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E-commerce Fuels Billion-dollar Growth in Beauty Purchases

Posted: September 21, 2011

Sales of cosmetics and toiletries through alternate channels have exploded, growing by nearly $1 billion since 2005, according to the latest Beauty Retailing USA 2010 report by Kline & Company. More double-digit growth is expected as consumers are increasingly drawn to the convenience of at-home shopping to meet their beauty needs.

Posting a stellar 25.4% growth from 2005 to 2010, e-commerce sales are leading the way, followed by home shopping networks like QVC and HSN posting a compound annual growth rate of nearly 20%. Similarly, infomercials for brands such as Hydroxatone, ProActive and Sheer Cover, bolstered by industry veteran Guthy-Renker and its multimedia celebrity-endorsement approach to marketing, have seen sales grow over 17%.

“Consumers are spending more time at home, either by virtue of unemployment, telecommuting, or merely a desire to save money by not going out so much,” observes Karen Doskow, consumer products industry manager at Kline. “Instead of running out to the store to buy their beauty products, they’re watching home shopping channels and infomercials to get the latest on new products.” They’re scouring through websites like dermstore.com to get information on high-end facial treatment products with unique benefits.

Consequently, brand marketers are exploring new tactics to build online buzz. Daily deal sites, such as Groupon, LivingSocial and so-called “flash sale” sites such as HauteLook, Rue La La and Gilt Group, are fueling e-commerce sales by creating awareness and enticing interest about new products or services by offering one-time discounts in order to create trial.

Doskow also notes that the bricks-and-mortar front is far from lagging: “Beauty has become the new revenue sweetheart in the traditionally slow-growing drug store channel as pharmacies reinvigorate their beauty offerings to lure customers with a more upscale, specialty-store look. For example, Walgreens’ acquisition of Duane Reed and its high-end Look boutiques is expected to promote growth for both the chain and the channel. Meanwhile, CVS, Rite Aid, and others have begun offering new and improved customer loyalty programs and expanding shelf space for their beauty merchandise.”

Furthermore, Kline’s study reveals that as brands increasingly look to leverage mobile and e-commerce to create seamless and ubiquitous purchase options for their customers, single-channel marketing is being rendered less and less viable.

“We expect a great deal of cross-channel promotion that will drive solid growth over the next five years,” predicts Doskow. “The Internet and mobile technologies are empowering consumers to be even more aggressive in their product and price comparisons and driving marketers to deliver value-based products to meet these demands.”