How Amazon Came To Dominate The U.S. Beauty E-Commerce Market
Even with economic challenges, Ulta Beauty and the owner of Sephora, LVMH, achieved unprecedented sales in 2022. However, Amazon's online dominance continues to grow unabated.
Amazon dominates the online market in every single beauty and personal care category in the United States. The e-commerce giant has managed to keep increasing its market share, apart from depilatories, in the second quarter of 2023 compared to the previous year, as per the latest research from Euromonitor International.
Amazon experienced significant growth in the beauty and personal care online market during the second quarter of 2023, surpassing its performance in the same period of the previous year. (Image: SEBASTIEN BOZON / AFP) (Image: SEBASTIEN BOZON/AFP via Getty Images)
Out of all the big players in the online beauty and personal care business in the United States, only Amazon and Walmart have seen an increase in their market share in the beauty industry. While Walmart's gains were not as significant as Amazon's outstanding performance, it managed to capture 60% of the market.
Amazon dominates the beauty and personal care e-commerce industry in the United States.
Amazon's domination in the beauty sector Amazon's unrivaled success in the cosmetics industry
Amazon dominates the beauty industry, as well as various other sectors, thanks to its commitment to providing affordable prices, a vast selection of products, and superior logistical capabilities. This approach allows the e-commerce titan to offer lower prices than both general stores and specialized beauty retailers. While Amazon emphasizes its affordability, certain beauty experts, such as Sephora, position themselves as high-end and price their products accordingly.
While Amazon's success is partially due to its extensive range of products available for online purchase, it also surpasses Ulta and Sephora in significant areas like makeup and skincare. These two categories hold the most value for all three retailers in the online beauty market. Therefore, the performance in these particular areas greatly influences the overall beauty strategies of these retailers.
Both Ulta and Sephora experienced a decline in their online market presence in these sectors throughout the previous year, based on the e-commerce research conducted by Euromonitor. When considering both categories collectively, the beauty-focused retailers maintained steady sales in the second quarter of 2023 compared to the previous year. However, Amazon managed to outperform them by approximately $1 billion, resulting in a loss of market share for Ulta and Sephora.
The timing of different seasons also has an impact on Amazon's plan. In the year 2022, the major online retailer experienced its most successful performance in terms of beauty and personal care products during the last quarter. Surprisingly, Amazon managed to make a significant portion (one-third) of its total sales in 2022 during this period. On the other hand, Ulta, a competitor of Amazon, only generated 27% of its online sales in the fourth quarter.
This time aligns with the customary festive shopping season – a period when customers indulge in purchasing presents. Consumers choose Amazon due to their trust in the e-commerce giant's proficient handling of deliveries, ensuring timely arrival. The holiday season and Amazon's exclusive shopping events like Amazon Prime Day are instances in which it surpasses numerous other retailers.
The Way Amazon Makes Use of Its Retail Occasions
Amazon changes its marketing approach significantly during Amazon Prime Day - a yearly event that lasts for 48 hours and takes place close to the company's anniversary in the beginning of July. During this event as well as its Prime Early Access sale in October, Amazon advertises numerous items, encompassing beauty and personal care products.
According to Euromonitor's Digital Survey, the primary motivation for shoppers to participate in a shopping event organized by retailers is to avail discounts or promotions. Almost 60% of online consumers in the United States stated this as their main reason, closely followed by the availability of free shipping and the chance to explore new products. Amazon effectively capitalized on this inclination towards saving money during its recent Prime Day.
According to Euromonitor, the amount of beauty and personal care products being offered at discounted prices on Amazon reached its highest point at 17% during Prime Day on July 13. This was a significant increase from the average promotional rate of 11% when the sale event was not taking place. Although other online retailers selling beauty and personal care items also saw a rise in promotional rates during Amazon Prime Day, the increase was not as dramatic as what was observed on Amazon.
According to the Euromonitor data, there was a change in how retailers conducted their promotional activities between 2022 and 2023. Specifically, Amazon put more effort into promoting during Prime Day in 2023 compared to the previous year. In 2022, the extent of promotions reached a maximum of only 11%, whereas in 2023, it peaked at 17%. Overall, Amazon's promotional activities were consistently higher by two to three percentage points before and after Prime Day in 2023 compared to 2022.
Retailers modified their marketing approaches in 2023 compared to the previous year, 2022.
Contrary to that, a completely different scenario unfolded among the assortment of alternate sellers. These retailers recorded a higher rate of promotions in 2022 compared to Amazon. Surprisingly, the promotional rate within this group was even more elevated than Amazon's during Prime Day, as revealed by Euromonitor (11% versus 16%). The non-Amazon retailers probably experienced a heightened sense of urgency to provide special offers in order to stimulate sales and alleviate their stock levels, given the prevailing economic uncertainty.
Amazon does not prioritize promotions in its strategy.
Amazon does not heavily rely on ongoing promotions as a core aspect of its strategy, especially throughout the entire year. During the initial six months of the year, Amazon had a lower number of beauty and personal care products on promotion compared to other retailers. According to Euromonitor's daily promotional data, only 11% of Amazon's product listings had promotional offers, with the most prevalent being strikethrough pricing.
The two biggest beauty experts advertised an equal or less amount of products compared to Amazon. Ulta had an occurrence rate of 11% for promotions, while Sephora only had 6% during the first half of the year, according to Euromonitor. This can partly be explained by the fact that Sephora positions itself as a more high-end retailer compared to Ulta and other competitors.
While both Amazon and Walmart present themselves as providers of affordable prices for everyday products, there are significant differences in their promotional tactics. Euromonitor's daily promotional data shows that during the initial half of the year, Walmart advertised 18% of the beauty and personal care items available for purchase online, whereas Amazon promoted only 11% of the same products.
The things they promote differ as well. Amazon puts a lot of focus on promoting products for babies and children, with a strong emphasis on deodorants and perfumes too. On the other hand, Walmart tends to promote fragrances the most, followed by color cosmetics and hair care. Interestingly, these categories happen to be among the least successful ones for both retailers when it comes to online sales, as per Euromonitor's analysis.
Amazon has a significant advantage in the online market for beauty and personal care products, but there are openings for alternative vendors.
Despite having a dominant presence in the market, Amazon faces challenges in expanding its reach in the fragrance category. Many high-end brands prefer not to collaborate with the platform. According to Euromonitor's e-commerce data, Amazon's performance in the online beauty and personal care segments is relatively weak when it comes to deodorants, bath and shower products, and color cosmetics.
There are possibilities that extend beyond classifications. Rivaling merchants need to utilize their advantages to outperform Amazon. In the case of beauty experts such as Ulta and Sephora, their extensive knowledge of their individual customer groups is their greatest asset. They can cultivate loyalty among beauty enthusiasts in a manner that Amazon is unable to achieve. In addition to their devoted followings, generalist retailers like Target and Walmart can capitalize on their robust omnichannel systems to establish beauty as a fundamental element of their overall business strategy.
