Member Exclusive   //   June 20, 2024

Amazon Briefing: Why more high-end beauty brands like Estée Lauder are joining Amazon

This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →

Estée Lauder’s Too Faced. L’Oréal’s Kiehl’s. DTC brand Function of Beauty. These are some of the beauty and personal care brands that have opted to open Amazon storefronts in recent weeks.

They join the e-commerce giant’s portfolio of brands that includes Lancôme, Clinique – another Estée Lauder brand – and Mario Badescu. It’s the latest evidence of Amazon’s growing dominance in the beauty industry. 

Beauty in general is a fast-growing area of Amazon’s e-commerce business, Modern Retail previously reported. But the recent flood of premium beauty brands inking deals with Amazon signals a notable sea change. High-end brands that once shunned Amazon are now warming up to the platform. With 300 million customers worldwide, the retailer’s growing dominance in the beauty industry is pushing companies to reconsider Amazon as a marketplace to sell their wares. 

Searches for “luxury” in the beauty category on Amazon jumped 262% over the last two years, according to data from e-commerce accelerator Front Row’s tech platform Catapult. In the first quarter, the Dyson Airwrap, which retails for about $600, was the third best-selling beauty product on Amazon, selling 23,000 units and generating nearly $14 million in revenue, according to Perpetua Prism. 

“Amazon has definitely become a beauty destination in its own right,” said Emily Safian-Demers, director of consumer insights at Front Row. She added that there’s been a rise in competition on the platform. “More beauty brands are entering the space because there are more shoppers that are looking for those brands on Amazon, so there’s definitely a snowball effect.”

All told, that’s potentially bad news for rival Walmart. Despite being the largest beauty retailer right now, Amazon is projected to surpass Walmart in the U.S. by 2025, snagging 14.5% of the total beauty market. This comes as the beauty industry as a whole is expected to grow to $580 billion by 2027, according to McKinsey & Company. Beauty consumers buy online through Amazon at nearly two times the rate of Walmart, according to eMarketer.

As such, it’s no surprise that Walmart has looked to beef up its beauty offerings. The Bentonville, Alabama-based retailer has sought to onboard a number of direct-to-consumer brands over the past few years. Just last week, Walmart announced an exclusive partnership with beauty startup Pretty Smart, which pitches itself as a price-sensitive premium brand. Other brands Walmart has recruited include British beauty retailer Space NK, hair color company Madison Reed and LeBron James’ grooming line The Shop.

In the past, beauty brands, especially premium labels, shied away from Amazon due to the stigma associated with the platform. But as more shoppers go to Amazon for everything from groceries to lip balm, the platform has become too powerful to ignore. 

“If you look even just five to 10 years ago, there were some lapses in trust among consumers who are shopping on Amazon,” said Safian-Demers. “Consumers are much more likely to trust that Amazon experience today, and that really goes a long way with luxury brands in particular.”

Amazon has also actively worked to woo higher-end brands to its marketplace by addressing their concerns head-on, such as that platform’s generic interface and lack of control over how the brand is presented. For example, in 2020, Amazon launched Luxury Stores, which attempts to give brands, including beauty, more control over how their storefront looks on the platform.

For Estée Lauder, which has traditionally retailed through department stores, the shift to Amazon is part of the brand’s revamp strategy. Lackluster demand for its products in China and the U.S. has weighed on the company’s earnings in recent quarters. In March, Estée Lauder launched its Clinique brand on Amazon. Since then, sales have “greatly exceeded” expectations, the company said during its most recent earnings. 

The recent wave of beauty brands flocking to Amazon comes at a time when industry players are increasingly fighting for consumer dollars. For example, Ulta said the beauty industry has gotten more competitive after the retailer reported a full-year profit that was below expectations. At the same time, shoppers are more selective about how they spend their dollars. U.S. retail sales barely rose in May and prior months were revised lower, suggesting financial pressure facing consumers. 

“Every company comes to a point when they realize their brand equity and scale have changed,” said Simeon Siegel, an equity analyst at BMO Capital Markets. “The question they have to deal with is whether to scale back or keep trying to find further avenues for growth.”

Whether brands like it or not, it behooves them to be on Amazon to help crack down on their products being sold on the platform without their permission. 

“If a beauty brand doesn’t have their own presence on Amazon, there’s a good chance that a third-party reseller is going to be selling the same products on Amazon — maybe counterfeit products or old stock that a beauty brand wouldn’t be able to exercise control over,” said eMarketer analyst Sky Canaves. “It’s definitely in brands’ interest to have a presence on Amazon, even though they might have previously had hesitations about it.”

Striking more deals with beauty brands also helps Amazon compete with rising e-commerce star TikTok Shop, where the vast majority of goods sold on the platform fall within the beauty and personal care category. Still, TikTok isn’t just a competitor, especially as Gen Z years increasingly rely on the platform more than Google as a search engine. For example, according to Front Row’s Safian-Demers, one of the agency’s clients saw that TikTok searches related to their brand name correlated more highly with Amazon searches than compared to Google. 

As Amazon’s portfolio of beauty players continues to grow, including the recent wave of premium labels, more brands will likely follow. 

“Competition for consumer dollars has become more intense, even in beauty, which has been a very resilient category,” said Canaves. “I think there’s a realization among brands that Amazon really has an enormous consumer base of people who are shopping for beauty products online.”

Amazon news to know

  • California has fined Amazon $5.9 million over violating the state’s labor laws.
  • Amazon announced plans to invest over $10 billion in its German cloud and logistics businesses.
  • Amazon aggregator Thrasio has emerged from bankruptcy and announced a new CEO.

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