Back in 2019, I was working as the Beauty Category Manager at Takealot.com, South Africa’s largest online retailer and marketplace.
Takealot pioneered eCommerce in South Africa; it was the Amazon of region.
After years of negotiations, The Estee Lauder Companies decided to launch on the platform with 9 of it’s brands.
I managed the launch. It was no stroll in the park.
This was seen as a first-of-a-kind launch for the Company.
Historically, high-end beauty brands shied away from online retailers and marketplaces, favoring the prestige of department stores along with their tightly-controlled environments, manicured sales consultants, and the ability to sample their sweet-smelling wares.
They viewed these aspects of the customer journey as an essential component in creating the aura of luxury that’s necessary to justify charging the premiums they do. And for a long time, these brands insisted that the department store experience was simply a requisite part of the luxury shopper’s needs — even an indelible part of their brand.
However, eCommerce has become integrated into consumers’ lives - including luxury consumers. Brands realized that they’re losing out on a market who is not only browsing, but also checking out online.
Companies like Estee Lauder launched their own brand .com stores, but it wasn’t enough. DTC sites simply don’t drive the traffic as efficiently as marketplaces like Amazon do.
After all, if they aren’t there controlling their presence, then other brands will be in front of their customers. Or worse, their product will be resold by third parties.
Something shifted, and premium brands started entertaining the thought of selling on online marketplaces.
Amazon and the Evolving Lux Consumer
Amazon launched Luxury Beauty (now Premium Beauty) in 2013.
It was a logical move: the luxury beauty segment was expanding rapidly and Amazon wanted a foothold, which they believed they could get by differentiating themselves from Sephora and Ulta through their outstanding convenience.
Furthermore, they knew that brand partnerships were critical: a few keystone partnerships with prestigious brands would help shift Amazon away from their perception of being a “mass-only” retailer to tap into a more affluent customer base, while also offering the brands access to their already skyrocketing base.
There were many challenges after launch, not least skepticism from brands and internal lack of strategic clarity an direction.
However, Amazon has shifted the balance in their favor over time, through developing successful brand partnerships with brands like Kiehl’s and Oribe, and in the enhanced brand storytelling and marketing capabilities they’ve rolled out for brands. For example, storefronts, enhances PDPs, and category and promotional support that allows brands to showcase their brand more effectively on-site. As a result of changes like these, Amazon is becoming more brand driven than ever.
Estee Lauder recently launched a number of their brands on Amazon Premium Beauty — Including Clinique, Dr. Jart+ and Lab Series, and it’s giving me major flashbacks from my own launch with them.
Allow me to share some thoughts on why this is so significant - and what it means for the industry.
Expanding the “everything store” into a department store
Of course, a company like Estee Lauder doesn’t just jump onto an online marketplace on the marketplace’s terms.
There were caveats. Major caveats.
Luxury brands didn’t want their products positioned next to a $5 discounted Maybelline lipstick or sold as a parallel import.
They wanted to curate the customer’s shopping experience to create the feel of “being in a department store”.
For “the everything store”, where iPhones are sold next to $10 earbuds, this means a fundamental shift in their platform structure. Something almost unheard of.
But, the Amazons of the world also needed the Estee Lauders, to attract that premium segment.
They made major enhancements to their platform over the last few years to meet premium brands’ “look and feel” requirements, like brand storefronts or “boutiques”. For example, I got a beautiful, bespoke-looking email from Amazon on the launch of some of these brands, very different from the typical algorithm-generated junkmail. Probably a requirement of the launch.
Importantly, Amazon’s Premium Beauty category is also restricted to approved brands only, and “gated” from 3rd party sellers, meaning that brands can control where and how their products are merchandised.
Before the premium brand joins as an Amazon vendor or seller, any 3P seller can list and sell their product in whatever way, at whatever price, they want. Naturally, this is is pretty bad for brand value. But with Amazon’s Premium Beauty model, as soon as the premium brand lists on Amazon, Amazon gates 3P sellers from reselling — and furthermore, puts their products far away from the Maybellines of the world (where it wouldn’t convert anyway).
Having gone through the negotiations of figuring out merchandising and gating myself between the brands and marketplace engineers, I can tell you that these changes were both critical and tense.
A lot of these policies are completely counter to Amazon’s fundamentals, and require serious re-engineering. On the other hand, Premium brands (especially Estee Lauder Companies) have a lot of power. They’re not afraid to throw it around — and they hate conceding.
Estee Lauder - and other major Premium Beauty companies - have likely been talking to Amazon for years to shape the experience into what we see today and to prepare for the possibility of future launch. And the crazy thing is that they generate a fraction of the revenue of other brands like LiquidIV and Crocs, who are subject to all of Amazon’s standard policies.
But why would Amazon change all of these policies for a few partnerships?
If you’re not asking yourself this question, you should be.
