TikTok Shop, specialist retail and Amazon’s ascent: Navigating the new beauty landscape

This article is part of our Advanced Membership package. To enjoy unlimited access to The Long View from Vogue Business, The Fashion Exec's Guide and bi-monthly Market Insights Reports, sign up for Advanced Membership here. Today, a beauty product is sold every two seconds on TikTok Shop. Amazon has become the largest e-commerce merchant for beauty in Europe. Specialists like Sephora and Ulta Beauty are fighting back with a focus on experiential retail, to varying degrees of success. Meanwhile, Farfetch and Net-a-Porter have both discontinued their in-house beauty businesses. Beauty’s shopping landscape has changed significantly in the past few years, becoming more vibrant and varied — but also harder to navigate. For brands, working out which sales channels to prioritise for investment can be a minefield. Dynamic and intensively competitive, the global beauty retail market grew to $569 billion in 2023 and is forecasted to reach $653 billion in 2028, at a 2.8 per cent compound annual growth rate, according to data analytics firm Euromonitor — outpacing an otherwise challenged retail sector. To succeed, brands must be agile and operate seamlessly across digital and offline channels. Consumers are increasingly savvy at shopping across different platforms, brands and price points, says Wizz Selvey, founder and CEO of luxury brand and retail consultancy Wizz & Co. “The current shopping landscape reflects a blend of digital convenience and the irreplaceable store experience.” Today, the path to purchase is a winding one, agrees Lucy Kriz, VP of global brands at Paris-based advertising company Criteo. “In beauty, the customer journey is more complex than ever. We see transactions happening everywhere with shoppers flowing from online to offline, on-site to off-site, and across mobile, with the path to purchase length varying widely too — from minutes to over 50 days.” This is especially true of Gen Z, research by Vogue Business shows. “The borders have become blurred, and consumers expect brands to take constant care of their experience and needs. Purchases are a quick process today and consumers are invested in online and in-store retail experiences to do so,” says Enrico Zannini, general manager at global beauty fair organiser Bolognafiere Cosmoprof. For Zannini, the challenge for beauty brands is being able to meet the customer where they shop, a place that is quickly evolving. The modern beauty consumer’s desire to shop everywhere and anywhere is reflected in McKinsey’s 2024 beauty industry report, which forecasts growth across most channels from 2023 to 2028. E-commerce (including social commerce) shows the greatest potential as technological advances such as virtual try-on and artificial intelligence-powered shade matching continue to rapidly improve the online shopping experience. Other fast-growing channels include speciality retail and travel retail. Department store beauty sales are expected to rise, but at a much slower pace, while TV shopping is set to decline. Table of contents: The ongoing e-commerce revolution Social gives rise to live shopping Specialist vs cross-category retailers The ascent of Amazon The problem with the need for speed Deciding where to invest In-app shopping and social commerce is driving an e-commerce beauty boom. “In-app shopping has moved digital commerce miles forward because people like to have everything in one place as it’s easy and convenient versus watching a video and searching the comments for an item, googling it and then heading to a brand’s website. Now, everything is a few clicks away,” says Julian Reis, CEO and founder of beauty incubator SuperOrdinary. The rise of social commerce has ushered in a new era of consumerism, Reis adds. “Consumers are increasingly moving away from traditional DTC (direct-to-consumer) websites and are gravitating towards social marketplaces like TikTok, where users can discover and purchase products from creators they trust and are entertained by.” Experts say DTC websites can fight back by ensuring they deliver on price matches, stock availability, a seamless on-site experience, product tutorials and quick delivery options. Many beauty brands have invested heavily in technology that can bring the shopping experience to life digitally, whether through their websites or apps. Mac Cosmetics, Too Faced and YSL Beauty are among the brands that offer virtual makeup tools, while the likes of Nars Cosmetics and haircare brand Amika have pushed into the metaverse and created a virtual realm for consumers to explore beyond the product’s web page. The use of technology and data will continue to revolutionise beauty e-commerce, says Neil Saunders, managing director and retail analyst at Globaldata. “It’ll allow for a more personalised experience where people can enter their needs and preferences and get recommendations based on their skin type or other attributes.” Traceability, virtual consultations and hyper-personalisation remain key battlegrounds in innovation, according to this year’s Vogue Business Beauty Index. Globally, beauty sales via social are expected to grow by up to 41 per cent between 2021 and 2025, according to professional services firm Deloitte. The influence of different platforms varies by global market: in China, for example, platforms like Douyin (the local equivalent of TikTok) and Xiaohongshu (an equivalent of Instagram) are the biggest drivers of beauty sales. TikTok Shop and its live-streaming functionalities are of particular interest. Shoppers can watch a video, click the affiliate link to TikTok Shop, receive a discount, check out and then swipe back over to their ‘FYP’ to continue scrolling through content. “The platform has led to a spike in impulse purchases driven by viral content as consumers are more inclined to