Andrea Leigh, Ideoclick10.05.21
The COVID-19 pandemic created an explosion in e-commerce growth within the beauty category. As sales boomed during the past year, more customers than ever before turned to online retailers to purchase beauty products. And it’s not expected to slow down. The online share of sales made in the health and beauty sector is expected to rise from 16.5% globally in 2020 to 23.3% by 2025.
Despite the recent increase in online sales, beauty brands face several key barriers to sustained e-commerce growth—especially when selling their products through e-commerce platforms like Amazon or Walmart. To win online, here are three challenges for beauty brands online and how to solve for them.
Barrier 1: Lookalikes, Counterfeits and Fake Reviews
Lookalike and counterfeits are a rampant problem for beauty brands in e-commerce, which compromise customer trust in e-commerce platforms. Customers often cannot tell the difference between reputable products and replicas of well-known brands, which makes the online buying experience challenging. For example, if a customer searches for retinol cream, they will find a page full of results that all look strikingly similar to a well-known product. These products have similar packaging and similar names. As a result, customers who are unfamiliar with the brand can easily buy the wrong product by mistake.
This problem is exacerbated even further by fake reviews, which is another challenge for beauty brands and can further erode customer trust. A 2020 study showed that 42% of Amazon reviews were fake. Fake reviews have boosted sales of unsafe products and hurt business for legitimate sellers. When customers realize that Amazon is flooded with both counterfeit items and fake reviews, they can become skeptical since they don’t know which products, brands and reviews to trust.
A brand can build customer trust by creating advertising content to communicate its unique value proposition to show its authenticity. When the brand makes a concerted effort to differentiate its products from the lookalikes, it helps the value proposition and inspires customer trust. Vendors should make sure their product pages are filled with rich content and accurate product details, with a focus on factors that differentiate them from their competitors.
Amazon offers additional ways for brands to tackle the trust issue. Manufacturers can enroll in Amazon’s brand protection programs: Brand Registry, Transparency and Project Zero. When brands use Amazon’s Transparency program, Amazon will scan its products to ensure that only authentic units are shipped to customers.
The Project Zero product specialization feature will allow brands to apply a unique code on every unit they manufacture for an enrolled product, allowing Amazon to scan and confirm the authenticity.
Vendors who enroll in Amazon’s Brand Registry can see where their trademarks are being used across Amazon. The Registry features automated protections that will remove content that is inaccurate or infringes on their brand.
It’s also important for brands to realize that, while competition from lookalikes and counterfeit products can be a problem, not all of them are a direct threat. Brands may want to consider using tools designed to capture data to help brands determine which competitors pose a real threat, such as Share of Search or Share of Shelf. This can be an effective way for brands to assess their search-based category size, assess their position and gain insight into which competitors they should actually be concerned about.
Barrier 2: Lack of Traditional Growth Drivers
Category players like Sephora and Ulta have loyalty programs that reward customers for shopping on their platforms. These platforms also create a highly personalized customer experience through beauty classes, seasonal promotions, and customized product recommendations. In contrast, E-commerce platforms like Amazon, Target and Walmart are one-size-fits-all platforms and cannot customize the category experience for their customers. Compared to beauty-specific e-commerce platforms, the experience of shopping on Amazon can feel very transactional, rather than a personalized experience. Beauty brands often find that this inability to deliver a personalized shopping experience can hinder their growth.
However, beauty brands often have more leverage than they think they do when it comes to lack of growth drivers on e-commerce platforms. For example, vendors can improve their organic search rankings through a comprehensive advertising and promotional strategy that includes automated advertising that specifically targets customers seeking competitive products. Beauty brands that manage e-commerce campaigns across multiple retail advertising platforms can use automation to manage their campaign insights and improve their advertising strategies.
Brands can also save time and maximize their growth by using automation for ad spending. Automated Bidding can help beauty brands to automate financial decisions across their campaigns by using smart logic that decreases campaign bids based on a brand’s specific performance logic.
Product detail pages are also vital to growth and should be richly detailed, tell the brand’s story and give the customer all the information they need to make an informed purchasing decision. Beauty brands should make sure their brand store pages are fully optimized and give customers a comprehensive snapshot of the brand and all the products they offer. This is especially important because, when customers don’t find the exact item they’re seeking, they look at the brand store page for other options. Ensuring that the brand page is filled with rich content can drive growth by attracting new customers.
