The beauty e-commerce sector has witnessed remarkable growth in recent years, with market expansion nearly quadrupling from 2015 to 2022. This growth can be attributed to various factors, including the influence of influencers and social selling, a surge in demand during the pandemic, and the innovation of direct-to-consumer models. One significant contributor to this sector's success has been the broadening of beauty product categories on platforms like Amazon.
In the United States, which is now the second-largest online beauty and cosmetics market, ecommerce sales reached an impressive $11.7 billion in 2022. Notably, Amazon has emerged as a dominant player, holding a share of the US online beauty market nearly three times larger than that of specialist retailer Ulta Beauty. Furthermore, predictions suggest that Amazon could surpass Walmart to become the largest overall US beauty retailer, potentially capturing 14.5% of a market projected to reach $180 billion by 2025.
Beyond Amazon's well-established reputation for competitive pricing, extensive product choices, and convenience, there are several strategies and initiatives driving its continued success in the beauty and cosmetics sector, benefiting both the platform and beauty brands.
1. Amplifying Brands through Promotions:
Amazon strategically utilizes promotions and sales events, such as Prime Day and Beauty Week, to enhance the visibility of brands and products across various categories. These events, especially significant for beauty products, coincide with peak spending periods like Christmas and Prime Day. For instance, Laneige, a Korean skincare brand, achieved remarkable success on Amazon Prime Day 2022, with its Lip Sleeping Mask and Lip Glowy Balm ranking as the top-selling beauty products.
2. Always-On' Advertising Strategy:
In an intensely competitive beauty market filled with various retail channels, Amazon promotes an 'always-on' advertising strategy through its Amazon Ads solution. This approach enables brands to differentiate themselves from competitors and achieve long-term success. Brands like Moroccanoil have effectively embraced this strategy, partnering with Amazon to meet campaign goals and expand their product lines. The strategy also includes the use of streaming TV and audio ads, resulting in increased sales and consumer engagement. A 2022 study found that beauty brands incorporating brand-building solutions in their strategies saw a 14-fold increase in consideration rates.
3. Expansion into Premium Beauty:
While Amazon typically attracts drugstore and lower-priced beauty brands, it aims to tap into the luxury beauty market through initiatives like Premium Beauty Week. This event provides high-end brands with greater visibility and promotional opportunities. Additionally, Amazon's luxury fashion retailer, Shopbop, launched a dedicated beauty category featuring prestigious brands like Dr. Barbara Sturm and Costa Brazil in October 2022. Shopbop's broader strategy involves competing with luxury fashion ecommerce platforms by leveraging the frequent purchases of beauty products to promote other categories like fashion, contributing to increased gross merchandise value (GMV).
4. Supporting New and Legacy Beauty Brands:
Amazon serves as an effective platform for both emerging and established beauty brands. Newcomers like Hero Cosmetics initially launched on Amazon and achieved remarkable success, eventually being acquired for $630 million in 2022. Meanwhile, legacy brands like Avon are turning to Amazon to enhance their omnichannel strategies, refreshing their brand image to attract younger audiences. This aligns them with brands that have gained popularity on platforms like TikTok and cater to a younger demographic.
By offering beauty brands opportunities to reach new customers, facilitating cross-promotion and product replenishment, and providing optimization and targeting capabilities, Amazon continues to expand its market share within the beauty and cosmetics sector.