Beauty Long Read: How Amazon is beginning to dominate the industry
Greater connectivity has allowed both traditional and independent beauty brands to reach consumers through various channels, including brands’ own websites, social feeds, and digital marketplaces.
Amazon has been investing in strengthening its position as a retailer for beauty online. We take a look at the role it has been playing, and how this may evolve.
Beauty dominant online
Beauty is second only to gaming as the most viewed topic on YouTube, according to the Financial Times, indicating how popular the industry is with internet users.
Aside from the opportunity this poses for influencers and marketing, digital retail has been a key area for innovation and growth.
In the US, Sephora is a major player online, and in both the US and Europe, Amazon is a lead figure.
Amazon and beauty
According to Credit Suisse, Amazon has about 9% of the US beauty and personal care market today, with that figure growing by a huge 40% year-on-year.
As quoted in Barron’s, Credit Suisse’s Michael Binetti explained the company’s rising success in the industry.
Amazon, he suggests, “has some areas where it does better than others--more mass market than prestige products, more skin care versus cosmetics, and more men's versus women's, which all makes sense given the level of customer service and customization that goes into the latter of those pairs.”
A divisive figure
Digital market insights firm L2 observes that beauty players tend to have either a love or a hate relationship with Amazon as a retail platform.
“Within the Beauty sector, Amazon is a polarizing force with major enterprises choosing to either work closely with or vocally denounce the platform,” the firm says.
“While Amazon panders to the giants with additional content capabilities and a promise to clean up third-party product listings, increased competitive bidding from high-growth indie brands is renewing interest in the platform and forcing luxury holdouts to re-evaluate the opportunity.”
One key example of a brand resisting the pull of Amazon can been seen in Lush, a company that even won a court case in 2014 against Amazon, for piggybacking off its brand by potentially misleading consumers searching for Lush online.
Indie spotlight
Amazon has been making ‘pointed investments’ in Luxury Beauty and Professional Skincare, says L2, looking “to mimic the feel of more traditional beauty retailers.”
The firm confirms that Amazon offers a route for small, new, indie beauty players to reach an audience, however, it isn’t always plain sailing for these brands.
Indeed, in Q4 2016, for example, fewer than 100 unique brands earned ‘Best Seller’ status on the retail platform.
This looks set to change, though: Amazon is reportedly set to launch a beauty shop next month dedicated to indie beauty players.
Spotlight on Amazon in the UK
Online retail in the UK can be taken as a case study for the retail giant’s efforts, with the market seeing Amazon compete in an increasingly aggressive way with other specialty retailers present on the market.
FeelUnique, allbeauty and lookfantastic each enjoy good market share, in the absence of Sephora, which dominates elsewhere in the world (see the US), and Amazon is looking to dominate in the face of this stiff competition.
“Amazon.co.uk continues to compete aggressively with these splintered specialty players, more than doubling its visibility for branded items year over year, accounting for 20% of paid results, compared to 9% last year,” explains L2.
The firm notes that Amazon has been accelerating its investment in the UK market (not limited to beauty, but across the board).
Diverse and connected
For good or for bad for industry players, Amazon is certainly savvy to set its sights on beauty.
Beauty consumers love engaging with influencers and brands online, and making the most of consumers’ increasing connectedness is crucial.
Mariel Brown, Director of Futures, Seymourpowell, recently spoke to CosmeticsDesign on the findings of the firm’s ‘Future of Beauty’ report, which included a focus on digital consumers.
“Widespread connectivity is having a phenomenal impact on the behaviour of beauty consumers as it has opened up the category with diversity,” she said.
“The beauty “standards” of old, now appear dull and unrealistic. There is a desire for more diversity and as a result new visions of beauty are emerging. Individuality follows on from diversity.”
Experiential: hope for beauty offline
While Amazon and Sephora may increasing their dominance online, many commentators have observed that beauty is actually proving remarkably resilient offline too.
A recent report for the Financial Times observed that compared to other consumer goods industries, the demand in beauty for the sensory aspect of retail - the look, touch, scent and feel of a beauty product is still key for consumers - beauty continues to enjoy healthy in-store sales.
“The sector is benefiting from a secular move towards “experiences”, making beauty less susceptible to the price cuts that have plagued commodities from toilet paper to T-shirts,” says the recent report.
“People want to touch and see lipstick and concealers before opening their wallets, sending them through the doors of Sephora, the French cosmetics chain owned by LVMH, or Target.”
