By Nathan Rigby, VP Sales and Marketing at One Click Retail

Household consumables make up a huge proportion of Amazon’s sales volume. Last year, consumables – including Health & Personal Care, Beauty, Grocery and Pets – generated more than $8 billion in estimated sales. Now into the second quarter of 2018, these product groups continue to experience strong growth on Amazon, outpacing brick-and-mortar retailers and most ecommerce players alike.

Last week, we took a close look at Amazon’s performance in the Grocery space in Q1 and discovered that, while YoY growth rates have begun to fall slightly (from 59% to 48%), volume growth is at an all-time high. At the same time, Amazon is doubling down on some key investments in the space (see our Grocery Q1 Update for details).

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

 

 

Both of these things are true in Beauty and Personal Care as well. Health & Personal Care (HPC) and Beauty are Amazon’s two largest product groups within the consumables space, each individually larger than Grocery (not including Whole Foods in-store sales). Like Grocery, both groups are experiencing volume growth at an all-time high and Amazon is in no way content to rest on its laurels, strategically adapting and reinvesting in the consumables space as the ecommerce giant’s market share grows.

Health & Personal Care: Will Private Brands Drive Prices Down?

In August, Amazon quietly launched Basic Care, a private over-the-counter (OTC) medicine brand with 60 individual SKUs, a larger count than most of Amazon’s past private brand launches. It’s too soon to predict the impact of Basic Care on Amazon’s HPC space – in Q1 2018, the brand earned only $20K in estimated revenue – but it’s worth noting that the private brand is produced in partnership with Perrigo, the manufacturer that also produces the generic brand GoodSense.

GoodSense is currently the #1 drugstore products brand on Amazon (it’s also available at Walmart and other retailers), so it looks like Amazon is white-labeling products that are known to be successful and selling them at a lower price exclusive to the platform. This will most likely draw more consumers away from drugstores like CVS and Walgreens, whose private label OTC products are more expensive than the Basic Care equivalent, while also putting more pressure on Amazon’s first party sellers to bring their costs down in order to compete on the platform.

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

 

At this point, drugstore products make up less than 30% of Amazon’s HPC sales (report: Drugstore Products: The Amazon Effect). Overall, the leading HPC items mainly belong to Household Consumables, the fastest-growing category with a 57% increase in sales compared to Q1 2017. This category is driven by paper towels and toiler paper, with Bounty and Angel Soft being the bestsellers, respectively.

By volume, Health & Personal Care has consistently been led by the Nutrition & Wellness category which experienced sales estimated at $580 million in Q1 2018, primarily driven by Vitamins & Mineral Supplements. Together, the three leading brands – Now Foods, Jarrow and Garden of Life – control roughly a quarter of the total market.

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

The #2 HPC item in the last quarter came from Pampers’ very successful diaper line, Pampers Swaddlers. In another example of a first party seller going head-to-head with an Amazon private brand, Pampers has been challenged by Mama Bear diapers introduced in October 2017, usually available at a lower price. Mama Bear is currently exclusively for Prime members – and Pampers is currently outselling Mama Bear by a very wide margin – but like with Basic Care, Amazon’s investments in private brands are putting more pressure on first party sellers to lower their costs in order to compete more aggressively on price.

Beauty: Consumers are Spending More on High-End Products

In 2017, we began to see a significant shift in the Beauty market: growth moved away from mass market consumables in favor of higher end beauty products. This remains true in 2018 – while the total Beauty product group grew by 30% during the first quarter, Luxury grew by 57%, nearly double the rate.

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

 

When consumers shop for Beauty products on Amazon, their first priority is Skin Care. Mass Skin Care continues to drive the most sales volume in this category, led by bestselling items from Aztec Secret and TruSkin Naturals. Growth, however, is driven primarily by Derma Skin Care, a subcategory including high-tier anti-ageing and sun-protection products. Derma Skin Care grew by 84% last quarter, now accounting for nearly 20% of total Skin Care sales.

After Mass Skin Care, the second-largest category is Personal Hygiene. Last quarter, Personal Hygiene was driven largely by teeth-whiteners and toothpastes which made up about 30% of category sales and were responsible for the most growth. The Crest brand dominates this category, controlling roughly 25% of the entire first party Personal Hygiene market on Amazon. This makes it challenging for new or emerging brands to gain visibility since a large incumbent brand has a strong grip on the results pages and placement in this space. Alternatively, most categories have a leading brand controlling about 10% of the market, such as Neutrogena in Mass Skin Care – still performing significantly better than most of the competition, but leaving the door open for new and emerging brands to compete for key terms and search rank.

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

 

 

The biggest trend today is that consumers are willing to spend more for high-end Beauty products – and increasingly so. For over a year now, Professional Salon & Spa has been the fastest-growing Beauty category on Amazon, nearly doubling in size and driving so much traffic that Amazon recently introduced a unique badge for items classified as Professional Beauty, which reads:

“Amazon has curated a selection of high-quality products that can be found in professional settings such as salons, spas, and dermatology offices. To buy Professional items, just look for the Professional Beauty badge.”

Beauty, Health & Personal Care in the US: Amazon Q1 2018 Update

 

 

In growth potential terms, one could say that Luxury Beauty is the biggest opportunity for brands on Amazon right now – but the reality is that there is opportunity across the board. Amazon’s share of the consumables market is growing rapidly, outpacing brick-and-mortar retailers and most ecommerce competitors by a wide margin. In Beauty and Personal Care, each of the top 10 categories are growing by at least 24% year over year with some having nearly doubled in size since Q1 2017 – and the sales volume in most of these categories is shared by a variety number of small and medium sized brands, leaving plenty of room for healthy competition.

The flow of consumers from in-store shopping to Amazon has not slowed down, and we’re seeing a clear trend quarter after quarter that they’re willing to spend more online for higher quality specialized goods tailored to their specific desires. Amazon is quickly becoming one of the most important retail channels in Beauty and Personal Care – and the brands that learn how to market on Amazon will have the most to gain.

One Click Retail is the industry’s most accurate source of sales data for the world’s top eCommerce marketplaces. Using a combination of website indexing, machine learning and proprietary software, OCR estimates weekly online sales figures with market leading accuracy in order to deliver the best insights, analytics and strategies to their brand manufacturer clients. To catch a glimpse of how OCR gives brands critical edge on online platforms with our unique data and expertise, subscribe to our weekly eCommerce insights blog, and follow us on Twitter and LinkedIn.

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