“The Amazon Effect” series breaks down specific product groups, compares Amazon’s performance in that category to total retail sales (online and offline) and considers the effect Amazon has on that specific industry as a whole. We’ve explored the effect Amazon is having on the Toys, Grocery and Housewares industries; in this latest edition, we explore how Amazon has impacted the U.S. Beauty market.
The United States has the largest beauty market in the world. As an affordable luxury, the beauty sector is known as one of the most recession-proof product groups; cost-conscious consumers can cut corners on more expensive luxuries and still afford cosmetics. For this reason, it’s a sure sign of economic recovery that the fastest-growing segment in the U.S. is prestige beauty.
On Amazon, however, Prestige continues to lag behind other product categories. Let’s take a look at some of the reasons why, explore Amazon’s place in the U.S. domestic beauty market, and identify some emerging trends.The Numbers
- $56.2 billion: The total value of the U.S. beauty market (2015).
- $2.5 billion: Amazon’s total Beauty sales (2016).
- 2%: The YoY growth of the U.S. beauty market.
- 47%: The YoY growth of Amazon’s Beauty sales.
Taking everything into account, the market value of beauty and cosmetics in the U.S. is stagnant with only 2% growth, but looking more closely reveals some interesting details. The most marked trend is that today’s beauty sector is being driven mainly by premium products. Prestige beauty grew by 6% in 2016, outpacing the total market, with 80% of the gains being generated by cosmetics.
Skincare was one of the major growth drivers in the total market along with cosmetics, but actually experienced a decline in the prestige category. This suggests that consumers are spending more on expensive beauty products for cosmetic reasons, not because of health and dermatology.
Top Growth Categories
|1.||Derma Skincare||262%||La Roche-Posay Acne Treatment <$1M|
|2.||Nail||135%||Essie Nail Color <$1M|
|3.||Hair Care||84%||Men’s Rogaine Foam <$7M|
|4.||Luxury Skincare||76%||Mario Badescu Lotion >$1M|
|5.||Mass Cosmetics||61%||Wunderbrow Perfect Eyebrows >$1M|
|6.||Beauty Appliances||58%||Infinit Pro by Conair <$3M|
|7.||Cosmetics||57%||Stila Eye Liner $2 MM|
|8.||Prestige Hair Care||56%||Fairy Tales Conditioning Spray <$1M|
|9.||Oral Care Appliances||53%||Oral Care Appliances: Oral-B Toothbrush <$12M|
|10.||Mass Skincare||53%||Proactive Cleanser >$2M|
|11.||Mass Hair Care||45%||Pura D’or Shampoo >$5M|
|12.||Personal Care||41%||Gillette Razor Blade Refills >$6M|
|13.||Prestige Skincare||36%||Millenium Tanning Bed Lotion <$1M|
|14.||Fragrance||32%||Giorgio Armani Spray for Men <$3M|
|15.||Hair & Beauty Appliances||30%||HSI Professional Hair Straightner >$5M|
|16.||Shaving & Hair Removal||20%||Braun Shaver >$17M|
|17.||Prestige Cosmetics||12%||Luminess Foundation & Cosmetics <$1M|
In contrast to what we’ve seen in the beauty industry overall, Skincare was the real MVP for Amazon’s Beauty product group, revealing three key ways Amazon differs from the total market in this segment:
Skincare outpaces Cosmetics by a wide margin
On Amazon, the 4 Skincare categories in the top 17 averaged 107% growth, while the 3 Cosmetics categories in the top 17 averaged only 43% growth.
Dermatological beats cosmetic
Derma Skincare was far and away the top performing Beauty category on Amazon with a growth rate of 262%, almost double that of the runner-up (Hair Care, 84%).
Prestige does not drive growth
In both Skincare and Cosmetics, the Prestige subcategory experienced a lower growth rate than both Luxury and Mass Market. Prestige items fared slightly better in Hair Care, but were still beat by regular Hair Care brands.
As you can see, the trends on Amazon do not match those of the total market. In part, this is due to the fact that many top prestige and luxury brands do not currently sell through Amazon. Even so, we would still expect significant growth in that category. Instead, our numbers suggest that when consumers shop for beauty products on Amazon, they don’t exhibit the same behaviors as when they shop elsewhere.
Men can take some of the credit. If you look at the “Top Item” column in our chart, you may notice something: the best-performing individual items tend to be men’s products. The biggest seller overall (by a wide margin at more than $17 million in sales) was a Braun Shaver. Of the top 4, three are men’s products – the Braun Shaver, Rogaine and Gillette Razors – and another is unisex (an Oral-B electric toothbrush).
In general, consumers purchasing their beauty products on Amazon already know what they want. They’re buying everyday disposable items or they’re buying small appliances from well-established brands. They’re not getting swayed by the subliminal marketing they find in stores or by the free samples which are proven to influence purchase decisions.
Perhaps most importantly, Amazon’s success in the Beauty product group comes from the sale of a very large volume of small, inexpensive items. The average price of products in this group (and more importantly in the list of top-performing items in this group) is below average, which shows that consumers using Amazon as a retailer for everyday items are the ones driving that 47% YoY increase in 2016 Beauty sales.
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