An axiom of the beauty and wellness industry is that selling out of products is a blessed curse. While it can demonstrate the popularity of a product, it also prevents further sales and can even drive customers to competitors. That was the experience that Unilever-owned Olly Nutrition had in 2020, as it faced epic supply chain constraints.
Jennifer Peters, DTC manager at Olly, said Olly’s raw ingredient supply chain was hit relatively hard in 2020, with ingredients like elderberry being nearly impossible to procure. She estimated that at the height of supply chain issues, up to 80% of its products were out of stock. Prior to finding a solution, Olly would offer customers the chance to be notified of inventory updates by filling out a form on a product’s detail page. However, supplements are often seen as perfunctory or functional items, and customers are more willing to bounce between competing brands based on availability. To prevent customer attrition, Olly worked with e-commerce analytics company MikMak to connect its online customers of out-of-stock products to it partner retailers’ websites. By providing the easy option, Olly reduces friction and customer frustration. From Dec. 2020 to June 2021, Olly attributed $28,000 of its sales to its ability to point those customers elsewhere.
“When customers came to our site and saw an Olly product was out of stock, they had an option to go to other [sites] to buy it. That was the main solution to this big problem we had,” said Peters. “But what came alongside that were a lot of new insights and information and data that we never would have had before.”
DTC e-commerce makes up 5-10% of the brand’s overall sales. But those DTC customers are some of the most important because of their loyalty, said Peters, though he declined to elaborate. Notably, Olly has an arrangement with Target to provide six-month exclusivity, aside from Olly.com, on any new products. Therefore, when Olly does not have its new products in stock, its direction of customers to Target.com recommits its dedication to its most important retailer relationship.
By linking up with retail partners, Olly also gets a unique peek into its customers’ shopping habits, including other products they buy, what they’re searching and browsing for, and which retail partners they gravitate toward. For example, 42% of DTC visitors preferred to shop on Target.com. MikMak partners with retailers to provide brands first-party data from retail partners. Rachel Tipograph, CEO and founder of MikMak, said this falls in line with all CCPA and GDRP regulations, as well as all policies around third-party cookies. Both Target and Walmart experienced a 15.6% sales conversion rate on Olly products in the six-month timeframe. Peters said she is unable to say whether the conversion rate was an increase compared to before Dec. 2020, as she was not employed at Olly until March 2021.
Olly’s core customers are millennial women, and now, it can get more granular in its targeting by further understanding their lifestyles, and develop new products or marketing accordingly. Olly can also better understand its male customers, who remain a more elusive consumer group for the brand, said Peters. She added, among customers directed to other sites, she saw a lot of what she calls “health light” behavior, where customers are trying to live healthier lives but are neither gym rats nor health-obsessed. Olly often sees customers buying healthy cereals, granola bars and fresh produce. It also sees women buying diapers, makeup and other lifestyle or family products.
“You see more specialty shop-in-shops, like Sephora and Target or Ulta Beauty with Kohl’s. And the more we [see] the comparison products [customers are buying], the smarter we get,” said Peters.
Olly’s approach to ameliorate supply chain issues is also demonstrative of the idea of controlling what you feasibly can. It is not possible to solve global supply chain problems overnight, nor build up a workaround. Instead, turning to what is within a brand’s control (in this case DTC e-commerce) is a better solution than pulling out one’s hair over systemic macro-issues.
“Our [brand] customers are figuring out how to marry demand to where inventory is available,” said Tipograph. “It makes brands rethink the paradigm of DTC [and wholesale]. For so long, DTC has meant protecting product margins and not thinking about mass retail partners.”