THE CYBER SITUATION
FASTEN YOUR SEAT BELTS. THE CYBERSPACE RACE IS HARDLY OVER. NEW BEAUTY SITES CONTINUE TO LAUNCH ON A REGULAR BASIS, EXISTING SITES ARE WORKING OVERTIME TO LURE CUSTOMERS AND THE DEPARTMENT STORES ARE GETTING SERIOUS ABOUT THE GAME.

Byline: Kerry Diamond

NEW YORK — There’s never a dull moment in cyberspace, is there? For the past year, it seems that each week has brought a new announcement, a new Web site and another personality defecting from the offline world to online.
This fall won’t be any different.
One of the season’s big stories is the emergence of the department store sites. The launch of saksfifthavenue.com is scheduled for later this month. The site will feature approximately 10,000 stockkeeping units, with 100,000 sku’s online by mid-2001.
Earlier this week, Saks and Hong Kong-based Dickson Concepts Ltd. announced that they had taken 3 percent stakes in each other’s e-commerce operations. This move could possibly give Saks a vehicle for selling abroad.
Neiman Marcus, meanwhile, announced it would invest $10 million annually over the next few years in neimanmarcus.com. The site already has a stellar lineup of beauty brands that includes Anna Sui, Chantecaille, Guerlain, Trish McEvoy, La Prairie, Sisley, Annick Goutal, Creed, Versace and Jean Paul Gaultier.
Neiman Marcus may also launch a Bergdorf Goodman Web site in the next 18 months.
These sites pose a serious threat to the beauty-only sites for several reasons. The major beauty brands already have relationships with the department stores — and longstanding ones at that. Also, the stores are brands unto themselves and ones with which customers are familiar and comfortable.
“Click-and-mortar sites are the best positioned and consistent, and failures among the pure-play sites are inevitable,” said Claire Kent, chief luxury goods analyst at Morgan Stanley Dean Witter. “We also see considerable consolidation of sites, especially in the beauty area. We think most of those sites will probably fail because they’re not getting the Estee Lauders and the L’Oreals and so are all selling the same small brands.”
All but one of the pure-play beauty sites that launched last year has seen a change in its ownership structure. Beauty.com was purchased by Drugstore.com, Gloss.com was bought by Estee Lauder Cos., Idealab now owns a majority stake in Eve.com and Beautyscene.com was bought by a group of New York investors. Beautyjungle is the only one that remains independent.
Its president, Jo Anne Kauffman, is optimistic about the months ahead for both the e-commerce portion of the company and its business-to-business division, which it added earlier this year.
“We have gained a lot of momentum on the b2b side, having signed two contracts and having a number more in advanced negotiation,” she said. Its first major B2B project — BeautyWall, the CDMA marketplace site — is set to launch in late August.
A fall promotion is scheduled to support the site’s new Esprit Francais product category, which will launch in a few weeks. New vendors will be added, “some of which are major international brands that have not been available in the U.S.,” said Kauffman. “Overall, we are also optimizing our brand mix so we may remove some of the vendors and have a tighter mix overall by fall.”
Behind the scenes, Beautyjungle is planning an infrastructure ramp-up that includes additional warehouse automation to tie in with the recent completion of a technology/back-end upgrade.
As for the beauty e-tail scene in general, Kauffman acknowledged that things could get complicated.
“Fall will show continued growth rates for beauty e-tailers, and will be particularly interesting given most of the traditional retailers will have had their beauty component online by then,” she said. “Sales rates captured in fall may be indicative of truer consumer adoption standards, as now customers can compare pure-plays to retailers, both in assortment and service, and make decisions how and where they want to shop longer-term.
“All in all, I think there is more that needs to happen, such as the relaunch of Lauder’s multibrand site and online sales decisions by holdout manufacturers, before the picture will clarify,” she said.
Lauder’s multibrand site, aka Gloss.com, is heavily anticipated by the industry. As Lauder announced earlier this year when it purchased the multi-brand beauty site, it would be transforming Gloss into the online home of all its brands.
It is expected that Gloss will launch in early 2001, but several Lauder brand sites will launch before then. Currently, the only Lauder brands online are Estee Lauder, Clinique, Bobbi Brown, Origins and Aveda. Angela Kapp, vice president and general manager of Estee Lauder Cos. Online, said the MAC site will be up by early August.
“I can guarantee you this,” she said. “There will be a lot of people with a lot of strong opinions when the MAC site launches. I’m the first one to tell you there are things I don’t like about that site, but it’s in keeping with the brand. The site is all flash, which is an animation tool that allows you to do more sophisticated animation in lower bandwidth. It allows you to create something that is more of an environment. You’ll see more sites coming up that use this kind of technology.”
The Estee Lauder site will soon introduce e-commerce, she added. “That site has been doing extremely well, and we really haven’t started talking about it or tagging it in our advertising,” Kapp noted. “We have somewhere around 100,000 registered users.”
Kapp acknowledged that she is anxious to get Gloss up and running, and that the company’s Internet team “goes back and forth about timing issues. Everyone wants something quickly, but we want to do this right.”
