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Building a Beauty Brand Online

By: Herman Chein
Posted: January 31, 2012, from the January 2012 issue of GCI Magazine.
  • The online beauty market is fragmented with small companies, but the potential for new players to capture significant market share through Internet sales at manageable costs is there.
  • In general, female shoppers’ online spend preferences/habits are similar to those in brick-and-mortar shops, and market research demonstrates the propensity for women who search for beauty products online to also make their purchase online.
  • For an online-based beauty company, answering customers’ questions and helping consumers learn more about products and their specific beauty concerns is critical.

The beauty industry is finding the Internet a vibrant place to operate. The potential for growing sales and the opportunities to reach ever larger numbers of consumers mean that there are plenty of opportunities for new brands online. In fact, in the current state of the Internet and social media, new players in the beauty industry have a favorable environment and the tools to stand out from and compete with the long-dominating multinational brands, to circumvent hard-to-break-into retail channels and centralize management to control costs. Young labels are now able to grow into robust, global competitors due to the multinationals’ legacy channel strategies, which might gradually become a burden in online markets.

Few major brands have an online presence stronger than their traditional retail channels, and no major global brand aggressively sells online internationally. The majority of beauty products are currently sold through traditional retail channels, with supermarket ranking as the top channel with 46% of total sales revenue generated in the U.S. The traditional distribution channels include:

  1. Department Stores
  2. Flagship Stores
  3. Spas/Salons
  4. Medical Clinics
  5. Drugstores
  6. Supermarkets
  7. Mass Category Specialty Stores
  8. Direct Selling

But if online sales are so viable, why do the large global players sell primarily through the above channels?

These channels require long-term investment in capital and human resources on such a large scale that it is rarely an option to redirect or to reallocate a significant portion of resources to promote sales online.