Online Exclusives

Online, All the Time

By Tom Branna, Editorial Director | August 26, 2013

From start-ups to multinationals, household and personal products companies understand the growing importance of e-commerce.

These days, parents don’t have to yell at their kids to turn off the TV and go outside and play. That’s because Jacob and Ashley aren’t glued to the tube anymore; they’re obsessed with iPhones and laptops. Mom and dad are too, it seems, and marketers are taking notice by shifting dollars from TV and print programs to digital platforms. Global online sales are expected to grow 17.5% this year to $963 billion, according to a recent study by Siemer & Associates, Santa Monica, CA. But there’s plenty of room for more growth as online sales account for just 6.5% of all retail sales worldwide and are growing four times faster than traditional retail. As a result, online sales are expected to account for 9.3% of retail sales by 2016.

And while consumer electronics account for nearly 25% of all e-commerce revenue in 2012, there is an expanding space for beauty and personal care products in cyberspace. Every personal care company in the US, from multinationals such as Estée Lauder, Avon and L’Oréal to smaller, multimillion dollar companies such BeautyRx, Mënaji and Cellure Stem Cell Skin Care, sell their wares online. Still, online sales of beauty and personal care products are less than $4 billion, according to a study by AT Kearney. That’s a far cry from China, where online sales account for an estimated 50% of beauty purchases, according to experts.

The AT Kearney study, based on survey responses from 1,381 participants across the US and Canada, found that 62% shop online regularly, and of these, 60% purchase beauty and personal care products online.

Traditional retailers are taking notice. Earlier this month, Target Corp. agreed to acquire the DermStore Beauty Group, a specialist in the online beauty market. A purchase price was not disclosed. The deal is expected to be completed in October.

"There is no doubt that the online beauty industry is growing rapidly, and this unique opportunity enables Target to gain insight into the superior, online customer experience DermStore provides," said Casey Carl, who serves as president of multichannel and senior vice president of enterprise strategy at Target. "Not only will DermStore's 750-plus brands offer Target expanded breadth across the beauty and skincare industries, but also access to exceptional content and helpful resources we know consumers want."

DermStore calls itself the leading and fastest growing independent skin care e-commerce site in the US with a comprehensive portfolio of prestige and professional products offered to over one million active customers. The company was founded in 1999 by a board certified dermatologist and features over 26,000 SKUs and 750 authorized brands such as SkinMedica, SkinCeuticals, Obagi and Dermalogica. The company recently launched two additional websites, and, extending its reach to cosmetics and hair care.

Target executives know a good takeover target when they see it. Among the most frequently purchased categories by online shoppers are skin care, personal care and hair care. No wonder why none other than AG Lafley, Procter & Gamble’s once and current CEO, is so high on online activity.

In his first presentation to shareholders and analysts, Lafley said P&G’s spending on online ads and social media ranges from 25% to 35% of its marketing budget and is currently near the top of that range in the US. In contrast, most companies only commit 20-25% of their marketing budgets on digital advertising.

"The bottom line is we need and want to be where the consumer is, and increasingly that is online and mobile," a P&G spokesman said.

What’s more, P&G executives insist that digital media in many cases is proving to be faster and cheaper for P&G to reach consumers and feedback from consumers is faster too. But that’s not to say that an online presence is the same for all P&G’s brands. Those with the biggest digital plans include Secret deodorant and Old Spice men’s grooming products.

A Web Presence

Avon, in its annual report, said it is determined to increase the number of consumers served per representative and their engagement online.  Estée Lauder is more specific. In 2012, the company’s global online business grew 24% and Lauder operates more than 340 marketing and ecommerce sites in more than 50 countries. Rather than taking a one-size-fits-all approach, Estée Lauder is tailoring its online presence to match its brands and their followers. For example, The Bobbi Brown Cosmetics Everything Bobbi blog, which is billed as an online magazine-meets-blog, gives Bobbi Brown fans a real, unscripted look at the makeup artist’s world and the things she loves, according to the company. Meanwhile, the all-important travel retail channel calls for a unique online presence in each country.

