As retail slows and new brands emerge, nobody should be surprised that the resulting industry growth is shifting online. For beauty companies, the same trend can be seen. According to Internet Retailer, the online beauty category grew web sales by 23.6% in 2017, outpacing the overall ecommerce growth rate.
By comparison, the beauty and cosmetics industry as a whole, while growing slowly on a global level, is set to increase by 62 percent or reach just under $863 billion by 2024. The industry is currently worth a whopping $532 billion. Over the next few years beauty and cosmetics brands will grow even more rapidly online, but beyond an increase in competition, they too will have their own unique set of industry challenges to face. A decade ago brands could get by with a simple site that allows consumers to purchase products at a great price; however, consumers are now more informed and connected than ever before.
Customers More Connected, Informed
As you’re reading this on a device connected to the internet, be it your phone, computer, or tablet, we’d be preaching to the choir when we detail just how connected our world has now become. As a result of this connectivity, consumers now have more access to information than ever before, which means they will be able to better price shop, learn about products, what products are made from, and the results of using them.
Showrooms and Experiential Retail
As retail stores continue to close, some brands are beginning to experiment with the gap being left in its wake. For beauty brands, information is readily available about their products, many many consumers still want to see it first-hand or try the products for themselves. Sephora has embraced the Tesla style showroom concept and offers their shoppers free makeovers with a $50 purchase as well as testers for every product. They also recently launched their Color IQ facial scanning technology to help in-store customers find the perfect skin tone match. Sephora stores also double as a pickup point for online orders and drop off point for returns.
Rejuvenating Effects of Ecommerce
“Having closely monitored trends in the beauty industries for years, I knew that H2O+ Beauty could not return to relevance without a focus on e-commerce,” stated H2O+ Beauty’s chairman and CEO Joy Che in an NBC report.
On H2O+’s product detail pages one of the front and center items are the ingredients in their products, which adds to the transparency that consumers now seek when making cosmetic purchases. Not only that, but they also use social media to show how their products work, specifically with Instagram. In fact, one of the biggest changes and challenges to the beauty industry is the creation of content. With so much of it being produced on a regular basis, from regular consumers to influencers, creating a brand voice that aligns and appeals to customers is only the first component. Even after the content is produced, being able to monetize it and turn viewers into buyers is even more challenging.
Regardless of conversion rates, consumers are driven to online outlets when first searching for new products. Between the recommendations from friends and peers, to reviews on websites and details regarding ingredients, Google is commonly the first place people start. The second? YouTube. Even now YouTube is considered the second most used search engine in the U.S. (yes, even over Bing), and the amount of beauty related content on there is staggering. According to Statista, beauty related reviews on YouTube increased from 55 billion in 2016 to 88 billion in 2017. Though much of the beauty video content and tutorials are now fueled by and paid for by beauty brands, the rise in the concept has led to one of the biggest marketing challenges in recent years, influencers.
Tapping Into Influencers
For ages, celebrities have been paid to slap their name on a product or service and recommend it. These paid endorsements are one of the oldest marketing concepts around; however, with the rise in technology and social media has resulted in the shift to influencers. While celebrities certainly can retain the influencer moniker, they also include everyday consumers who market their name as a brand, have developed huge followings, and produce content that speaks to specific niches. Beauty and fashion brands are quite possibly the two largest areas for influencers, which in turn makes it a large challenge for beauty brands. Not only is there a large demand for influencers (aka cost a great deal of money), there is also not a lot of transparency around the concept.
It’s easy to see how many people your brand reaches with influencers based on their number of followers, likes, and shares, but tracking the ROI of influencer marketing can be tricky. Caila Schwartz, Senior Business Intelligence Analyst at Salesforce, offers a few tips to track the success of influencer marketing:
“In order to effectively track the success of influencer marketing, beauty marketers first need to establish clear goals around their influencer campaigns. Marketers then need to define the KPIs that can help them measure their success against these goals. Once these two major tasks are complete, beauty brands need to do their research and select the right influencers that will help them achieve these goals. Once the relationship has been started and the campaign has been activated, brands can use tools such as Google Analytics to track and measure against these KPI’s.”
Free two-day shipping? Thanks, Amazon. Even if Prime Shipping isn’t technically free, Amazon has set a precedent regarding shipping times, and as a result, beauty brands too will have to face the growing need for instant gratification. For cosmetics, hair supplies, and everything in between, it’s easy to walk to your local retailer, grocery store, or big box brand to get a product, so where does that leave ecommerce brands? Typically you have two options: compete head-to-head with Amazon’s shipping approach or offer some sort of in-store pickup. Sometimes it’s just about the illusion of it all, or in other words, giving the appearance of free shipping while increasing prices site-wide.
Being Able to Compete With The Big Brands
With so much content, influencers, and competitors already online, where does that leave new brands trying to enter the industry? Or legacy brands competing with large retailers? The short answer is that their online customer experience needs to be quite simply better than the big brands and retailers.
Selling products directly to the consumer has significant business benefits, but selling products through retailers comes with its own perks. Schwartz suggests leveraging retailers to sell limited-edition merchandise that will generate awareness around the brand. Once you have the consumer hooked on your product, offering an incentive or exclusive content on the brand’s site provides them a compelling reason to visit your site over the retailer’s. For example, if you sell items through Sephora, you could include messaging on the packaging that directs the customer to visit a retail-specific landing page for special offers and tips.
Once the customer reaches the site, personalizing and customizing the shopping experience to their needs is a good start to encourage return visits. For instance, you could align product recommendations and marketing campaigns with other items they purchased or viewed.
If your beauty brand needs a digital makeover, feel free to contact us here.