Content-rich brand store and product detail pages also help overcome consumer trust barriers by giving consumers confidence that the product is from a legitimate manufacturer and not a lookalike brand.
Barrier 3: Profitability Challenges
Managing e-commerce profitability is another barrier to growth for beauty brands. Beauty products have narrow profit margins in the e-commerce space due to their low retail selling prices and high shipping costs. For example, shampoo is typically not profitable for e-commerce retailers since its weight makes it cost prohibitive to ship profitably.
Beauty brands can also find themselves in retail pricing wars as retailers try to price match each other on the overlapping products they offer. This impacts profitability by cutting into both retailer and brand margins.
Driving as much cost out of the product is a critical component of boosting profitability and beauty brands can improve their profit margins by making changes to their packaging. Brands can sometimes make their products more profitable by changing the packaging to reduce bulk or weight. For example, products sold in glass jars, which are heavy and expensive to ship, may be replaced with plastic. While this may not be the most sustainable option, it will improve e-commerce profitability.
Shifting assortment strategy is also an effective way for beauty brands to avoid getting caught in the middle of retailer pricing wars. Differentiated assortment can help a beauty brand maximize its cross-platform success. Beauty brands should consider differentiating their assortment by offering tailored versions of products to each retailer. For example, a cosmetics manufacturer might offer Target an organic line of makeup while giving Walmart an inexpensive line of cosmetics. This will help guard against price matching wars between retailers and preserve retailer and consumer brand margins.
Once beauty brands learn how to effectively address the challenges of customer trust, lack of growth drivers and challenges to profitability, they can thrive in the e-commerce space. The most successful beauty brands will take the time to leverage strategies to take advantage of the valuable opportunities to grow their brands through e-commerce platforms.
When beauty brands shift their advertising content and assortment strategies, consider automated advertising technology and are proactive about building customer trust, they can successfully and sustainably navigate the challenges of selling across multiple e-commerce platforms.
About the Author
Andrea K. Leigh is an e-commerce expert and thought leader currently serving as VP-strategy and insights at Ideoclick, provider of the industry’s leading e-commerce action platform. With more than 20 years of e-commerce experience, including a 10-year stint as a senior executive at Amazon, she helps unlock sustainable growth opportunities for brands of all sizes. She is a frequent keynote speaker at various conferences and corporate events, as well as a regular guest on The CPG Guys podcast and a contributor to Forbes and Entrepreneur. andrea@ideoclick.com
Despite the recent increase in online sales, beauty brands face several key barriers to sustained e-commerce growth—especially when selling their products through e-commerce platforms like Amazon or Walmart. To win online, here are three challenges for beauty brands online and how to solve for them.
Barrier 1: Lookalikes, Counterfeits and Fake Reviews
Lookalike and counterfeits are a rampant problem for beauty brands in e-commerce, which compromise customer trust in e-commerce platforms. Customers often cannot tell the difference between reputable products and replicas of well-known brands, which makes the online buying experience challenging. For example, if a customer searches for retinol cream, they will find a page full of results that all look strikingly similar to a well-known product. These products have similar packaging and similar names. As a result, customers who are unfamiliar with the brand can easily buy the wrong product by mistake.
This problem is exacerbated even further by fake reviews, which is another challenge for beauty brands and can further erode customer trust. A 2020 study showed that 42% of Amazon reviews were fake. Fake reviews have boosted sales of unsafe products and hurt business for legitimate sellers. When customers realize that Amazon is flooded with both counterfeit items and fake reviews, they can become skeptical since they don’t know which products, brands and reviews to trust.
A brand can build customer trust by creating advertising content to communicate its unique value proposition to show its authenticity. When the brand makes a concerted effort to differentiate its products from the lookalikes, it helps the value proposition and inspires customer trust. Vendors should make sure their product pages are filled with rich content and accurate product details, with a focus on factors that differentiate them from their competitors.
Amazon offers additional ways for brands to tackle the trust issue. Manufacturers can enroll in Amazon’s brand protection programs: Brand Registry, Transparency and Project Zero. When brands use Amazon’s Transparency program, Amazon will scan its products to ensure that only authentic units are shipped to customers.
The Project Zero product specialization feature will allow brands to apply a unique code on every unit they manufacture for an enrolled product, allowing Amazon to scan and confirm the authenticity.
Vendors who enroll in Amazon’s Brand Registry can see where their trademarks are being used across Amazon. The Registry features automated protections that will remove content that is inaccurate or infringes on their brand.
