Beauty Sector to See Attractive Rise27 Nov, 2013 By: Doug McPherson
NEW YORK – Sellers in the beauty sector should be especially thankful this holiday season; they’ll see their E-commerce fortunes soar nearly 30 percent this year, says L2 Research, a think tank for digital innovations.
The key reason: research. It turns out that beauty is a highly research-oriented category, says Stasha Rosen, a researcher at L2.
“Shoppers can find a wealth of information available on digital platforms … on websites or one of the thousands of YouTube how-to videos produced by Beauty vloggers,” Rosen says. “The information, along with features such as user ratings and reviews and live chat-based customer service, fortify a shopper’s confidence… This enhanced product information, combined with the convenience of shopping online, has helped to increase E-commerce's share of total sales in the beauty sector.”
Rosen says one example of increased convenience is the auto-replenishment model that encourages shoppers to subscribe to periodical auto-shipments of products.
L2 estimates 44 percent of the E-commerce sites offered auto-replenishment this year, compared to just 22 percent in 2011. Yet the health of the beauty industry has perpetuated an "arms race" across both traditional media investment and digital channels, L2 reports.
Estée Lauder has made aggressive investments in its online division, while L’Oréal increased its domestic media budget to $1.5 billion last year, and has indicated that digital – as a percentage of spend – has grown double digits annually since 2010.
Procter & Gamble has said up to 35 percent of its media budget goes to digital, and that it views investments online and a renewed focus on product innovation as key to future profits.
Scott Galloway, L2’s founder, says leaders in the beauty space are good at exploiting new growth channels. “Beauty brands are doubling down on digital, and some of these bets are starting to pay off,” he says.
MediaPost reports Rosen thinks other sectors can follow the beauty business to E-commerce success.
“Brands across sectors can best benefit from the growth in E-commerce by first mastering the basics – a solid E-commerce site, a commanding search presence, a robust E-mail program, and a seamless mobile experience – before being distracted by some of the flashy, yet untested, fads that inevitably arise in the digital realm. Sephora is a best-in-class example of a brand that has added tangible value to its beauty shoppers by integrating its multichannel beauty insider loyalty program across these dimensions,” Rosen says.
The report also includes these interesting tidbits:
- Instagram is beauty’s hottest social platform, with 79 percent of brands in the index, up from just 29 percent in 2012.
- Amazon is the most visible site in beauty searches, appearing on the first page of organic results for more than 60 percent of skincare, color cosmetics and fragrance keyword searches.
- Beauty brands’ products are being sold unofficially on Amazon at an average of 30 percent less than suggested retail prices.
- Nearly three-quarters of beauty sites are mobile – a 50-percent year-over-year increase.