Top 8 Online Beauty Shops and the Strategies They Use

The Beauty and Cosmetics category is one of the fastest moving digital commerce areas. It is a highly competitive and innovative market with large brands quickly adopting digital models and challengers innovating their way to the top.

The emergence of the ecommerce sales channel for beauty brands has seen a long wait. The time has come for beauty retailers to align with the customer’s demand and specific requests. For example, a recent AT Kearney study showed 28 percent of online shoppers use the digital media to get informed on products. They carry this information in stores where they are sometimes more knowledgeable than the store assistants, which may pose a real challenge for beauty brands.

The AT Kearney study shows that only 16% of all online shoppers are online enthusiasts. The rest either use the digital media for information or for shopping for products they are already familiar with:

Beauty shoppers split

Online shoppers are more inclined to shop for particular products, such as skin, personal and hair care. Products such as beauty tools and nail care are less likely to be purchased online, unless is a very specific product, one the customer is already familiar with:

In this post we’ll get a glimpse of the eight most important type of beauty brands that engage their users through digital commerce (also). We’ll have a look at a selection of global champions with different backgrounds and different models. From digital pure-plays to established brick and mortar brands, let’s have a look at some of the most interesting approaches to beauty and cosmetics digital retailing:

1. Amazon Beauty

As expected, Amazon leads the way when it comes to online beauty retailing also. Customers are delighted to almost 2 million products, including luxury brands.

Its Beauty category is the go-to place for most of online enthusiastic shoppers, where Amazon is available. And with Amazon’s shipment policies, that’s basically everywhere.

Amazon’s secret weapon lies in its free-shipping policy (for orders above 25$), a great motivator for online shoppers and a better threshold than challengers Sephora and Beauty.com.

Another great asset Amazon will use to gather shoppers around its beauty retailing section is the fact that more customers use Amazon (30%) than Google when doing online product research.

2. Sephora.com

Sephora is generally seen as the actual leader in the digital beauty commerce. Though it lacks Amazon’s ecommerce strength, the company is part of the largest luxury high quality goods (ahem…ahem) group, LVMH, packing a lot of beauty retailing know-how.

The company has developed a great omnichannel model that focuses on mobile as a bridge between online and offline.

One of the best things Sephora.com has implemented in its web store is the content marketing and digital assistance features. I’ve previously covered the subject and praised Sephora’s efforts to offer quality content, as praised are due.

The curated content customers find is a great choice to build loyalty. So is the Community where customers can browse among the knowledge base or post questions and interact with professionals.

As mentioned, one of the greatest assets Sephora has is its focus on digital rich content. Users are treated to:

  1. Sephora TV, the go-to area for video advice, how-to’s and trends
  2. Sephora Glossy – a fashion, beauty and style blog that offers great advice from beauty professionals in a great, visual format.
  3. The Beauty Board – an user generated gallery from customers that upload pictures to showcase how and which products they use.

Some other touches make Sephora a great choice for beauty products customers, not the least of which are the three free samples with each order (a great way to drive future orders) and the mobile apps that make us of barcode scanning to offer price info and customer reviews.

3. Beauty.com

Beauty.com is an online retailer so it has no apparent need or intention to leverage offline or omnichannel sales. It has developed specific filters and features to cater to customers that either know what they want and want the best price or they can quickly decide.

The auto-reorder option seems to be a great first step to a subscription program.

Customers can set an auto-reorder flag for certain products, which can be shipped each 30, 60 or 90 days. Before the order is shipped, customers receive an email notifying them and they can pause, skip or cancel the auto-orders. The customer incentives are savings and free shipping.One of the features that really stands out (they have a pop-up to insure it stands out) is “Auto reorder and save” option. Simply put, the online retailer has noticed the habitual purchase beauty customers take and leveraged it.

Another great feature that lets customers reach the right product is the filtering option which is set not only for product features but also customer concerns and specific needs. In the Make-up section, the eye category, one can find brand and ingredients options, but also filters such as concerns (acne, dryness or oiliness), benefits (curling, hold or smooth) and skin type. Unfortunately, the filters are not usable on the smartphone version of the web store.

Just like its direct online competitor (Sephora.com), Beauty.com offers free samples, free shipping for orders $35 and above, free returns and 5% back through its loyalty program. It also features great content areas, such as its Beauty Blog, with Romy Soleimani, The Latest Trends section reviewing product news and a Beauty Videos section, ranked according to customer reviews. A great no-no on the video section is the fact that videos embedding is restricted to affiliates only, leaving a lot of marketing potential untapped.

Download the rest of the report below:

What is Omnichannel Retail? Past, present and future.

I’ve put together a slideshare presentation regarding omnichannel retail. It focuses on the events that lead to the adoption of omnichannel, the challenges and several ideas that will help you understand the concept.

