Beautify Case Interview | Case Studies - Interview Preparation PDF Download

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.

Q.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?

To elaborate on the factors that Beautify should consider when transitioning its beauty consultants to virtual social media-beauty advisors, some additional points are:

(i) Retailer response: Beautify will need to consider how retailers will react to consumers buying directly from their website. They will have to work out the financial arrangements with their retail partners, as some may see this as competition and may choose not to stock their products.

(ii) Competitor response: Beautify will also need to consider the response of their competitors. They should investigate if other beauty companies offer virtual assistants and if they are successful. If not, do they have plans to digitize the personal selling experience? This will help Beautify identify potential threats and opportunities in the market.
(iii) Current capabilities: Beautify should evaluate the current skill set of their beauty consultants regarding social media. They should determine how many already have an online presence, such as those with professional accounts on social media platforms or a personal beauty or skincare blog. If necessary, Beautify should consider hiring new advisors with marketing skills to effectively implement the transition.
(iv) Brand image: Transitioning to virtual social media-beauty advisors may impact Beautify's brand image. They should consider the implications of having hundreds of advisors suddenly posting about their products. However, this could also be leveraged to make Beautify seem more attractive as an employer in the market. By offering their employees the opportunity to develop their social media and marketing skills, Beautify can differentiate themselves from other beauty companies and attract top talent.

Q.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?

Here are some suggestions you could consider in your response:

Personalized recommendations through a virtual experience: Beautify could create a personalized beauty profile for customers to fill out, which could then be used by the virtual beauty advisor to offer tailored recommendations based on individual preferences, skin type, and other factors.

Live streaming and interactive video chats: Beautify could set up a live stream with virtual beauty advisors for customers to ask questions, get advice, and learn new tips and tricks. Interactive video chats could also allow for a more personal experience and the chance to try out different products virtually.

Virtual try-on tools: Beautify could provide virtual try-on tools, such as augmented reality, so that customers can see how different products look on their skin tone and type before making a purchase. This could help to reduce returns and increase customer satisfaction.

Exclusive promotions and discounts: Virtual beauty advisors could offer exclusive promotions and discounts to customers who shop through them, which could incentivize customers to switch to a virtual sales experience.

Easy access to product information: Virtual beauty advisors could provide easy access to product information and reviews, making it easier for customers to research products and make informed decisions.

Q.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.
• 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 in advisors turns profitable?

A potential approach that can be discussed with your interviewer is to consider the financial impact of introducing new beauty advisors. Here are some points to elaborate on this approach:

Incremental revenues: Introducing new beauty advisors is expected to generate €130 million in incremental revenues. This amount represents ten percent of the current €1.3 billion revenue of Beautify. The revenue growth is a result of the new sales channels that beauty advisors will create through their own pages on beautify.com, appearances at major retail outlets, and being active on all social media platforms.

Resulting profits: After accounting for the additional costs of hiring new beauty advisors, the resulting profits are expected to be €120 million annually. This means that the all-in cost of hiring new advisors is estimated to be €10 million per year.

Expected upfront investment: The upfront investment required to hire new beauty advisors is €150 million. This amount includes expenses for recruitment, training, marketing, and technology infrastructure. Specifically, €50 million is allocated for recruitment, €25 million for training, €50 million for marketing, and €25 million for technology infrastructure.

Profitability timeframe: Based on the estimated incremental revenues and all-in costs, the investment in new beauty advisors is expected to be profitable after 1.25 years or one year and three months. This timeframe is calculated by dividing the upfront investment of €150 million by the annual profit of €120 million.

Overall, introducing new beauty advisors is expected to create significant revenue and profit growth for Beautify, although it requires a substantial upfront investment. The profitability timeframe of 1.25 years suggests that this investment is likely to yield a positive return in a relatively short period.