Amazon Puts On Luxury Makeup To Compete In $10.6B Industry

Amazon has been angling toward the luxury market for a while now, launching its own online luxury beauty store earlier this month. We told you about this impending move in our July, 2013 blog post, "Why Amazon's Foray into $10.6 Billion Prestige Makeup Biz Has Department Stores Worried." Until now, the Amazon cosmetic and personal care offerings focused more on the mass market, with price discounting being a key feature to attract customers. Also until now, selling prestige cosmetics has been the traditional bailiwick of top-line department stores, a $10.6 billion industry.

Amazon knew it had luxury shoppers -- but hadn't tapped them by offering luxury brands, said Amazon's director of beauty and health and personal care. (Although Amazon did open a luxury clothing and accessories department on its site last spring).

 

As for the luxury makeup store, Amazon said it wanted to offer its brand partners an elegant and refined place to showcase their products to Amazon's more than 215 million active customers. The new luxury beauty store presently carries 24 luxury brands of beauty-care products that include L'Occitane, Ahava, Burberry Fragrances, Clark's Botanicals, Dr. Brandt Skincare, Jack Black men's grooming products, and Sabon.

 

Amazon's luxury beauty site focuses on the customer experience with a different look and feel, rich visuals, and clear navigation. In addition to editorial content, customers can search by category: Makeup, Skincare, Fragrance, Hair Care, Men's Grooming, an "On Trend" category curated by 12 editors.

 

“Shoppers will also find more product information, visuals and editorial content to help with their purchasing decisions,” said an Amazon senior marketing manager of beauty. Meanwhile, many brands, that include Clinique, Chanel, Lancôme and Laura Mercier, already sell on sites like Sephora and Net-a-Porter, and haven't, as yet, signed on with Amazon.

Bottom Line For A Retailer's Bottom Line: 

The best news for other retailers is that Amazon stated that it is committed to selling merchandise at full price -- the same as traditional channels like department and specialty stores -- and will not go below the prices charged by them. (This was probably required by the beauty companies themselves before they agreed to have their products sold on Amazon, so they could protect against offending their long-term relationships with prestige retailers, and undermining their own product sales).

If not price, here's where Amazon has a few advantages over the competition:

1. With the ease of its one-click shopping and one-stop shopping capabilities, Amazon is likely to see a great amount of interest in its Website, even with near identical pricing,

2. 30% of online buyers begin researching their last online purchase at Amazon, double that of Google, according to a 2012 Forrester survey,

3. Amazon offers free shipping on orders over $35 (this figure went from $25 to $35 as of October 22, 2013); order can contain more than just beauty products, and free two-day shipping for members of its Prime subscription program.

In order to compete, other retailers must use sophisticated pricing & assortment intelligence to gather and project critical pricing and assortment information such as whether Amazon carries a particular product; what is the price; and are they in or out of stock? And then the retailers can price, sell, and compete accordingly. (For more on this subject, a good blog post to revisit is: Use Of Advanced Pricing Analytics Will Improve Retail Margins 2%–4% & Grow Sales 1%–2%).   

Source: Move Over, Sephora: Amazon Launches a Luxury Beauty Store, By Lauren Indvik, Mashable.

Source: Is Amazon a threat to luxury brands’ own ecommerce efforts? By Tricia Carr, Luxury Daily.

  

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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