Beauty ecommerce has continued an upward trajectory over the past few years, with growth in the market nearly quadrupling between 2015 and 2022.
As well as the impact of influencers and social selling, a spike in demand during the pandemic, and direct-to-consumer innovation – one factor in the sector’s growth has been the expansion of beauty categories at marketplaces such as Amazon.
The US is now the second largest market for beauty and cosmetics online, with ecommerce sales reaching $11.7bn in 2022. Indeed, RetailX’s ‘Beauty and Cosmetics Report 2023’ states that the largest share of the US online beauty market is held by Amazon, with its share being almost three times higher than that of specialist retailer Ulta Beauty. Meanwhile, it’s been predicted that Amazon could overtake Walmart as the biggest overall US beauty retailer, taking 14.5% of a market that could hit $180 billion in value by 2025.
Beyond its well-established reputation for price, choice and convenience, how is Amazon continuing to grow sales within beauty and cosmetics, and how are beauty brands benefitting from its dominance within the category?
For more on ecommerce and FMCG…
Amplifying brands via Prime Day and Beauty Week promotions
Promotions and sales events are a key part of Amazon’s strategy, helping to amplify brands and products across categories. This is particularly the case for beauty, where consumers tend to ramp up spend during key retail events such as Christmas and Prime Day sales.
According to RetailX, Korean skincare brand Laneige become one of the top selling beauty brands on Amazon Prime Day 2022 in the US, with its Lip Sleeping Mask and Lip Glowy Balm ranking as number one and three best-selling products in the category.
Amazon has become a core part of omnichannel strategy for beauty brands, with the marketplace offering several tactics to help boost performance, such as Sponsored Brands and Sponsored Products (custom ads that run on-site), as well as the ability to optimise product pages and Brand Stores for events such as Prime Day.
Creating ‘always-on’ advertising to drive long-term success for brands
Today’s beauty market is ultra-competitive, offering consumers a dizzying array of retail channels, ranging from direct-to-consumer websites like Glossier and speciality retailers like Ulta, to high street drugstores like Superdrug and supermarkets like Sainsbury’s. Let’s not forget the retailers that have also launched their own brand skincare and cosmetics, including Aldi and M&S.
Amazon promotes its ‘always-on’ advertising strategy, facilitated by its Amazon Ads solution, as one way to stand out from the competition – and to help brands drive longer-term success.
Moroccanoil is one brand, which sells first-party on Amazon, that has succeeded with this strategy, partnering with the ecommerce giant in 2022 to assist in achieving campaign goals, which involved consideration for its existing haircare line as well as awareness of a new expansion into bodycare. Morocconoil also launched a full-funnel campaign approach which, alongside Amazon Ads, also included streaming TV and audio ads. Emma Sayles, senior manager of eRetail and digital marketplaces at Moroccanoil, told WWD that in the months that followed the campaign launch, the brand saw above-benchmark increases in average monthly sales and glance views. Additionally, in a 2022 study, Amazon Ads data revealed that beauty brands that included brand-building solutions in their strategy saw a 14 times higher consideration rate on average.
“The shopping journey is not always straightforward, so brands that can reach shoppers across various ad experiences with relevant messages at different points in their journey can see an increase in conversion rates,” Sayles told WWD. “It’s all about finding the right mix of ad products that work for your brand and reaching shoppers where they are most likely to engage with your message.”
Expanding into premium beauty (and increasing GMV) with Shopbop
While drugstore or lower-priced beauty brands appear eager to sell on Amazon, high-end brands typically steer clear of the marketplace, due to worries that it might dilute their luxury image or impact their control over a brand. One way Amazon is aiming to expand into luxury beauty is through its Premium Beauty Week, offering brands greater visibility, and the opportunity to target consumers through promotions.
Another tactic is Shopbop, Amazon’s luxury online fashion retailer (acquired in 2006), which has its own website and app, as well as selling through an Amazon storefront. In October 2022, Shopbop launched a dedicated beauty category featuring prestige brands such as Dr. Barbara Sturm and Costa Brazil.
But in addition to building out its share of luxury beauty, the launch is also part of Shopbop’s wider strategy to compete with the likes of Farfetch and Moda Operandi – both luxury fashion ecommerce retailers which also now sell beauty. Speaking to Business of Fashion, Luca Solca, head of luxury goods research at Bernstein, explained that “Beauty is a category consumers buy often, [and] if you manage to leverage that traffic and promote other categories like fashion, this can provide a good tailwind to GMV [gross merchandise value] growth.”
Offering a digital boost to legacy beauty brands
Amazon can be an effective starting point for new and independent beauty brands. Hero Cosmetics is one of the most successful examples, first launching on Amazon in 2017 before going on to be acquired by Church & Dwight for $630 million in 2022. As of 2021, it was reported that 50% of the brand’s sales still stemmed from Amazon.
At the same time, however, legacy brands are also looking to Amazon to enable them to boost omnichannel strategies. Take Avon, for example, which recently started selling on Amazon in a bid to accelerate online strategy. Speaking about the decision, Kristof Neirynck, the brand’s Global Chief Marketing Officer stated that “Avon is a true pioneer in direct selling and, as we continue to realise our omnichannel ambitions, now is the right time to launch our new Amazon store. Across Avon worldwide, online sales are now nearly three times pre-pandemic levels and expansion into other channels complements our existing network of reps.”
In addition to this, however, Avon is also using Amazon as part of a wider brand refresh, as “some people were saying it feels a bit dated,” Neirynck told Cosmetics Business. In partnering with Amazon, Avon is aligning itself with brands such as Hero Cosmetics, Paula’s Choice and e.l.f – beauty brands that have gained traction through viral social content on TikTok, and that are targeted at a younger audience.
By offering beauty brands the opportunity to connect with new customers, as well as unique benefits such as cross-promotion and product replenishment, and optimisation and targeting – Amazon looks set to continue building out its market share in beauty.