Together, Health & Personal Care (HPC) and Beauty make up a significant majority of Amazon’s household consumables market. Last quarter, the two product groups generated nearly $2 billion in estimated sales, an increase of over 30% compared to the same period in 2017. As of the end of Q2 2018, YoY growth has fallen slightly but remains strong, outpacing brick-and-mortar retailers as well as most online competitors.

During Q2 2018, both HPC and Beauty reflected some notable changes in consumer habits. Some are seasonally-influenced, such as the strong sales of summer skin care products, while others suggest a long-term shift in how people shop, such as Amazon’s growing share of the Luxury Beauty market. Amazon is clearly committed to strengthening their role in this space going forward as evidenced by the acquisition of Pill Pack, an online pharmacy service. Let’s take a look at some of the most striking trends during Q2 2018.

AMZ Q2 Update: HPC & Beauty in the US


1. Health

Nutrition & Wellness is consistently the largest category in either product group, earning an estimated $600 million in Q2 2018 with sales split fairly evenly between Sports/Weight Loss Nutrition and Vitamins & Supplements. The large size and growth of this category reveals the company’s strong penetration among health-conscious consumers and this is further evidenced by the rapid growth of Amazon’s Health Care category, which consists primarily of over-the-counter (OTC) drugs. Growing at over 40% YoY, Health Care now ranks as Amazon’s #4 HPC category, worth nearly $200 million by our estimates driven in part by the August 2017 launch the private label OTC drug brand Basic Care.

On June 28, the company doubled down in the Health Care space by announcing the acquisition of Pill Pack, a full-service pharmacy specializing in ongoing and chronic prescription medications. Pill Pack simplifies medications by sending customers a 14-day supply of prescriptions divided into daily packets. Amazon has expressed interest in the prescription drug business in the past but had not made a move in this industry for some time, so this acquisition is a clear bid for this large portion of the market. Pill Pack allows Amazon to solve one of the key difficulties in this space – namely, the challenge of acquiring pharmaceutical licenses to sell online in all 50 states, since Pill Pack already has those licenses.

At this point, it’s too early to assess Amazon’s strategy with Pill Pack – whether it will be kept as a separate site like Zappos or integrated into Amazon’s main platform, and whether Prime members will get some kind of discount similar to those already available at Whole Foods – but whatever the company’s plan, Amazon has declared its intent to compete in prescription medications.


AMZ Q2 Update: HPC & Beauty in the US


2. Summer Skin Care

Mass Skin Care, the long-standing top category in the Beauty product group, is highly susceptible to seasonal conditions. In Q1 2018, solar protection made up about 9% of this category; in Q2, that proportion doubled to 18%, with sunscreens entering the top product spots (Thinkbaby Safe Sunscreen was the #5 Beauty item of Q2). Sun Skin Care has also seen greater YoY growth than other subcategories: sales of Mass Skin Care products grew by 35% overall, while solar skin care sales grew by 55%. The category continues to be led by the long-established Neutrogena brand, but coming in at #2 is Elta MD with their line of “clinical strength” sunscreen and skin care products exhibiting significant growth.

Smaller sun care brands such as Sun Bum and Supergoop are also rapidly rising in rank. Supergoop is a luxury beauty brand benefiting from the rapid growth in popularity of luxury products on Amazon. During Q2 Derma Skin Care, including high-tier anti-ageing/sun-protection products, was the #3 Luxury Beauty subcategory and grew by 63% YoY.

Sun Bum, alternatively, has achieved this growth by responding to the values of environmentally-conscious consumers. Sun Bum’s reef safe sunscreens are an attractive product for shoppers concerned about the ethical implications of their purchases. This indicates a strong shift in consumer behavior: in 2017, the term “reef safe” was rarely used in search, but during Q2 2018 it was one of the top 50 terms among shoppers searching for sunscreens.

AMZ Q2 Update: HPC & Beauty in the US


3. Teeth Whitening

Paper products and diapers have consistently ranked as the bestselling HPC items and this continues to be the case, with brands like Pampers, Quilted Northern, Angel Soft, and Bounty taking up all of the top spots. In Beauty, the top items exhibit more variety, with Rogaine (Hair Loss), Active Wow (Teeth Whitening) and TruSkin (Skin Care) appearing in the top three spots.

Teeth Whitening specifically is flourishing on Amazon. Crest dominated the first-party sales in this category, but third-party sellers have now captured a large share of the market driven by the new trend of activated charcoal powders. These products are trending on social media and being heavily promoted by influencer marketing, which is driving traffic and sales to Amazon. Active Wow currently holds the bestseller in this space, but many brands specializing in activated charcoal products such as Ecco Pure and Cali White are having success.

As with Sun Bum’s reef safe sunscreens, the success of activated charcoal products reveals the power of responding to consumer trends in real time. By being the first to appeal to an emerging trend on Amazon, brands can capture a fresh wave of traffic and generate a long-term lift in sales rank.


AMZ Q2 Update: HPC & Beauty in the US


4. Luxury Beauty Appliances

Amazon’s role in the Luxury Beauty market has been steadily growing. While mass market beauty products have had success online since the very beginning of ecommerce, consumers were originally reticent to purchase high-tier products through Amazon. Today, that is no longer true. Shoppers are willing to spend more for high-end products online, driving the Luxury Beauty category to grow at a YoY rate of 57%.

This trend is reflected in the growth of Luxury Beauty Appliances, where sales in Q2 2018 were more than double the sales during the same period in 2017. In beauty appliances, consumers are moving to the luxury space as this category grew twice as fast as the Mass Beauty Appliances category and is on track (if current growth rates continue) to rank as the larger of the two categories by the end of the year.

Brands like CHI, BabylissPro and Clarisonic are benefiting from the success of this growth. As with Teeth Whitening, it’s promising for emerging manufacturers that smaller brands are capturing the highest growth rates. This suggests that Amazon shoppers are increasingly influenced by word-of-mouth, social media and customer reviews and that emerging brands are able to beat the established competition by marketing directly to digital consumers.

The growth potential in Health, Skin Care, Personal Hygiene and Luxury Beauty for brands on Amazon is impressive. Amazon’s growing share of household consumables in America is outpacing the competition by a wide margin. The ecommerce giant continues to capture the flow of consumers away from in-store shopping and, quarter after quarter, those consumers are willing to spend more on Amazon to get higher quality specialized goods tailored to their specific needs, desires and values. Today, Amazon is among the most important retail channels in both Health & Personal Care and Beauty and a key opportunity for brands regardless of their specialty.


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