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One Click Retail Delves Into Amazon’s Beauty Business

Health and personal care and beauty sales rose 30 percent in the second quarter of 2018 versus the same period last year, according to One Click Retail.

Brick-and-mortar retailers, especially mass marketers, have even more reasons to shudder as Amazon ups its commitment to beauty.

Amazon pumped out an estimated $2 billion in health and personal care and beauty sales in the second quarter, according to an analysis just released from One Click Retail. That represents a 30 percent jump over the same period in 2017.

Amazon’s gains continue to outstrip category increases at physical retailers and most online competitors. Amazon’s beauty category haul alone is pegged at $950 million for the quarter, up 26 percent over the past year. Interestingly, as more prestige brands succumb to consumer demand and sell on Amazon, the percent of luxury sales is also on the rise. One Click Retail estimates luxury beauty chalked up sales of $250 million in the second quarter, an eye-opening 57 percent increase. Similar trends were seen in the U.K. analysis reported by One Click Retail.

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“Amazon’s growing share of household consumables in America is outpacing the competition by a wide margin. The e-commerce giant continues to capture the flow of consumers away from in-store shopping and, quarter after quarter, those consumers are willing to spend more on Amazon to get higher quality specialized goods tailored to their specific needs, desires and values,” stated Pete Andrews, One Click Retail’s director of insights.

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Just as shoppers have migrated from mass beauty lines to the higher-end in stores, Amazon consumers are also lured to more expensive lines. “The addition of new brands is certainly a factor in Amazon’s rapid growth in luxury beauty. Amazon is clearly putting an emphasis in this space by creating a specific online store page and digital tag for luxury beauty products. Luxury products may be more niche than some mass products as well, so rather than spending time searching multiple brick-and-mortar stores for specific items, shoppers are going straight to Amazon where they know they can quickly find specific items,” said One Click Retail’s insights manager Ojastro Todd.

Compounding that, mass chains are vulnerable to a dent in beauty sales following last month’s announcement that Amazon had picked up Pill Pack, an online pharmacy service. Amazon has made it clear it wants in on the prescription drug business. Pill Pack conquers a major hurdle of acquiring pharmaceutical licenses to sell online in all 50 states since Pill Pack already has those credentials.

“We see accelerated shift potential for beauty sales from the drug channel into online and specialty stores,” said Stephanie Wissink, equity analyst at Jefferies. With fewer people filling prescriptions in stores, there is a drain on front-end foot traffic. Drugstores, she said citing Euromonitor data, account for 14 percent or $12.4 billion of U.S. beauty sales.

Danny Silverman, head of product innovation at One Click Retail’s sister company Clavis Insight, agreed. “Mail order has long been a dynamic pharmacies deal with, with PBMs [pharmacy benefits managers] targeting their customers with mail order offers. The risk here is that Pill Pack takes a bigger bite out of store-based pharmacy, growing the overall size of mail order. That will absolutely erode front of store traffic but the bigger challenge is erosion of pharmacy, where the bigger margins sit.”

Amazon is also trampling on pharmacies’ turf by doubling down in the health category. Nutrition and wellness is consistently the largest category within the health and personal care/beauty banner, pulling in an estimated $600 million in the quarter.

Digging deeper into luxury beauty trends, One Click Retail estimated Amazon produces $50 million in professional salon and spa products, $50 million in luxury skin care, $40 million in derma skin care and $30 million in beauty appliances. Of note, premium beauty appliances grew twice as fast as mass beauty tools. Brands singled out include Chi, BabylissPro and Clarisonic. “I actually found the rapid growth of luxury beauty appliances a bit surprising,” Todd said. “Amazon tends to find rapid growth the easiest in consumables categories, so my guess would have been that Amazon’s growth push in luxury beauty would be focused on more consumable type products [makeup, skin care, etc.]. The fact that a hardline category is outgrowing consumables in luxury beauty means that Amazon’s luxury beauty success is happening in a different way than its historical success in many other categories.”

Teeth whitening is an emerging category on Amazon. Active Wow, a natural tooth whitener with charcoal, buoyed by strong social chatter, holds the bestseller title in the beauty space. In June, Amazon launched its Indie Beauty shop to bring visibility to up and coming lines, many which are premium priced. Amazon shoppers are quick to respond to trends as exhibited by the mounting demand for Sun Bum’s reef safe sunscreens. “By being the first to appeal to an emerging trend on Amazon, brands can capture a fresh wave of traffic and generate a long-term lift in sales rank,” Andrews said. Sun Bum introduced reef safe products to attract to those concerned about the environmental impact of sunscreens. In 2017, said Andrews, reef safe was rarely used in a search; in the first quarter of 2018, it was one of the top 50 terms among shoppers searching for sunscreens. Sun Bum, along with Supergoop, are premium lines challenging the market leading mass sun protection logos on Amazon.