purchase the latest beauty products featured in trending content and live shopping events, often prioritising novelty over loyalty to specific brands,” says Reis. TikTok has pushed ahead of other platforms such as Instagram, YouTube and Pinterest for product discovery and purchase in the last 12 months, according to data firm Retail Economics. TikTok Shop can rapidly boost product visibility for mass-market beauty brands, with items often selling out within hours of trending. Makeup brand Made by Mitchell made $2 million in a week last year after launching on TikTok Shop, propelled by community content re-shares and product tutorials. However, the platform does have its shortcomings, including a strain on in-house operations stemming from product and delivery sell-through, content and ad fatigue, as well as a reliance on content creators, impacting influencer marketing budgets. Success isn’t guaranteed, especially as the platform grows and becomes progressively competitive. Brands need to implement a content-first approach, says Emily Caine, head of beauty at TikTok Shop UK. “Compelling storytelling drives conversion — the best videos tap into a shared experience or an emotional connection with the user, not just focusing on the product itself.” She also recommends using affiliate creators (content creators who promote products or services for a brand based on a fee). “TikTok Shop streamlines what is a traditionally long process of partnering with creators to make content on your behalf,” she explains. Finally, she says, it’s important to remain consistent and actively engage with the community; the latter is a key consideration when striking the balance between driving engagement and sales. “On TikTok Shop, participating with the community means as much as buying the product.” TikTok and Instagram have also made live shopping a reality in the West. Some 43 per cent of global consumers have made beauty and personal care purchases via live streaming, according to a 2024 survey by Euromonitor — up from 40 per cent in 2021.“In July we held our TikTok Shop live festival, which generated over $2 million in 12 hours, with over 96,000 items sold,” says Paige Williams, CEO and founder of makeup brand P.Louise. Williams says the brand sold two products every second during the event and generated over 2.9 million page views, 150 million likes and introduced 29,000 new followers to the brand. “On average, over 3,700 live shopping sessions are held every day,” says Caine. For brands to get live shopping right it comes down to product strategy. “Think about why someone should join your live. Is it a new product launch? A celebrity host? Or are you offering exclusive discounts? Having a unique offering will attract people to your session. Also, ask questions. The more you ask, the greater the engagement so it’s a joyful and entertaining space for your community,” she says. Brands have started hosting sessions within their retail stores so users can access the IRL shopping experience online, she adds. For brands selling through social, navigating the algorithm to reach a wider audience and managing the rocketing cost of acquisition remain significant challenges. At its best, the algorithm is an asset, increasing brand visibility. At its worst, it hides a brand’s page from new and existing consumers. To stay ahead of algorithm changes, evergreen principles apply, according to social media management company Sprout Social. These include: remaining highly engaged with the community (as algorithms favour engagement), using the right hashtags for content discoverability, optimising post timings and embracing high-performance features such as Instagram shopping tags and TikTok’s promotional product badges. Speciality retail remains a bright spot for beauty. Sales through this channel grew 14 per cent last year and are expected to grow at a compound annual growth rate of 8 per cent from 2023 to 2028, driven by North American and European markets, per Euromonitor. Reflected in earnings reports: LVMH-owned Sephora stated “remarkable” growth in its first half-year 2024 results, Ulta Beauty saw a slight lift (0.9 per cent) in net sales, while Space NK’s latest sales report stated a 23 per cent increase in sales for financial year ending 2023. Signalling the opportunity in this space, Cassandra Grey has teamed up with a private equity investor to buy back Violet Grey, the specialist beauty retailer she founded in 2012 and sold to Farfetch in 2022. Specialist retailers are good at bridging the gap between the online and offline experience, experts say. They have the advantages of a large brand mix that includes exciting new and niche names, interactive loyalty schemes, and, for some, bricks-and-mortar stores in which to host events, says Oliver Chen, luxury retail analyst at investment bank TD Cowen. Sephora stocks 314 brands and has 34 million members, while Ulta Beauty stocks 555 brands and has 43 million members, according to a TD Cowen report released in June. Specialist retailers offer educational services, in-store experiences and brand exclusivity, which cross-category retailers such as Amazon can’t easily replicate, says Chen. For both specialist and general retailers, experience is key. “Today’s beauty shopping experience, whether online or offline, needs to feel bespoke and immersive. Shoppers want high volume, high value and a high-touch element,” says global content strategist Miya Knights. The large majority of US beauty and skincare companies (84 per cent) have upped their budgets for experiential marketing, according to a survey by marketing agency Gradient. The key areas for investment include in-retail rituals (64 per cent of respondents say they had increased their budget for this), live streams (56 per cent), partnership and collaborations (41 per cent) and influencer content creation (36 per cent). “The