of the cosmetics industry, which will be held in Bologna from 16 to 18 March.