The beauty industry is getting a long-overdue digital makeover that is driving an acceleration in online sales. A growing number of beauty brands and retailers are deploying technologies such as artificial intelligence (AI) and augmented reality (AR) to enable customers to assess, compare, test and find beauty products online, just like they do in in brick-and-mortar stores.
Last week, the Coresight Research team attended the Tech. 2018 event in London, a conference produced by Retail Week and the World Retail Congress that focused on the intersection of retail and technology. Numerous times, we heard about the possibilities that are being opened up for beauty e-commerce. Here are five catalysts worth noting:
Fragrances can now be tested online by using AI: Coty, a global leader in the beauty segment, is using AI to help shoppers choose which fragrance product to buy. The company has launched an AI-powered Fragrance Finder on the website of UK health and beauty retailer Boots; this uses a 7-stage questionnaire to recommend fragrance products to shoppers. Coty also offers a chatbot that helps consumers find the right fragrance product for them, in a conversational way.
Cosmetics can now be tried on using AR: Coty is helping shoppers choose color cosmetics with its AR Try It tool on Covergirl.com. When a shopper uses this tool, she is given five different views of her face after virtually applying the chosen item along with a link to Walmart.com for purchasing it. Coty’s next ambitious project is a virtual makeup artist that will use facial recognition to make personalized recommendations.
Discovering new brands is now much easier: Technology is not just making it easier for consumers to try new products, but is also helping them discover new brands. Dhruv Kumar, Chief Technology Officer at beauty retailer Charlotte Tilbury, noted the ease with which beauty microbrands can now reach their customers by cutting out retailers and going direct-to-consumer (DTC). Kumar said that just five years ago, smaller beauty brands faced major entry barriers when venturing online because it was an expensive and time-consuming affair. But now, he said, APIs (applications) and other technologies make it “unbelievably easy” for brands in the $10–$15 million sales bracket to offer a compelling DTC experiences that are as good as the experiences offered by even their big competitors.
Technology can grow per-shopper spend: E-commerce is not simply a race to the bottom on price as new ways of buying beauty can drive up per-shopper spending on the category. Janis Thomas, Marketing Director at Birchbox UK, told the audience at Tech. that once customers discover Birchbox’s beauty boxes, they tend to spend more on beauty products than they did previously. This is because, according to Thomas, they begin to understand why they might want to spend more on a better product.
Richer content offers a better online shopping experience: Joël Palix, CEO of beauty retailer FeelUnique, was amongst those that credited the boom in online video content for the ongoing migration of beauty to digital channels. Thomas also remarked that her company had recently refurbished its website to offer rich video content that aligns with the real-world experiences of Birchbox customers, and she noted that Instagram has become a “huge” platform for Birchbox marketing from the niche channel that it once was.
It should be kept in mind here that online beauty business still has a long way to go. This year, only 1 in every 9 dollars that US shoppers spend on beauty products will be transacted online, according to Euromonitor estimates, and that puts the category well behind apparel and the overall average for nonfood products. As a category where consumers want to touch, try and smell products, beauty will probably always lag behind categories that are bought more on measurable specifications—including clothing and footwear.
Contradicting the “law of large numbers,” which states that growth should slow as its base value increases, growth in beauty e-commerce looks to be gathering pace. L’Oréal reported that online sales of its products rose by 36% in the first half of this year, up from 34% growth in 2017. Likewise, Euromonitor forecasts an acceleration in total US online sales of beauty products this year, albeit at a modest rate of 15%. The launch of further new digital tools and business models is likely to fuel this delayed digital boom further. As a consequence, major beauty brand owners will continue to better their digital offerings by acquiring brands that are digital natives, courting nontraditional online retailers, and cultivating more DTC digital channels.