“Before the consumer even begins her trip, our online messaging opens her eyes to purchasing opportunities that will greet her along the way,” according to Estée Lauder.

“We increasingly see our online e- and m-commerce sites as digital “flagship” stores that offer unique opportunities for engaging and customizing consumer experiences,” said Estée Lauder in its annual report. “Pulling consumers to these sites and to our retailers is an integral part of our strategy.”

To attract consumers to its various sites, Estée Lauder has created some novel content. The High-Touch On-line Skin Care Guide developed for is an interactive tool that offers consumers personalized recommendations and feedback based on individual skin care concerns. At, visitors can get fragrance-combining consultations. Finally, Smashbox relied on an app, aptly called “Lights, Camera, BB!” to educate them about the benefits of BB creams, while allowing them to put themselves into their very own BB cream commercial.

Interestingly, when it comes to online health and beauty sales, it’s Amway, not Avon or Estée Lauder, with the most sales, according to Internet Retailer, a US business magazine. In fact, Amway’s held the No. 1 spot on the list for a decade. According to Internet Retailer’s estimate, Amway North America earned more than $1 billion in web sales in 2012. Amway’s parent company, Alticor, reported enterprise-wide sales of $11.3 billion in 2012.

“A decade at the top of this ranking for online health and beauty sales is the direct result of the hard work and dedication of the Independent Business Owners Amway supports,” said Tanios Viviani, regional president of The Americas for Amway. “The ranking also is a testament to the appeal of our business model. Amway offers a low-cost, low-risk opportunity for people to get into business for themselves by selling high quality products and sponsoring others to do the same.  Our model is clearly relevant in today’s e-commerce world, moving more health and beauty product than any other online retailer.”

Amway and other marketers understand that consumers are spending more time than ever online—and at the expense of traditional media. For example, the average time that consumers spend with digital media per day is expected to surpass TV viewing for the first time this year, according to research firm eMarketer, which estimates the average US adult will spend more than five hours per day online, on mobile devices or with other digital media this year. By contrast, the average person will spend four hours and 31 minutes watching television, eMarketer estimates.

Companies that make consumer packaged goods spent about $13.4 billion on advertising in the US last year, of which 22.2% was spent on digital media, according to data from IRI, Kantar Media and eMarketer. In 2011, about 19.3% of these companies' US advertising spending went to digital media.

Similar growth of online beauty products is taking place in Europe. According to a recent Forrester report, European e-commerce is expected to growth 12% annually to $230 billion by 2016. In France, for example, the number of online shoppers is expected to increase from 63% in 2011 to 76% in 2016. L’Oréal estimates that 43% of its European customers shop online. Aside from its own website, L’Oréal sells its products through online retailers like

The Rise of Cyber Monday

How important has online sales become for retailers and their supply partners? Well, consider that Cyber Monday has replaced Black Friday as the most important shopping day in the US. Although it only traces its history from the birth of the World Wide Web in 1990, Cyber Monday has become a much-circled date on every retailer’s calendar.

The term made its debut on November 28, 2005. A year later, Cyber Monday sales topped $600 million and more than doubled to over $1.2 billion by 2011. Last year, Cyber Monday sales jumped more than 20% to $1.5 billion—that’s impressive when you realize the US economy grew just 2.2% last year. It’s even more impressive considering Cyber Monday always occurs in the fourth quarter. Last year, the US gross domestic product, a measure of all goods and services produced in the economy, increased at a 0.1% annual rate between October and December.

Marketers are following that money trail. Digital ad spending in the US is expected to grow 14% this year to $41.9 billion, while TV ad spending is expected to grow just 3% to $66.4 billion, according to eMarketer.

High double-digit annual sales gains are the norm, not the exception, when it comes to online beauty sales. As the overall US cosmetics market continues to mature, it’s safe to say that more marketers will come to rely on Cyberspace in their growth plans.

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