by What a difference a few years can make.
Some now look to Amazon, once the pariah of prestige beauty, as its potential savior, but what does this mean for other beauty retailers?
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The biggest turning point happened in March when the Estée Lauder Cos., after years of escaping the platform, turned around and launched Clinique on Amazon with its own storefront. Since then, Too Faced and Bumble & Bumble have joined and outgoing Lauder chief financial officer Tracey Travis previously told WWD that the e-commerce platform has the potential to be an important distribution channel for the company.
Its launch follows L’Oréal, whose Luxe division was the first of the powerhouse prestige players to make the leap when Lancôme launched last year. Since then, Kiehl’s, Youth to the People, IT Cosmetics, Urban Decay and Ralph Lauren Fragrances have followed suit.
Overall, in 2023, even before the Lauder brands came in, Amazon sold a billion-plus beauty products in the United States and currently has more than 100,000 brands available in its beauty store. “Amazon Beauty is about driving the category and the entire industry,” said Melis del Rey, general manager, US stores, beauty, baby tech and beauty at Amazon, at the WWD Beauty CEO Summit in May earlier this year. “This means incremental net new customers, and it means incremental new shopping opportunities for the brands we work with.”
It also certainly has the potential to attract more brands, with more than 100 million unique beauty customers on its books. Morgan Stanley predicts that Amazon will take over Walmart Inc. as the largest beauty retailer in 2025.
As for what this all means for other beauty players in the space, this poses more of a threat to Ulta Beauty than LVMH-owned Sephora, according to a recent note from Jefferies analyst Ashley Helgans. Based on Jefferies estimates, Ulta’s premium makeup business and Amazon’s premium beauty store face have a 16 percent brand overlap, versus Sephora’s 9 percent.
“There is a need for a flagship brand refresh, as many of Ulta’s premium legacy brands have added new distribution points in both off-price as well as e-commerce,” Helgans said, noting that the retailer was given the biggest challenge in terms of prestige, going over the top. category growth in mass business. She believes that promotions, which have increased year after year, are expected to remain.
When asked about competition in the digital space during his latest earnings call, Ulta Beauty chief executive officer Dave Kimbell said: “One of the best things about our business is when we get our in-store guests shopping online, they increase their love for the brand. , their brand connection and our share of the wallet. Their spending increases 2.5 times,” he said. “We see the opportunity to continue driving programs as communities and affiliates.”
Kimbell said that while promotion has increased, the levels are still reasonable and he expects promotion levels to be below 2019 for the year.
Amazon also continues to push into department stores, a slowing but still important distribution channel for beauty.
Macy’s has laid out plans to close 150 stores by the end of 2026, leaving 350 “go-forward” stores. That’s down from about 850 stores 15 years ago. For the remaining stores, he is piloting new activations including beauty services such as perfume bottle engraving, and craft stations.
Others are of the opinion that if you can’t beat it, join it. When Hudson’s Bay Co. on an agreement to acquire the Neiman Marcus Group for $2.65 billion, bringing the Dallas-based luxury retailer together with the New York-based Saks Fifth Avenue as Saks Global, Amazon was revealed as a surprise investor in the market.
Little is known about the mechanics of the deal at this point, but HBC has said that Amazon will work with Saks Global to “innovate on behalf of customers and brand partners after the transaction closes.”
Lucie Greene, founder and chief executive officer of consultancy Light Years, believes that where brands can’t compete is Amazon’s infrastructure, so Amazon’s involvement in the Neiman Marcus/Saks deal is very timely.
“If you were to take the branding away from Amazon’s deliveries, the experience and the speed and the convenience of getting Amazon packages would probably be more luxurious than what you get from Prada, where it would take a week and then b maybe. which would be released somewhere and not get a proper signature,” she said. “If they can, in terms of beauty and luxury, create an elevated version of that, with all that muscle power for their infrastructure and utility, that’s very interesting.”
She added that this bet could give Amazon access to data to better understand the luxury customer.
Where non-Amazon retailers have some muscle to flex, however, is in storytelling and modernity, Greene said. “[Amazon] it’s not necessarily the place to discover and play, although they’re trying really hard….I’m a YSL Touche Éclat repeater on Amazon because I know I’ll get it the next day. Would I go to Amazon to find a new blush? No.”
In this case, beauty retailers with a physical presence need to make sure their stores are worth the trip and that their websites create editorial style buzz around products, experts said.
Wendy Liebmann, chief executive officer and chief marketer at WSL Strategic Retail, said that as it is difficult to compete with Amazon on infrastructure, other retailers must ensure that consumers can order, reorder and subscribe with ease.
“Can I buy the brand I want as easily at the regular retailer, as I could at Amazon?” she said. “That speaks to the retailer’s omnichannel success, and some are better than others. Sure, Sephora and Ulta have really boosted their websites, as has Bluemercury. They are doing a good job, but some of the department stores are not so great.”
As for prices, Liebmann said the smart retailers won’t try to compete. Instead, they need to focus on rounds, freshness, loyalty programs, samples, events and exclusives.
“Those are the things that retailers really need to increase because when you start going to them, it’s about low price and convenience, then Amazon wins,” she said.
One other area where they can also compete is the fact that most luxury beauty brands (think Chanel, Prada, Guerlain) are not currently on Amazon.
Whether we’ll see another seismic shift in luxury beauty coming to Amazon, only time will tell.
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