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Beauty’s E-tail Race Heats Up in Europe

Amazon and Zalando are helping up the competition for pure online beauty players, such as Cult Beauty and Feelunique.

PARIS — As e-commerce gets the gold for the fastest-growing beauty channel today, competition is rife among sites vying in that increasingly crowded space in Europe, putting the squeeze on pure-play digital sellers such as Cult Beauty and Feelunique.

Both platforms, based in the U.K., were on the block recently but have failed to find a buyer. Sources said Cult Beauty went out on the market with a banker, who has since been let go. Feelunique is no longer being shopped around after bids fell short of the asking price, according to reports. Adding to changes now afoot there, the site’s chief executive officer, Joël Palix, is stepping down after helming the company for five years, it was revealed Monday.

“Pure-play beauty retailers such as Feelunique and Cult Beauty are facing increased competition from online giants in Western Europe, including Amazon and newcomer Zalando, who tapped into beauty in 2018,” said Gabriella Beckwith, beauty and fashion analyst at market research provider Euromonitor International.

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While Amazon isn’t new to the prestige beauty sector, it has been increasingly stepping up its game since launching its Luxury Beauty vertical in 2013, adding sectors for professional and indie beauty, as well as launching its own private label collection, Find. While many brands nixed selling on Amazon early on, an increasing number are now available on the site, particularly as the e-tailer has helped restrict unauthorized third-party sellers.

“This has allowed Amazon to build up a portfolio of high-caliber brands to compete with pure-beauty e-tail sites,” Beckwith said. “What makes players such as Amazon a threat to players [like] Feelunique is superiority in convenience and low prices.”

When it comes to beauty, quick delivery is important for consumers looking to restock and a service like Amazon Prime gives a significant competitive edge.

“Consumers really shop online to save time as well as money; having a one-stop shop for all of your items — beauty, as well as clothing, electronics, etc. — is more appealing than having to shop at one web shop for cosmetics, one web shop for shoes, one web shop for electronics and so forth,” said Sara Lone, senior research analyst and coordinator at Ecommerce Foundation.

Other industry experts pointed out that the resurgence of physical retail is challenging the pure-play beauty e-tail sites.

“The real competition is coming from bricks-and-mortar stores; they’ve really updated the consumer experience to play on the senses and make the shopping processes more enjoyable,” said Alex Fisher, senior beauty analyst at market research provider Mintel. “Pop-up locations, in-store treatments, special events, etc., especially appeal to young shoppers, who can upload fun images of these experiences to their social media.”

Beauty brands born online are changing the e-tail game, too. “The ability to purchase products directly through platforms like Instagram has made it easier than ever for native brands to cut retailers out of the shopper journey,” continued Fisher. “Direct selling in this form is the future of online retail, while those brands wanting to increase their reach will look to department stores, where they can offer the consumer some form of unique experience or in-store theater.”

“The level of penetration from brand owners is very high compared to other retail sectors,” said a spokesman from global consulting firm AlixPartners, referring to beauty manufacturers overall. “There’s a real strong direct-market presence, and that’s growing all the time….There’s a very strong desire not to lose control of the brand, of the experience.”

Influencers are another phenomenon helping to reshape e-commerce. “The new marketing strategy using influencers and online marketing is making it significantly easier for consumers to click a link to the actual brand web shop, such as Sephora, leaving web sites like Feelunique and Cult Beauty struggling to find shoppers,” Lone said. “Influencers are targeting the exact audience that is shopping online more than any other audience.”

From Cult Beauty's home page
From Cult Beauty’s homepage Courtesy Photo

Still, store-based retailing continues to dominate beauty and personal care, generating about 90 percent of the category’s sales, according to an industry estimate. Yet online retailing was the segment’s fastest-growing channel last year, up 14 percent versus 2017, Euromonitor said. And the firm forecasts gains to continue, with compound annual growth of 11.5 percent until 2023.

People increasingly are looking online to learn about beauty products and purchase them there. Forrester Research polled 29,607 people in Germany, France, the U.K., Italy and Spain, who were asked: “In the past three months, which of the following have you researched online?” Twenty-four percent said fragrances; 18 percent, skin care; 15 percent, hair care, and 15 percent, cosmetics/beauty products.

In the same time period, 14 percent said that, online, they purchased fragrances; 11 percent, skin care; 9 percent, hair care, and 9 percent, makeup. By comparison, 32 percent said offline they had bought hair care; 24 percent, skin care, and 23 percent, grooming.

With such interest — and spending — on the rise for beauty online, industry experts believe there is space for all types of e-tailers.

In the case of Feelunique, which, according to reports, registered a loss of 6.6 million pounds on revenues of 80 million pounds in 2017, industry sources reckon some cost-cutting measures need to be taken.

“I suspect most of [the loss] is coming from either they’re trying to compete on price on the product…or they’re taking a hit on delivery,” said one industry source.

But most laud how such pure-players have been developing in the beauty space.

“A number of online-only beauty retailers have started to use their shopper data in clever ways, creating additional content like blog articles or trend predictions based on what their shoppers are buying,” Fisher said. “Cult Beauty and Feelunique have taken great strides here, and could use this alongside customer reviews to become a really credible source of beauty information for the masses. If they really make the most of this, we could see e-tailers becoming the new influencers.”

“We may expect to see players such as Feelunique attempt to offer consumers even more choice and convenience, and find ways of adopting new technologies to enhance online shopping,” Beckwith added. “For example, this could be advising consumers via computerized algorithms, and offering access to virtual communities, bloggers and vloggers to help consumers choose the products best-suited to them, in the aim to enhance their online experience.”

That shopping experience will more and more involve smartphones. In 2017, 24 percent of consumers reported buying items or service with a mobile phone, versus 20 percent in 2016, according to Euromonitor’s “Global Consumer Trends Survey.”

“As a result, we are seeing beauty players increasingly invest in developing m-commerce with mobile apps to provide a seamless experience during online mobile purchases,” Beckwith said.

European e-tailers could also build on subscription-based models. “The U.S. is well ahead of Europe,” said the spokesman from AlixPartners. “Beauty, particularly in terms of generics, lends itself really well to that.”