Die Beauty-Branche im Umbruch

Market analysis: The beauty sector in change

The global market for cosmetics and personal care is growing. According to Euromonitor, its current value stands at 250 billion US dollars. But the beauty sector is now witnessing change. So far, the majority of market share and prestige has been held by major cosmetics manufacturers and brands like L’Oréal, Dior and Chanel. Recently, however, it has been mainly young beauty companies (such as Too Faced or Benefit Cosmetics) who have conquered the market. Between 2008 and 2016, these “challengers” grew by 15.7 percent annually, or four times faster than the established cosmetics giants. They thus gained a market share of 10 percent in the process.

As the figures from Euromonitor show, young cosmetics companies have grown around four times faster than established industry leaders since 2008 (Source: McKinsey&Company)

One of the reasons for the success of these young brands is their digital expertise. In most cases, they started as pure online companies and quickly reached a broad target group via social media. And so the alarm bells are now ringing on the established beauty players. These are expanding their multichannel strategies and even opening up for sales on marketplaces. Online retailers also desire a piece of this cake and are increasingly entering into the cosmetics market.

For a long time a straggler in eCommerce, the online cosmetics business has now become a booming sector. Anyone wanting to play a role in this market must now seek out their share. Today’s article, therefore, offers you an overview of current market developments and digital strategies in the online beauty sector.

The cosmetics sector at the forefront of digitisation

Overall, cosmetics companies are pioneers in the field of fast-moving consumer goods / FMCG. Whereas the FMCG branch grew by only 2.5 percent annually between 2012 and 2016, the decorative cosmetics business grew by an average of 5 percent per annum. The reason for these differences is that digital technologies have revolutionised buying and consumer behavior, and also require new marketing strategies. Many FMCG players are having trouble keeping up with the changes. The cosmetics industry as a whole, however, has been able to take advantage of these developments. Consumers become bonded to a brand via social media, with influencers creating new trends with their posts, stories and presentations, with consumers receiving information about the products, make-up tips and instructions from cosmetics videos. These are the results of a study, “What beauty players can teach the consumer sector about digital disruption“, by the management consultancy McKinsey & Company.

“Earlier than in other sectors, cosmetics customers have discovered new technologies, like social media, to inform themselves and to buy beauty products. Because of their strong visual nature and emotional bond, decorative cosmetics are almost taking on the pioneering role in the current digitisation wave”, says Stefan Rickert, McKinsey partner and consumer goods expert.

Established companies learning from digital challengers

With the advance of beauty startups and their successful digital strategies, established beauty companies are now rethinking their position. They are buying up these young providers, restructuring internally, or increasingly relying upon online retail.

The latest drumbeat was sounded by Douglas in June 2018. The European market leader in the beauty sector is acquiring a majority stake in the stationary perfumery chain Akzente and its successful online shop parfumdreams. Douglas also plans to be the most important beauty destination online. In an interview with Horizont, CMO Lucas van Eeghen said:

“In the beauty sector, the future belongs to those who offer customers unique shopping experiences”.

Besides the specialist Douglas, major retailers have also brought movement to the beauty sector over the last year – as have the two heavyweights Otto and Zalando. Since the end of 2017, Otto has been selling around 1,000 products from the cosmetics manufacturer L’Oréal and another 500 products could be added during this year. The exciting thing is that a cooperation of the cosmetics manufacturers themselves should ever have been initiated. No wonder here, though, because L’Oréal has been successfully using online marketing for years.

In March 2018, Zalando also entered the beauty sector. Since then, more than 4,000 beauty products for women have been available on Zalando.de. But this retailer is not limited to online sales alone. In June, Zalando opened their “Beauty Station” in Berlin – a stationary concept store where customers can experience the Zalando Beauty world live and receive valuable tips from beauty experts.

Avon, the leading direct sales brand, could no longer escape this pressure of digitisation. The US cosmetics manufacturer thus launched an online shop in Germany at the beginning of October.

Stationary retail continues to convince consumers

Despite the eCommerce boom, a study by the Berlin market research company POSpulse shows that stationary retail is continuing to remain convincing. Almost 1,000 consumers (61 percent male, 39 percent female) were asked about their shopping behaviour for cosmetics and beauty products. The results show that virtually nobody buys these exclusively online. Some 62 percent continue to prefer over-the-counter retailing and as many as 35 percent buy partly online and partly offline. But the arguments for online shopping here do remain convincing. According to the respondents, these shops score above all for a large product selection (76 percent) and shopping options around the clock (70 percent), as well as convenient delivery directly to the home (69 percent). Consumers cite immediate availability (48 percent), testing options (25 percent) and a wide range of products (19 percent) as their reasons for purchasing offline.
For the future of the beauty industry, the market research company sees an increasing correlation between online and offline channels, whilst also recommending the implementation of targeted marketing measures both digitally and stationary.

The most important weapon in the beauty competition: Active price management

The market for beauty and cosmetic products is a challenging sector containing intense competition. A precise market overview is therefore all the more important for a company’s own success. It is, after all, only those who know the offers and price strategies of their competitors who can make better decisions about their own prices and assortments. As our “blackbee Pricing Report: Beauty and Wellness” makes clear, a large proportion of German online beauty retailers still have some catching up to do. To date, only a quarter of the online shops surveyed have implemented strategic price management. To remain competitive in the highly contested eCommerce market over the longer term, however, systematic pricing has now become indispensable.

With blackbee, you always have the online market for beauty and cosmetic products within view. The unique matching technology and outstanding data quality of blackbee offer you a clear competitive edge in eCommerce.

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