experiential era allows beauty brands to connect with their consumers on a deeper level and prompts more user-generated content because audiences want to live the story of the product, not just buy it,” says Pauline Oudin, CEO and partner of Gradient. This is where department stores can fight back, experts say. Harrods, Macy’s and Selfridges are among those partnering with brands to create experiences for consumers that include gamification, personalised treatments and sensorial activities. For example, Elemis popped up at Harrods with a ‘play to win’ initiative to take home its bestselling cleansing balm, while Shiseido partnered with 4D immersive company Xydrobe to take customers on a virtual journey through Japanese landscapes at Macy’s. In the British Beauty Council’s 2023 Value of Beauty report, Amazon has a 35 per cent share of the beauty market in the UK and Europe, and 31 per cent in the US, according to Front Row Group. It launched into premium beauty in 2013 and now houses over 500 premium brands including Biossance, Laneige and Kérastase. This year, beauty conglomerate Estée Lauder Companies announced the launch of Clinique, Too Faced and male grooming brand Lab Series on the Amazon US beauty premium beauty storefront. “Platforms like Amazon provide vast product ranges and easy accessibility, making it simple for consumers to find both high-end brands and their more affordable dupes in economic slumps. Convenience is key as these platforms are highly responsive to trends, allowing brands to capitalise on viral products quickly, as the barrier to entry on these marketplaces is low,” says Reis. However, experts warn about the presence of unauthorised sellers, who can pass off product dupes or offer cheaper priced inventory — making product and reputation control challenging. (Amazon says it strictly prohibits the sale of counterfeit products and states that failure to abide with this policy may result in loss of selling privileges.) For Selvey of Wizz & Co, the rewards outweigh the risks as the growing consumer interest in marketplaces like Amazon presents an opportunity for brands to expand their DTC strategies, capitalising on wider audiences and platform promotions. Consumers have been spoiled by next-day and same-day delivery, thanks to loyalty programmes like Amazon Prime Day. Speed is now table stakes to retain customers. And the speed at which products can go viral or sell out via live shopping presents a new challenge for many beauty brands on how to keep up with demand. “The demand and shortened customer journey can lead to an unprepared sell-through, we’ve outgrown our warehouses on three separate occasions and the factories have felt the demand, too. The immediacy meant they hadn’t time to plan to process the orders,” says P.Louise’s Williams. As a solution, the brand has heavily invested in its fulfilment processes and incorporated data analytics to better forecast demand and prepare the inventory for any surges. It was a similar challenge for makeup brand Made by Mitchell. “Resource is the main challenge. To land a product on time our product development, manufacturing and supply functions have to operate 24 hours a day,” says James Gammage, head of retail partnerships. As a result, the brand has had to increase staff investment at its head office and international factory locations. Brands must not lose sight of the economic and sustainable aspects, says Zannini. Consumers hold a brand’s value and service to a high standard. “At the same time, they are becoming increasingly conscious about the impact on the planet,” he adds. If standards slip while trying to keep up, brands risk customer loyalty. With so many sales channels to choose between, how can brands decide where to prioritise spend? There are a few factors to consider, experts say. One is the brand’s customer demographic: are they digitally native like Gen Z and Gen Alpha, or do they prefer the blend of online research with in-store purchases like Gen X and baby boomers, according to Selvey. Another is margin and channel costs compared to product price and type, highlighted by digital testing platform First Insights. Are marketplaces like Amazon (which comes with higher fees) worth it for a product with low margins? Brands should also evaluate the potential of a platform, reports marketing firm Yellowbrick — and the pitfalls of growing too quickly. E-commerce (including social commerce) can scale without shelf space concerns, according to Mckinsey, but can be met with logistical and operational setbacks, such as fulfilment costs squeezing into margins. Finally, brands are advised by Selvey to evaluate retention, channel risk and long-term viability. TikTok is highly trend driven, offering quick wins but affecting long-term visibility. DTC, meanwhile, offers control only if brands are willing to invest in customer retention strategies and fulfilment capabilities. “Digital is moving at pace with innovation, sales growth and customer engagement, but physical shopping can’t be ignored. Customers purchase emotively and beauty touches all the senses so physical experiences can elevate a brand, make more of an impact and often be more memorable when we are bombarded with so much digital content. We have used the word omnichannel for many years but it’s never felt so important as right now for the future of shopping,” Selvey concludes. Key takeaway: The global retail market is growing, despite the ongoing cost of living squeeze. Consumers are shopping across platforms to suit their needs; notably social platforms, which provide consumers with research, brand discovery and accessible price points. Consumers aren’t going to slow or streamline how they shop anytime soon, so a robust omnichannel strategy must be at play. To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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