Gloss, she added, needs to be more than just an interesting, easy-to-use site.
“We would like to create the best beauty site and the best place for brands,” she said. “Gloss is designed to be a site that actually builds the brands that it houses and that is an extremely challenging course.”
Although selling products will be an important part of Gloss, it’s not the site’s raison d’etre. “To a certain extent, we don’t care whether customers transact,” said Kapp. “We’d love them to go into the store to complete the transaction. From a business standpoint, we’re trying to grow the market, grow the demand for total beauty products. The last thing in the world this site should be is something that facilitates replenishment.”
As for the timing of the launch, Kapp doesn’t sound optimistic about getting Gloss up and running for the holidays. “If you are not going to launch by October, you might as well not launch until February. For this holiday season, we’ll have several individual brand sites. I think it’s much safer this way. I don’t want customer service nightmares.”
Gloss might be the site that everyone is waiting for, but life online goes on. For many of the smaller, independent brands, the Internet has proven to be an important business tool for sales and for educating consumers. Many companies told WWD that certain Web sites now count among their top-performing doors — in some cases, top 10.
Several companies, like Tony & Tina, Poppy and Joey New York announced that they will begin selling their products to international Web sites, like Beautyspy.com, a German and English site that specializes in hard-to-find products. Its headquarters is in Munich and a key member of its team is Amy Gordinier, who was most recently international marketing director for Manifesto, the Isabella Rossellini color cosmetics range.
Another site, Looks.com, launched in October and is considered to be Asia’s first home-grown beauty site. The site conducts e-commerce in a region that stretches from South Korea, to Australia, New Zealand, India and Japan.
Sephora.com is working to capitalize on its brick-and-click positioning. The Web site will continue to publish the Sephora.com Beautycyberspace magazine, which is a lively bimonthly publication distributed in-store and edited by Andrea Pomerantz Lustig. The next issue hits stores in mid-September, said Jim Kenney, chief executive officer of Sephora.com.
Next up is a catalog that will be sent to several hundred thousand households in late October or early November. “It’s a joint project with the stores,” explained Kenney. “The catalog will be organized in the same fashion as the gift section of the Web site.”
On the Web site, Kenney said customers can expect a “plethora of new brands and exclusives in the early part of September. There will be an incredible set of things that are new to the market and new to the Web.” Also, the fall will bring the launch of Sephora.com’s branded boutiques.
Kenney said business has been fairly strong so far. “We had a great spring and summer has not had nearly the slowdown you would expect,” he said. “Things have continued to grow and look very, very positive for us.”
On a smaller scale, Bluemercury.com also is capitalizing on the brick-and-click advantage. “We continue to concentrate on our three channels — the catalog, the Internet and the retail stores,” said chief executive officer Marla Malcolm.
The site relaunched earlier this year with new products, like the Fresh Index collection, and a new category for hair. “We are doing substantial volume in skin care and hair care,” Malcolm reported.
Two of her best-selling brands online are Nars and Acqua di Parma. “We keep selling out of Nars’s new colors and the Acqua di Parma business is unbelievable,” she said. “It’s because people have trouble finding these products across the country. We’ve got shoppers from all 50 states.”
While Malcolm is happy with how the Web site is performing so far, she believes the beauty category continues to be hampered by technological issues. “The Internet is still inhibited by the bandwidth problem,” she said. “We still get a lot of people telling us it’s not fast enough. As we go to cable and people are a click away, this channel is going to explode.”
Not everyone cares about selling online. Some, like Hara Glick, founder of Makeupalley.com, an online beauty community, are more interested in information.
The site, which was purchased by Beauty.com in December, has a new look and several new features. “We updated last week with member profiles,” said Glick. “You can establish a profile with a photo, hobbies, your favorite makeup brands. It’s really nice because it builds on the community so people can put a face to the name.”
Glick would like to expand the profiles so that they become like homepages for each member. “We’ll add things like the ability to put more pictures there, like if you want to add a picture of your dog or your baby,” she said.
Members can now respond to negative swap tokens. Makeupalley.com is well known for its swap section, where members can trade cosmetics and fragrances they no longer want. “If I gave you a negative token because we didn’t have a good swap, now you can comment on it,” explained Glick. “As the swap grows, it allows for more honest feedback.”
Next up is a more intensive search function. “We’re rehauling the message boards so you can do things like call up all the posts on Nars, for example.”
Overall, Glick wants Makeupalley to serve as a virtual beauty adviser. “People are hungry for honest information and this site fills a need,” she said.

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