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How Beauty Retailers Can Maintain Their Edge As Amazon Encroaches

With more prestige beauty brands joining its ranks in recent months, Amazon has been leveling up in beauty in a big way and challenging established retail leaders Sephora, Ulta Beauty, Target and Walmart for customers' dollars. Estée Lauder Cos., a long-time Amazon naysayer, placed Clinique and Too Faced Cosmetics …
Erica La Sala·July 15, 2024·2 min read
The 30-second read
With more prestige beauty brands joining its ranks in recent months, Amazon has been leveling up in beauty in a big way and challenging established retail leaders Sephora, Ulta Beauty, Target and Walmart for customers’ dollars.

Estée Lauder Cos., a long-time Amazon naysayer, placed Clinique and Too Faced Cosmetics on the e-commerce giant this year shortly before L’Oreal-owned Kiehl’s launched on it. Chasing scale, the prestige brands are looking to draw customers increasingly searching for products on the platform, which is running its deal event Prime Day on Tuesday and Wednesday.

According to performance marketing agency Tinuiti, 37% of shoppers in the United States started their beauty product searches on Amazon in February last year, outperforming Walmart at 23% and other retailers’ websites at 9%. Last year, over 100 million customers visited Amazon each month, and it has over 230 million customers in the U.S.

Sephora and Ulta still reign supreme in brand curation and reputation, but Amazon’s prestige beauty moves are intensifying the race for dominance in the beauty retail sector. By next year, the e-tailer is forecast to become the largest U.S. beauty retailer, accounting for over 14% of beauty market share to Walmart’s 13%.

In a recent consumer survey conducted by investment bank TD Cowen, 34% consumers identified Amazon when asked where they’d purchased beauty products in the last 30 days, Combined, 36.8% responded they’d purchased beauty products at Sephora and Ulta during the same period.

While most beauty brands have concluded selling on Amazon is a necessary step, at the very least as a strategy to repel unauthorized sellers, retailers are fighting back from weaker positions. Sephora tries to hold brands off Amazon in its agreements with them, and retailers are leveraging exclusive products or bundles that brands don’t place on Amazon.

Amid Amazon’s beauty territory grab, we have been wondering what effects it may have on the beauty retail landscape. To dig into that topic, for the latest edition of our ongoing series posing questions relevant to indie beauty, we asked nine retail consultants, brand strategists, investors and brand founders the following questions: What does Amazon’s rise in beauty mean for the future of the industry, especially as prestige beauty brands continue to jump on it? If you were operating a beauty retailer, what would you do to fend off competition from Amazon?

The players

5 mentioned
Brand

Kiehl's

Brand

Estée Lauder

Brand

Too Faced

Brand

Topicals

Brand

AS Beauty

Founded2019
HQNew York, New York, United States
Revenue Range$150M+