The global beauty industry is currently valued at over $500 billion, and is expected to reach $800 billion by 2023. Between 2015 and 2017, private equity groups invested $1.6 billion in the sector. Unsurprisingly, Amazon is already a big part of it – but the e-commerce giant wants more. Amazon Beauty store is now one of the most important channels in the industry, and it continues to expand fast.
Although some luxury brands still resist having an official presence on the marketplace, more and more big names are joining. Amazon Luxury Beauty shop launched late 2013 pushed by 24 prestige brands such as NARS, Deborah Lippmann and Burberry. Today, it features hundreds of big and small brands worldwide. Between online shoppers, onefourzero’s data shows that Amazon Beauty is quickly becoming progressively popular.
Emerging Markets and Trends
Amazon’s investment in the beauty department is expanding globally and include territories where the company’s presence is still limited. In Brazil, for example, the website only sells books, DVDs and electronics – but the country is the fourth-largest beauty market in the world, and Amazon wants a piece of it. It is currently in talks with two of the biggest beauty brands, Natura and Boticario.
In India, Amazon is focusing on luxury brands in an attempt to take over a sector currently dominated by Nykaa. Between national and international prestige names, the retail giant already stocks over 30 new brands and is investing in partnerships to bring exclusive products.
While part of the beauty industry remains sceptical about the power of the platform, specialists warn that, in such a dynamic environment, no sector is completely “Amazon-proof”. Sephora and Ulta Beauty, the two main beauty destinations for American beauty shoppers, are recently discovering their empire might be at risk. In fact, recent rumours suggest that Amazon is preparing to buy Ulta altogether. It’s clear that the beauty industry can’t ignore the marketplace for much longer, but learn how to deal with it instead.
Consistent efforts on customer experience, endless battle for customer acquisition & retention through low prices and programs such as Amazon Prime, and high investment in technology and logistics (more than double of what the average retailer invests on) are some of the reasons why the company is succeeding. But another main factor that contributes to the success of Amazon – and something that other companies should take as an example – is its capacity to identify and react to trends.
In the UK, the website has partnered with Beauty journalists and influencers to recommend ‘Hot Picks’ items from their wide selection of brands. In France, where customers from around the world traditionally head to local pharmacies to find their favourites and explore what’s new, Amazon created a Drugstore Shop. In the US, Amazon Beauty has dedicated pages for natural products and Korean brands, segments that have seen a sharp increase in demand in the past years. Not surprisingly, the platform is the top beauty retailer in the country – in the first quarter of this year, its sales were up by 30%, to $900 million.
Keeping up with trends, now Amazon prepares to launch an ‘Indie Beauty Shop’, featuring cult brands not already sold at big retailers. This is a huge opportunity for small brands that can benefit from the website’s exposure and logistics capabilities to reach new customers and territories much faster. However, it remains a two-way street, and others are still reluctant: companies on Amazon have little control over brand and prices, and can indirectly feed competition.
By sharing its data on sales and customers with Amazon, brands may be helping the website launch competing products. Amazon already offers its own private-label products in beauty, following the successful strategy on fashion and furniture departments. Some are available for Prime members only, but around 60% of US households already have an Amazon Prime account. Today, more than 55% of customers skip Google and go directly to Amazon when searching for an item. Meanwhile, Google still relies on advertising for 90% of its profits.
But should brands be scared of Amazon’s access to their sales data, or even pull out of the website? No. All platforms collect data in some way or another, and while Amazon will not suffer if a brand leaves the marketplace, the brand most likely will. The trick is to embrace the flow of the audience and maximise it using data as an ally, not a threat. Expanding will always be the best choice, so investing in branding and customer experience is ever important.
Customer relationship is the key
Not even the most advanced technologies can replace the experience beauty customers have in store. Trying out a moisturiser to feel how it blends, finding the perfect match foundation under any lightening or discovering how a perfume smells different on your skin are just some of the experiences online shopping can’t beat. But it can find alternatives to create a new approach and build a “community” feeling.
Online reviews are one of the strongest ways of connecting with customers and building trust. On the same note, by listening to what shoppers have to say, brands can easily identify and correct problems. Although Amazon has a detailed rating and review system that now includes videos, it also has a bad reputation for fake reviews created by bots, which affects trustworthiness and can ultimately put customers off the website completely. On the Amazon Beauty store, however, this doesn’t seem to be an issue yet.
When searching for consumer sentiment towards the marketplace, onefourzero’s data found that it’s mostly neutral or positive between both UK and global public, with very little negative mentions. It’s a clear sign that Amazon’s strategy is working.
Fleur Hicks, onefourzero’s MD, says that the beauty industry, like all other industries, can’t ignore the threat of marketplace selling, such as on Amazon or AliExpress. “Digital disruption is happening and those that are succeeding in the bricks and mortar vs online market are those who are accepting that consumer dynamics and needs are changing. They are thinking less about high street vs online, and more about how physical stores can facilitate online sales and vice versa”.
Retail is not dying, it is changing – and this includes e-commerce. The relationship between customers and websites is beyond the lowest price. In beauty, where customers often develop an emotional connection with brands that make them look and feel better, this relationship goes deeper. Building this connection – with and alongside Amazon – is the key to any beauty business.
“Consumer dynamics are changing, so take control of your sales by following the audience to where they want to transact. This doesn’t necessarily mean the death of your brand or the concept of premium”, says Hicks.
In this ever-changing environment, information is the most valuable asset. By understanding customer’s interests and staying on top of trends, brands can learn how to make customers overall experience special. Thankfully, technology allows companies to find pertinent data on every aspect of consumer behaviour nowadays. However, it is the balance between tech investment and personalisation of services that guarantee which brands will remain relevant for the next generation of beauty customers – whether they’re on Amazon or not.