How Amazon Got here To Dominate The U.S. Magnificence E-Commerce Market

Regardless of financial headwinds, Ulta Magnificence
ULTA
and Sephora’s proprietor LVMH reported document revenues in 2022. This robust efficiency has not been sufficient to sluggish the continued ascension of Amazon
AMZN
on-line, although.

Amazon is the clear on-line chief throughout all 11 magnificence and private care classes within the U.S. and continues to win share. In truth, Amazon gained market throughout all classes besides depilatories within the second quarter of 2023 in contrast with the earlier yr, based on new e-commerce analysis from Euromonitor Worldwide.

Among the many high gamers promoting magnificence and private care on-line within the U.S., solely Amazon and Walmart
WMT
gained share throughout magnificence throughout that interval. Walmart’s features had been minimal compared to Amazon’s blockbuster efficiency, capturing 60% of the market.

How Amazon bests magnificence specialists

Amazon wins within the magnificence area – and plenty of others – by providing on a regular basis low costs, a large product vary and unmatched logistics. This technique is enabling the e-commerce large to undercut generalists and specialists alike. Whereas Amazon touts its affordability, some magnificence specialists, like Sephora, place themselves as extra premium and worth accordingly.

Though Amazon wins partially as a result of it sells such a large assortment of merchandise on-line, it additionally outpaces Ulta and Sephora in key classes – coloration cosmetics and skincare. These are the 2 largest on-line magnificence classes for all three retailers by way of worth. In consequence, efficiency in these areas closely impacts the retailers’ total magnificence technique.

Each Ulta and Sephora misplaced on-line share in these classes over the past yr, based on Euromonitor’s e-commerce analysis. When the 2 classes are seen collectively, the wonder specialists offered the identical quantity within the second quarter of 2023 in comparison with 2022. Amazon offered nearly $1 billion extra, permitting it to steal share.

Seasonality additionally performs a consider Amazon’s technique. In 2022, the e-commerce large posted its strongest efficiency within the fourth quarter throughout all magnificence and private classes. In truth, Amazon generated a 3rd of its 2022 gross sales throughout this era. In distinction, solely 27% of Ulta’s on-line gross sales had been made within the fourth quarter.

This era coincides with the normal vacation purchasing season – a time of yr when shoppers splurge on presents. Customers flip to Amazon as a result of they’ve confidence within the e-commerce titan’s logistics capabilities to ship on time. The vacations and its personal shopper occasions like Amazon Prime Day are when it most outperforms many retailers.

How Amazon leverages its purchasing occasions

Amazon’s promotional technique shifts significantly throughout Amazon Prime Day – an annual 48-hour occasion hosted close to the corporate’s anniversary in early July. Throughout each this and its Prime Early Entry sale in October, Amazon promotes 1000’s of merchandise, together with magnificence and private care.

The highest purpose that customers take part in a retail-led purchasing day is to save cash by way of reductions or promotions, based on Euromonitor’s Voice of the Shopper: Digital Survey. Almost 60% of U.S. digital shoppers level to this purpose adopted by the supply of free delivery and the chance to strive new merchandise. Amazon tapped into this need to avoid wasting throughout its current Prime Day.

Amazon’s share of magnificence and private care merchandise on promotion peaked at 17% throughout Prime Day on July 13, up from its 11% common exterior of the sale interval, based on Euromonitor. Whereas the promotional price elevated throughout different retailers promoting magnificence and private care on-line throughout Amazon Prime Day, the height was not as steep as seen with Amazon.

The Euromonitor information additionally exhibits a development whereby retailers adjusted their promotional methods in 2023 as in contrast with 2022. Amazon promoted extra closely throughout Prime Day in 2023 than 2022, with the promotional incidence peaking at solely 11% in 2022 versus 17% in 2023. On the whole, although, Amazon’s promotional incidence was two to 3 share factors increased earlier than and after Amazon Prime Day in 2023 than in 2022.

Fairly the other occurred on the assortment of different retailers. The group had a better promotional price in 2022 than Amazon did. In truth, the speed throughout this group was even increased than Amazon throughout Prime Day (11% versus 16%), based on Euromonitor. The non-Amazon retailers seemingly felt extra strain than the main participant to supply promotions to drive gross sales and cut back stock amid higher financial uncertainty.

Promotions will not be core to Amazon’s technique

Ongoing promotions will not be a central a part of Amazon’s technique – at the least on a year-round foundation. For the primary six months of the yr, Amazon provided fewer magnificence and private care merchandise on promotion than the common retailer. Solely 11% of Amazon’s SKUs had been promoted, with the most typical being strikethrough pricing, based on every day promotional information from Euromonitor.

The 2 largest magnificence specialists promoted the identical share or fewer SKUs than Amazon. Ulta had an 11% promotional incidence price whereas Sephora’s sat at solely 6% for the primary six months of the yr, based on Euromonitor. To some extent, this may be attributed to Sephora positioning its retail banner as extra premium than Ulta or others.

Though each Amazon and Walmart place themselves as providing on a regular basis low costs, their respective promotional methods differ significantly. Throughout the first six months of the yr, Walmart promoted 18% of the wonder and private care SKUs offered on-line in distinction to Amazon’s 11%, based on Euromonitor’s every day promotional information.

Additionally they differ by way of what they promote. Amazon most closely promoted child and child-specific merchandise, adopted by deodorants and fragrances. In distinction, the classes that had been most incessantly promoted at Walmart included fragrances adopted by coloration cosmetics and hair care. The commonality is that these classes symbolize among the weakest performing on-line classes for every retailer, based on Euromonitor evaluation.

Competing towards Amazon

Amazon has a commanding lead in magnificence and private care e-commerce, however there are alternatives for different retailers.

Though Amazon controls half the market, one potential progress class is fragrances provided that many premium manufacturers favor to not work with {the marketplace}. Amazon’s weakest on-line magnificence and private care classes by way of share of the class embody deodorants, bathtub and bathe, and coloration cosmetics, Euromonitor’s e-commerce information exhibits.

Alternatives transcend classes. Competing retailers ought to leverage their strengths to greatest Amazon. For magnificence specialists like Ulta and Sephora, that may be their deep understanding of their respective buyer bases. They’ll drive loyalty with magnificence fans in a manner that Amazon can’t. In addition to their loyal fan bases, retail generalists like Goal
TGT
and Walmart can leverage their robust omnichannel infrastructure to make magnificence a core a part of their company technique.