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How Amazon is shaping the retail landscape is already a major topic of debate across most sectors as retailers scramble to keep up with the way today’s consumers make purchasing decisions. The giant e-commerce company is taking the online sales world by storm disrupting the entire retail landscape, having become a force to be reckoned with across many sectors including health and personal care.
In the first quarter 2017 online sales in US health and personal care rose, driven by Amazon which now, according to research by Digital Commerce 360, has the largest online market share in the category with one in every five beauty product purchases online made via the ecommerce engine. This was despite the fact that actual overall sales in the category dropped by one per cent.
Most retailers across all sectors now view Amazon as a chief competitor and it would be folly to ignore the rapid growth and pace of change the e-commerce engine is driving. According to Global Cosmetics Industry “Amazon is the second most popular app with teens and millenials, second only to Snapchat”. The first generation to grow up with the Internet as a normal part of everyday life, millenials are clearly supporting this shift in change in the retail landscape.
While sales at department stores are declining, sales on Amazon are going through the roof. The New York Times reported earlier this year that the e-commerce platform accounted for 6.6 per cent of clothing sales in 2016, for example, and this is expected to increase to 16% by 2021 as it confidently goes head to head with department stores and traditional retailing.
Health and personal care online
According to Euromonitor International, Internet retailing accounted for 9 per cent of global retail sales in 2016. For beauty products the share of online sales is less at 6.6 per cent. Nonetheless, that is still double the 2010 figure of 3.3 per cent and is only set to increase further as technological innovations become increasingly sophisticated and retail capabilities across mobile technology are enhanced.
This shift to online retail sales is largely driven by ecommerce engines such as AliBaba, E-Bay and Amazon. Digital 360 reports that Amazon.com Inc.’s marketplace (including its marketplace sellers) was the largest seller of online beauty product sales in 2016 accounting for 21.1 per cent of total online sales in this category. This trend has continued through 2017 with Amazon itself reporting a 30 per cent year on year growth of Health and Personal Care sales in both the UK and US market for the first quarter.
Already boasting an increasing portfolio of top beauty brands such as Burberry, Calvin Klein fragrance, Essie and SK-II since it launched its Luxury Beauty Store in 2013, Amazon is also constantly adding new health and personal care products to its offering. With a bold brand proposition directly rivalling the department store concept, Amazon states in its Luxury Beauty Store descriptor “you can shop your favourite luxury beauty products without the first-floor department store experience”.
Amazon is really shaping how consumers shop for their beauty products as more and more customers adopt ecommerce over physical retailers as their preferred purchase point. As sales continue to dip at brick-and-mortar outlets, it is likely that manufacturers will reconsider their point of sale and suppliers will also gravitate towards the ecommerce heavy weights, leaving physical retail outlets with a lot of work to do if they are to protect their market share.
Fortunately, it is not all doom and gloom for brick-and-mortar outlets. Those that can adapt traditional methods to also incorporate digital innovations and experiment with marketing strategies can still continue to trade successfully. In fact, despite the many benefits of online shopping, Forbes recently reported that as many as 70 per cent of shoppers still want the interaction of a physical store.
After all, can an ecommerce engine ever really replicate that ‘personal touch’ physical shopping experience?