Demand Sensing is a $1.1 Trillion Opportunity for Retailers

Consumer demand is the one thing that can decide whether a retailer is successful or not. Of course, there is a whole field of marketing studies to determine how we can influence consumers to purchase. But a really important aspect of how good retailers fare in the market is their ability to “sense” demand, not just influence it.

In a recent study, IHL Group claims Overstocks and Out-of-Stocks cost retailers almost $1.1 trillion world-wide. To put it in perspective, that figure is the size of Australia’s GDP.

What that means is that Overstocks and Out-of-stocks, collectively defined as Inventory Distortion, are a problem that cost retailers world-wide 7.5% of their gross revenue.

The most important overstock causes

The figures translate into poor performance, decreased customer satisfaction, decreased sales and increased costs of inventory warehousing and inventory spoilage. Basically there are two really simple outcomes:

  • Either retailers stock up on too much inventory which turns to increased warehousing costs and spoiled products.
  • …Or they don’t and they miss on sales opportunities

Either way, one thing is for sure: Inventory Distortion leads to poor retail performance.

How do you solve Inventory Distortion? (Not exactly) Simple: Demand Sensing

Demand Sensing is a concept and set of technologies that make use of analytical and prediction models to estimate … well … demand. Imagine a retailer that runs a network of 10 stores, one online store and has a mobile app that drives sales also, along side a call center.

Said retailer probably has an inventory management system, an warehouse management system, a sales reporting tool and probably some type of integration with suppliers and manufacturers.

Let’s imagine this retailer selling a type of red shirts that is available in one of the 10 stores and that inventory is not available online. If a customer will visit 3 of the stores in search of that particular red shirt and then search for it online and still not find it, it will probably consider it to be out of stock and the retailer would lose a sale opportunity.

You probably see where the problem lies: even though the product was available, it was not available to the customer and opportunities were lost. The same thing goes for products that are not exposed to the customers, or they are, say, unreachable on the shelf or unfindable on the web store if the search engine is not fit for the job.

The opposite situation, where demand is not correctly estimated and out-of-stocks become a reality, are just as bad as sales opportunities are lost.

The solution lies in gathering enough data across all sales channels, compiling this data and using models to predict demand. That easier said than done because …

To make demand sensing a reality, inventory transparency has to be achieved

As you are reading a blog on omnichannel retail, the term was bound to appear somewhere along the line. So here it is. You can’t have Demand Sensing without a connected sales operation and inventory transparency. All inventory sources have to be connected and data should be generally available. So should sales data across channels.

The picture below shows an example of omnichannel supply chain, one where all the operational pieces work together and share data. When such a structure is implemented, demand is easily “sensed” and estimated and thus inventory distortion can decrease.

So now we have the data. Implementing omnichannel retail can lead do a better demand sensing and therefore improve inventory distortion, a small glitch in the global retail system costing “only” $1.1 trillion.

3 Factors Slowing Down Omnichannel Adoption

Across the globe, retailers have picked up on the omnichannel trend and try to give the customers what they want: the same level of service across all sales channels.

Some are doing better than others but everyone’s trying. Especially for multi-channel retailers, the switch is essential in keeping up with an increasing competition from online pure-plays.

The switch is not easy and certain bottlenecks stand out:

1. Omnichannel is sometimes treated as a marketing or tech buzzword. Hint: it’s not

When you say omnichannel, you have to think of all the sales and distribution channels. Hence the “omni”. That certainly looks like a marketing area and to a certain degree, it is.

But to make omnichannel a reality instead of long consultative talks, you have to go beyond marketing and into the dark woods of technology systems and process management. That’s the hard part. The change comes when companies and especially executives leave aside their differences and interact to connect cross-department processes.

Yes, omnichannel is marketing driven but it needs inventory transparency, it needs technology investment and updating and it needs a change in internal processes and culture.

Yes, culture because…

2. There’s a lot of sales cannibalization between channels

Mid to large retailers that switched from brick and mortar to multi-channel did this by adding silo-ed sales structures one after another. First came the brick and mortar operation, then came the online store, the call-center, the mobile sales and so on.

Each of these channels eventually developed into a full-fledged sub-organization. It is not uncommon to see, for example, ecommerce departments with full operational structures from purchasing, warehouse management, picking and packing, sales, marketing and others.

When such structures emerge, a certain type of independence emerges also and this can lead to channel cannibalization. Simply put it’s one channel stealing sales from another, instead of working together for the customer and the common (company) good.

That’s why a change in culture is much needed when striving to implement omnichannel retail policies. Any customer should be encouraged to buy from any channel, as long as it stays within the retailer’s domain.

3. BAGA is a lot more complicated than it seems

BAGA stands for “Buy Anywhere, Get Anywhere“. Buy online, pick up in store. Or at home. Buy in the physical store and receive at home. Place an order on the phone and pick up in store.

