How Amazon is changing how we buy and sell beauty
Friday, February 16, 2018
These days, you can find almost anything on Amazon. Pretty much everyone you know uses the internet e-commerce site to buy everything from jewelry to toilet bowl cleaners to steak knives.
In fact, according to CNBC, Amazon claimed about 44 percent of all U.S. e-commerce sales last year. Amazon boasts more than 90 million Prime customers who pay an annual fee for certain privileges, so it's safe to say that Amazon's appeal isn't fading any time soon. In terms of the beauty industry, Amazon grew 47 percent in luxury beauty sales, which generated $400 million in revenue, last year alone.
So what are the reasons that Amazon is so successfully changing how we buy and sell beauty products? Let's take a look at the new trends in online beauty buying.
Many are saying that Amazon is removing the aura of the beauty buying experience. In other words, many customers are not so concerned with brand names because they are after certain ingredients or results instead.
"Amazon guts brands down to their basic parts — ingredients, prices, customer service, shipping and reviews," writes Rachel Brown of BeautyIndependent.
This is what customers want: to solve their beauty woes with transparent ingredients, competitive pricing, trusted reviews and throw in free shipping. It's not to say that consumers don't seek out brands they love, it's just that Amazon makes it so easy to search for a solution or a specific ingredient instead. The age of coveted beauty brands is waning, and egoless beauty is here to stay.
Consumers hear that certain vitamins, oils and muds are fantastic for their complexions and just search for those terms without certain brand names in mind. If you are searching for the ingredient retinol, for example, you would see both recognizable and obscure brands in your results.
In other words, popular brands and no-name brands are competing side by side to get into customers' virtual carts. In fact, some successful skincare brands on Amazon have no website, social media presence or brick-and-mortar store of their own, but they report having over $200K per month in revenue. Moreover, BeautyIndependent also reports that "skilled Amazon beauty firms score $1 million-plus a month on the e-commerce site."
So what impact is Amazon's beauty sales having on the more traditional beauty buying experience?
Macy's, Sephora and Ulta will certainly have a thing or two to say. Until the turn of this century, buying a lipstick or a moisturizer most likely involved traveling to a retail establishment, interacting with other shoppers and sales associates, peering through glass cases at colorful testers and standing in line.
If the brick-and-mortar stores didn't have your favorite shade of lipstick or signature fragrance, they would order it for you from another store/online and ship it to you directly. Unhappy shoppers would sometimes leave the mall empty-handed and have to wait for the UPS driver to deliver their purchases.
Now, the playing field is leveled for consumers: stay home, skip the line, be free of the screaming babies and shop online.
According to stock market expert Richard Duprey, "Amazon is the leading e-tailer with a 35.5 percent share of the online market in 2016, or twice as much as second place Macy's. Sephora came in third with a 15 percent share and Ulta, with 8.2 percent, was fourth." Amazon has already disrupted traditional beauty buying habits and replaced them with effortless searches, cut-to-the-chase ingredient or brand searches and zero time looking for a parking space.
If you are an online beauty entrepreneur or the owner of an independent beauty brand, then these facts should be appealing to you. Independent beauty brands are quietly building their empires.
Anyone can start a beauty brand on Amazon with little expertise, no beauty industry experience, scant social media presence and just a handful of employees. A new, independent beauty brand can have absolutely no retail distribution but sell thousands of dollars per month on Amazon.
How are these independent beauty brands selling astronomical amounts of product? They are immune to retail buyers "judging their packaging, formulas and demographic fits, and the costs for beauty wannabes to enter the Amazon universe are significantly less than they are for securing positions on store shelves."
Furthermore, for a relatively small investment of around $2,500, most independent beauty brands can be successfully launched on Amazon. In essence, almost anonymous, no-name beauty brands can go head-to-head with the most notable ones and get a fair shot — this had not been the trend, up to this point.
But how and when will notable/luxury brands fight back? Ask Coty.
At the end of last year, Coty made headlines when they won a lawsuit that prohibited retailers and distributors from selling their luxury goods on e-commerce platforms such as Amazon and eBay. The European Court of Justice ruled that because there is a "special exemption for luxury goods under competition rules, allowing the owners of expensive brands to keep sales of these types of products limited to brick and mortar shops enabling them to maintain their high-end brand."
In other words, luxury brands are allowed to "distinguish" themselves from "mass market" brands and lower-priced items. Though the EU ruling does not have legal authority in the U.S., it does set an example that many industry professionals may support.
Coty may have won this battle, but many think Amazon will ultimately win the war. After all, consumers who buy luxury goods shop on Amazon, too. Amazon continues to provide a lot of convenience and low-cost or free delivery fees. Moreover, luxury shoppers still want to pay competitive prices and want to ensure the authenticity of their purchases.
It may just come down to common sense, in terms of purchasing luxury items on Amazon. Obviously, it could be risky to buy a $3,000 handbag or an expensive watch, but shouldn't a "little luxury" like a beauty product be OK? For consumers who choose to buy notable/luxury brands on Amazon, they usually will visit brand websites to learn all of the important features of the product before buying them online.
Some luxury brands aren't putting up a fight at all and give their customers an option to buy on Amazon. The "Buy It On Amazon" button will redirect customers to Amazon to complete a purchase. The rationale here: A sale on Amazon is better than no sale at all.
Why miss an opportunity to sell your products if your customers are already on Amazon searching for bedding, cookware or perfume? Edward Hertzman, the founder and president of the Sourcing Journal sums it up perfectly to Forbes, "Amazon is the largest catalyst in the world. The real question is how to embrace it, rather than fight against it."
If you have questions about Amazon, maybe you could ask Alexa. Alexa is the voice service powering Amazon's Echo. Having Alexa is like having a virtual assistant that can do everything from turn on your home lights to ordering you a take-out dinner.
Intelligent "personal assistants" like Alexa are also creating a new way to shop that involves no clicking, no search bars and absolutely no trip to the store. In one fell swoop, decades of research and marketing related to where a beauty product is placed on the shelf are effectively obsolete.
Voice services like Alexa are becoming more and more popular and will be the new normal. Now, buying your favorite sunscreen is less than a click away — it's a command away — from being in your virtual shopping cart.
Thanks to Amazon, the future of beauty buying is here, and it is faster, more efficient and as egoless as ever. Up to now, a lot of what we have cherished about beauty brands is seeing a new day. For brands to succeed they will have to make themselves accessible via the Amazon buying experience.
If my favorite grocery store, Whole Foods Market, isn't immune to the power of this e-commerce giant, then the beauty industry certainly won't be either. Only time will tell how Amazon will further change how we buy and sell beauty, but needless to say it will be here for years to come.
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