Beauty e-commerce has been growing at a compounded annual growth rate of 24 percent since 2009, according to market research and management consulting firm Kline in its just-released Beauty Retailing USA: Channel Analysis and Opportunities.
However, Kline began seeing a shift in 2014 to digital marketers expanding from the virtual world to the physical one. Subscription sample box Birchbox opened its first physical store in New York in 2014, and is teaming with Gap to bring Birchbox to seven U.S. locations with pop-up shops. On the West Coast, Violet Gray, once only an online purveyor, opened a store in Los Angeles, and Credo Beauty, an online natural beauty retailer opened a physical store in San Francisco.
“The flurry of online retailers entering the physical world signifies yet another paradigm shift in beauty retailing,” notes Karen Doskow, director of Kline’s Consumer Products practice. “While everyone else has been flocking online, online pure plays are becoming physical. Omnichannel retailing strengthens both ways as retailers and marketers strive to offer channel agnostic consumers the convenience of shopping in physical stores and online.”
The study also took note of the role technology is playing in transforming beauty retailing, pointing to such in-store offerings as Sephora’s Color IQ and online tutorials, and beacon technology that informs shoppers of information and special offers when they are in stores.
Brands that once were only available during late-night infomercials, such as Guthy-Renker’s Meaningful Beauty and Wen, are now carried by brick-and-mortar retailers such as Sephora and Ulta, while some of Atlantic Coast Media Group’s infomercial lines, including Miracle Skin Transformer and Hydroxatone are being sold in Kohl’s beauty departments.
As well, Amazon.com piloted a staffed on-campus pick-up and drop-off service at Purdue University, has leased space in New York City that could turn into a retail location and has experimented with pop-up shops, the study points out.
Despite their strong growth, virtual channels account for only 8 percent of total U.S. beauty and personal-care sales while physical stores account for the vast majority, according to the report. “This movement underscores the continued relevance of bricks and mortar in an increasingly digital world,” added Doskow.