It’s complicated just working with two or three of these scenarios. When you add general inventory transparency, cross-store orders and supplier availability it gets a lot more complicated.

That’s why a BAGA policy should be built after implementing:

  1. inventory transparency policy and technology. This should spread across the full inventory spectrum including warehouses, stores, in-movement goods and suppliers.
  2. customer master-data management. The customer is the same across all channels and should be recognized and its treatment personalized on demand. Think of this area as a CRM on steroids that spreads across all channels.
  3. product master-data management. Product information should be available on all channels, when needed and in the right format.
  4. cross-channel marketing policies. Think marketing independent of channel and at the same time available on all.

These are just three of the most important factors that slow down omnichannel adoption. The fourth is probably the fact that some companies are just so tired of working their way through ecommerce adoption that they are unwilling to move forward.

It takes willingness to discover the benefits and what omnichannel is. For many, the switch is rather simple in terms of technology. It does bare costs in willingness to learn new concepts and implement these concepts within the company.

Apple Music is Big News for the Music Industry and a Direct Blow to Spotify

Where does a 800 pound gorilla sit? Anywhere it wants to.

That 800 pound gorilla is Apple and today it introduced what is probably the biggest change in music business since 2001, when it launched the other big change in music business, iTunes.

Though some might undermine the impact Apple Music will have, that would be a mistake. Apple Music is a huge change for music and it will by a serious blow to Spotify and other streaming services.

Here’s why:

1. Apple has at least 800 million iTunes user accounts. Lots of them are paying customers.

Last year Horace Dedieu of Asymco tweeted this chart, comparing the number of Amazon and Apple accounts:

Compare this to Spotify’s 60 million.

2. Apple owns the platform. And it’s spreading to other platforms.

The biggest asset Apple has is its software-hardware platform. And I’m not talking about iTunes only. I’m talking about iPhones, iPods, iPads, Macs, OS, iOS, Watch OS etc. Anyone willing to compete against Apple, has to compete on Apple’s turf, with its hands tied.

Why is this so important? Say Apple decides to optimize its streaming process for certain apps and also decides not to share this info with outside app developers. Such developers may be left in the dark regarding optimum hardware usage for a better sound or longer battery time. By the way – iOS 9 comes with a better battery time. What a coincidence.

Even more, Apple Music will be available on Android too, coming this fall. So there you have it. It’s spreading.

3. Apple is closer than ever to artists and labels

Jimmy Iovine

But this is just the cherry on top of more than 14 years of continuous business development with global labels. The fact that Apple Music will be available in 100 countries is an extraordinary business feat. Anyone knowing just how complicated licensing is, knows how hard it is to stream, collect fees and distribute revenue to and from 100 countries.With its Beats / Jimmy Iovine / Dr. Dre acquisition, Apple also purchased a certain level of influence it previously lacked within the music industry. The proof is today’s event, showcasing the deep integration and the many people involved in launching Apple Music.

4. Apple is not stepping on Spotify’s toes alone, it also steps into Facebook and Youtube territory

Apple unveiled more than just a streaming service. Just like when Steve Jobs launched the iPhone, today Apple launched a product that never existed before.

Apple Music is a music streaming service, a video streaming service, a social network, a global radio and most of all, a curated music experience.

Let me just emphasize the “video streaming service” area. If you didn’t know this already, iOS alone dominates online video streaming. So Apple is already king of the hill on lots of user behaviors and now it just collected them all into one big service. Maybe that’s why Google never could pull a decent Youtube streaming experience on iOS.

And it’s not just Youtube Apple is going after. Facebook should be a bit worried also. Artists get a little more reach on their Facebook pages than, say, commercial brands. But if they want to share their news with all their Facebook fans, they still have to pay.

Apple Music makes a point by letting artists and fans connect in a seamless way. And this should send some chills up Mark’s spine. Once the artists are gone, there is also a big gap left within the social network.

5. Apple gets that technology is useful, but it’s not core

Let’s face it. Technology can be boring and frustrating. The best thing Apple has done so far is teach the world that great products happen when technology meets the arts. And its Music service does just that. From curated lists to making sure artists get an way to connect to improving the battery time so users can have a better experience, it all ads up to a human experienced enhanced by technology, rather than the other way around.

Technology and humans

This is where most of the recent tech companies have failed to understand their place in the world. Maybe Google can get away with being the Lovable Borg, but Spotify can’t. Facebook can’t. The lesson Apple Music will teach to the tech world is that technology is just not enough anymore.

6. Apple is rolling in cash and it’s rolling out cash

Say what you will but one thing is for sure. Apple has deep pockets. With more than $194 billion in cash it can survive the end of the world on champagne and cigars (that’s not really a great combination, is it?).

Even more, it just reported it paid out $30 billion to its app developers. I’m not exactly sure how much it paid to record labels, but I can bet it’s a liiiiitle bit more than Spotify’s $3 billion.