It’s also important for brands to realize that, while competition from lookalikes and counterfeit products can be a problem, not all of them are a direct threat. Brands may want to consider using tools designed to capture data to help brands determine which competitors pose a real threat, such as Share of Search or Share of Shelf. This can be an effective way for brands to assess their search-based category size, assess their position and gain insight into which competitors they should actually be concerned about.
Barrier 2: Lack of Traditional Growth Drivers
Category players like Sephora and Ulta have loyalty programs that reward customers for shopping on their platforms. These platforms also create a highly personalized customer experience through beauty classes, seasonal promotions, and customized product recommendations. In contrast, E-commerce platforms like Amazon, Target and Walmart are one-size-fits-all platforms and cannot customize the category experience for their customers. Compared to beauty-specific e-commerce platforms, the experience of shopping on Amazon can feel very transactional, rather than a personalized experience. Beauty brands often find that this inability to deliver a personalized shopping experience can hinder their growth.
However, beauty brands often have more leverage than they think they do when it comes to lack of growth drivers on e-commerce platforms. For example, vendors can improve their organic search rankings through a comprehensive advertising and promotional strategy that includes automated advertising that specifically targets customers seeking competitive products. Beauty brands that manage e-commerce campaigns across multiple retail advertising platforms can use automation to manage their campaign insights and improve their advertising strategies.
Brands can also save time and maximize their growth by using automation for ad spending. Automated Bidding can help beauty brands to automate financial decisions across their campaigns by using smart logic that decreases campaign bids based on a brand’s specific performance logic.
Product detail pages are also vital to growth and should be richly detailed, tell the brand’s story and give the customer all the information they need to make an informed purchasing decision. Beauty brands should make sure their brand store pages are fully optimized and give customers a comprehensive snapshot of the brand and all the products they offer. This is especially important because, when customers don’t find the exact item they’re seeking, they look at the brand store page for other options. Ensuring that the brand page is filled with rich content can drive growth by attracting new customers.
Content-rich brand store and product detail pages also help overcome consumer trust barriers by giving consumers confidence that the product is from a legitimate manufacturer and not a lookalike brand.
Barrier 3: Profitability Challenges
Managing e-commerce profitability is another barrier to growth for beauty brands. Beauty products have narrow profit margins in the e-commerce space due to their low retail selling prices and high shipping costs. For example, shampoo is typically not profitable for e-commerce retailers since its weight makes it cost prohibitive to ship profitably.
Beauty brands can also find themselves in retail pricing wars as retailers try to price match each other on the overlapping products they offer. This impacts profitability by cutting into both retailer and brand margins.
Driving as much cost out of the product is a critical component of boosting profitability and beauty brands can improve their profit margins by making changes to their packaging. Brands can sometimes make their products more profitable by changing the packaging to reduce bulk or weight. For example, products sold in glass jars, which are heavy and expensive to ship, may be replaced with plastic. While this may not be the most sustainable option, it will improve e-commerce profitability.
Shifting assortment strategy is also an effective way for beauty brands to avoid getting caught in the middle of retailer pricing wars. Differentiated assortment can help a beauty brand maximize its cross-platform success. Beauty brands should consider differentiating their assortment by offering tailored versions of products to each retailer. For example, a cosmetics manufacturer might offer Target an organic line of makeup while giving Walmart an inexpensive line of cosmetics. This will help guard against price matching wars between retailers and preserve retailer and consumer brand margins.
Once beauty brands learn how to effectively address the challenges of customer trust, lack of growth drivers and challenges to profitability, they can thrive in the e-commerce space. The most successful beauty brands will take the time to leverage strategies to take advantage of the valuable opportunities to grow their brands through e-commerce platforms.
When beauty brands shift their advertising content and assortment strategies, consider automated advertising technology and are proactive about building customer trust, they can successfully and sustainably navigate the challenges of selling across multiple e-commerce platforms.
About the Author
Andrea K. Leigh is an e-commerce expert and thought leader currently serving as VP-strategy and insights at Ideoclick, provider of the industry’s leading e-commerce action platform. With more than 20 years of e-commerce experience, including a 10-year stint as a senior executive at Amazon, she helps unlock sustainable growth opportunities for brands of all sizes. She is a frequent keynote speaker at various conferences and corporate events, as well as a regular guest on The CPG Guys podcast and a contributor to Forbes and Entrepreneur. andrea@ideoclick.com