“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. In this latest edition, we explore how Amazon has impacted the U.S. Health & Personal Care market.

After groceries, health & personal care is America’s largest retail category, with a year-over-year growth rate of over 7% amounting to an annual total sales increase of more than $20 billion dollars. With these kinds of numbers, retailers and investors are watching closely in an effort to identify and capitalize on the next big trend in this product group.

There is one area where health & personal care is underperforming in “share-of-wallet”: eCommerce. Online sales of health & personal care in the U.S. represent less than 10% of the industry’s total; for comparison’s sake, online sales comprise 30% of the electronics market and 20% of the home furnishings market. While that “share-of-wallet” on eCommerce may be low now, its growing five times faster than the total domestic market – especially on Amazon.com, the clear eCommerce leader. Amazon is on track to cause seriously disruption to the US grocery and drug store channels.

The Sales Numbers

Health-Personal-CPG-eCommerce-Sales-Amazon

  • $336 billion: The total value of the U.S. health & personal care market.*
  • $4.7 billion: com’s U.S. Health & Personal Care sales.
  • 7.4%: The YoY growth of the U.S. health & personal care market.
  • 35%: The YoY growth of Amazon.com’s U.S. Health & Personal Care sales.

*Calculated by One Click Retail based on data from the U.S. Department of Commerce and the U.S. Census Bureau.

According to the U.S. Census Bureau’s Retail Trade Report, Health & Personal Care experienced the second-largest year-over-year gain in 2016 of any retail category, with a growth of 7.4%. The largest gain was, predictably, digital retail, showing 11.4% growth. As Amazon continues to digitize this product group, those two figures will inevitably feed into each other and cause a serious disruption of the health & personal care industry.

Top U.S. Health & Personal Care CategoriesHealth-Personal-CPG-growth-on-Amazon

  1. Nutrition & Wellness: 40% YoY growth

  • Herbal/Mineral Supplements: 35%
  • Sports/Nutritional Drinks: 35%
  • Multi-Vitamins: 45%
  • Diet Supplements: 65%
  • Nutritional Bars: 90%

Not all product categories within the Health & Personal Care group are experiencing the same success (or lack thereof) online. The leader of the pack is the Nutrition & Wellness category, driven by sales of Herbal/Mineral Supplements, which was also one of the leading subcategories in the Prime-exclusive Amazon Pantry, with $8 million total sales in 2016, more than double the previous year.

  1. Baby Care: 30% YoY growth

  • Diapers: 30%
  • Formula: 35%
  • Infant Wipes: 20%
  • Infant/Child Skin Care: 30%
  • Baby Care Accessories: 15%

Like Nutrition & Wellness, Baby Care is a category driven by consumable items that, for the most part, inspire brand loyalty among consumers. The most successful Health & Personal Care items on Amazon are those that consumers purchase on a consistent basis, such as supplements and diapers.

  1. Household Consumables: 55% YoY growth

  • Paper: 55%
  • Household Cleaners: 50%
  • Laundry: 115%
  • Home/Office Supplies: 70%
  • Bags/Trash/Wraps: 55%

We previously reported on the launch of Amazon Presto! Laundry Detergent. Sure enough, last year’s Household Consumables category growth was driven by Laundry, with a growth of 115%. Amazon’s private label detergent was also a successful Prime Pantry item, driving laundry sales up to the $10 million mark, a YoY growth of 80%.

  1. Health & Wellness: 5% YoY growth

  • Pedometers: -35%
  • Heart Rate Monitors: 200%
  • Scales: 0%
  • Sound, Light, and Aroma Therapy: -20%
  • Magnetic & Electrotherapy: 70%

Though pedometers (also called step counters) are still the top subcategory under Health & Wellness, Amazon’s sales dropped by 35% in 2016. This is due to the late-year release of the second generation of the Apple Watch, not made available on Amazon.com (the first generation can be found via third-party sellers).

  1. Health Care: 45% YoY growth

  • Adult Incontinence: 40%
  • Feminine Hygiene: 50%
  • Antacids/Stomach Remedies: 35%
  • First Aid: 40%
  • Analgesics/Pain Relief: 75%

Although among the strongest-growing categories, Health Care trails behind others, as many consumers still prefer to buy these products at the drug store. The reason for this is either because of urgency (many of these items are only bought as they are needed), or because they’re viewed as more “sensitive” items that some people may be less comfortable with ordering online.

  Amazon Pantry Sales Growth Amazon.co.uk rank (value)
1. Household Cleaners $15 million 60% 2 (£500k)
2. Paper $12 million 95% 3 (£400k)
3. Laundry $10 million 80% 1 (£1 million)
4. Herbal/Mineral Supplements $8 million 115% N/A
5. Toothpaste/Whiteners/Mouthwash $5 million 140% N/A

Amazon Prime Pantry has experienced massive growth this year, though on a small base. The growth of this “Prime-Members only club” is likely tied to two things (1) the rise in Amazon Prime membership seen in 2016 through Amazon’s marketing efforts, “Prime Day” events, and expansion of Prime services & benefits; and (2) the increase in assortment found on Amazon Prime Pantry that could not ship profitably in the standard dot.com space. Items that historically struggled (e.g. heavy liquid laundry detergent, $2.50 tubes of toothpaste, $1 spices, etc) can now be packed alongside other Pantry items and shipped in a single box, spreading shipping charges across a whole order (for more info, see our piece on eCommerce pack sizes). Unsurprisingly, Prime Pantry sales in Health & Personal Care are driven (both the U.S. and the U.K.) by Household Cleaners, Paper and Laundry.

US / UK Product Comparison
Health-Personal-CPG-eCommerce-Sales-UK

however, Amazon.co.uk’s year-over-year growth is significantly higher. You may be tempted to interpret the latter as “catching up” to Amazon.com, but almost universally Amazon.co.uk holds a larger market share of the total domestic retail category than its American counterpart. In fact, it’s Amazon.com playing catch-up by gradually climbing toward a larger market share of the much larger U.S. market.

Similar to the rise of online grocery sales last year, what we’re currently witnessing is eCommerce finally beginning to disrupt the health & personal care market. This disruption is coming from both sides: consumers are becoming more comfortable with buying health products online; and e-tailers are getting better at marketing and fulfillment in this industry, with Amazon again leading the pack. Whether incumbent brick-and-mortar drug stores will respond by selling through Amazon, introducing their own online sales, or doing nothing, will determine their success in 2017 and beyond.

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