The beauty category has been built through the careful cultivation of image. It’s not news to anyone that Amazon wants their piece of the $445 billion beauty pie, but how Amazon does business is in many ways antithetical to the business of prestige beauty. In the past year Amazon has gone from walking trade shows and “cold calling” brands to becoming an active participant in the beauty industry, sponsoring trade events and wooing insiders with an open checkbook.
Quietly, Amazon has captured 21% of the online beauty market, becoming the largest online beauty retailer according to analysis company 1010data. So what’s a beauty brand to do? Do you ignore the millions of eyeballs that research and shop on Amazon? Do you ignore what the higher margins Amazon offers will do to your bottom line? Or do you stick to your guns and make the Amazon decision in the same way you would vet a traditional retail partner, ensuring your brand image is maintained?
For mass and professional hair care brands, Amazon is a welcome part of the distribution mix. For most indie brands, they can’t afford to lose the revenue opportunity Amazon provides, but the goal is usually to have a relationship that maintains pricing. However, many of the big prestige brands are not playing ball.
Last month the European Union’s top court ruled that luxury-goods companies, including Coty, aren’t violating antitrust rules by restricting where their products can be sold. “The quality of luxury goods is not simply the result of their material characteristics but also of the allure and prestigious image which bestow on them an aura of luxury,” the EU judges said in the case. “An impairment to that aura of luxury is likely to affect the actual quality of those goods.”
Stephan Kanlian, chairman of the master’s degree program in cosmetics and fragrance marketing at the Fashion Institute of Technology in New York, predicts beauty companies may not have the luxury of excluding Amazon from their distribution mix. “The drumbeat becomes louder, louder, and louder until the point that it is inevitable—because the business is there,” he says. “The consumer traffic is there.”
I guess only time will tell.
Read the full article on Bloomberg.
Photo: Charisse Kenion via Unsplash