When I was a category manager, our share of beauty sales was relatively similar to Amazon’s, but there were definitely a few questions around whether all the changes that were demanded requested were worthwhile.
The answer is, this is a BIG opportunity.
Amazon is already the most popular online destination for beauty shoppers and is set to become the US’s top beauty retailer by 2025, but Premium Beauty is reportedly outpacing mass 29% to 18% on the platform in 2024.
Also, Amazon didn’t bend that easily to the Premium Beauty brands. Amazon charges an additional 15% on top of their standard 15% referral fee just to take part in the Premium Beauty program, and there are strict requirements to staying in the program.
Great, so there’s all this opportunity and Amazon has custom-built a platform to suit it…
So when will I be able to buy Chanel on Amazon*?
* A question I check for frequently.
If you know the beauty space, you will know there’s not just Premium Beauty, there are levels.
The Premium beauty category is split into several segments:
Luxury beauty includes brands positioned as ultra-premium, often offering exclusive or limited edition products at very high price points (that are deliberately inaccessible to average consumers.) They focus on bespoke services and exceptional customer experiences to justify their price tags. Tom Ford, Dior and Chanel are some of my favorites, since you asked.
Prestige beauty brands are known for their superior quality, premium pricing, and luxury positioning as well as more advanced formulations, but are positioned between mass-market and luxury. Estee Lauder and Smashbox are good examples. Their average customer feels good pulling their lipsticks out of their handbag, but they’re not draining their annual savings to buy foundation.
Masstige occupies the middle ground between mass-market and prestige. The line is a little murky. In my opinion, L’Oreal Paris, Fenty, NARS, Too Faced, and Marc Jacobs Beauty all fall in here. L’Oreal Beauty knows they won’t make it into the Amazon’s Premium Beauty category, but Too Faced is in. Between you and me, if you’re talking to a customer or employee from a higher-end masstige brand, don’t call them “masstige”. The masstige user wants to be perceived as prestige. Talons will fly — take it from me.
Professional beauty (often used to refer to haircare and clinical skincare brands) includes brands made for salons and spas, like Olaplex. They’re now selling on Amazon, but faced early resistance from salon owners who felt that selling online would dilute their service value proposition. The big resistance here is that they actually sometimes need a face-to-face consultation to sell the products because of it’s active ingredients - think, brands like Dermalogica - so selling online can be very complex, if not impossible.
Indie beauty is kind of a catch-all for the brands like Drunk Elephant, Huda Beauty, and The Ordinary that stand apart from the traditional mainstream brands. They typically operate outside of major corporate structures, prioritize innovation, sustainability, and niche down on consumers with concerns like ethical consumption or sensitive skin. Because of their innovation, quality, and hyper-targeted branding, they are often perceived as premium and positioned alongside luxury brands.
In my opinion, true luxury beauty brands will never (or not in the foreseeable future) sell on marketplaces. Their shoppers want the look, feel, and smell of going into a store and being looked after (and if they need to re-order their Tom Ford cologne, they’re more likely to go to the DTC site than Amazon).
So unless it’s a parallel import, you won’t find your favorite Chanel fragrance on Amazon anytime soon (don’t worry, I check often, and I’ll update you if that changes).
Prestige beauty are the brands you’ll mostly see merchandised on Amazon’s Premium Beauty category landing page. There are already hundreds of brands in the category, but there are a lot of notable brands missing, like Aesop and Sisley Paris. More on that later.
Masstige brands, on the other hand, was an early adopter of eCommerce, and they’re almost ubiquitously available on online retail and marketplaces. Moreover, they’re at the forefront of digital trends. L’Oreal Groupe is a good example; I remember when they rolled out their AR-enabled lipstick sampling a few years ago (can confirm: drove me to purchase 3 new shades). However, Masstige brands risk getting eaten at the top and the bottom from the indie and the mass brands. They’re going to have to keep innovating and driving their brand persona to stand out. And using some of that corporate CPG clout to excel as marketers.
Indie beauty has been a hot space for a few years. Many of these brands grew to significance around 2020 in the DTC growth wave, like Poppy & Pout, when it was cheap to acquire customers and grow a brand online. And that success easily translated onto Amazon. It’s harder to launch an indie brand now, but these digitally native brands will likely continue to compete with prestige brands, especially leaning into social media and commerce.
So, as you move “down the chain” of premium-ness, there’s more adoption of online marketplaces.
But will more premium brands move to marketplaces?
Two-thirds of US adults make at least some of their beauty purchases via Amazon, and are more likely to start their searches there.
Brands who aren’t on Amazon lose customers at a critical place in their omnichannel shopping journey - like, when they are searching for your product to replenish. Case in point: Charlotte Tilbury, who has over 50k monthly searched on Amazon for their main branded term alone, and no presence to capture it…ugh.
And here’s the thing: other brands will place beautiful sponsored brand ads on those searches, and steal those incremental sales.
Or equally bad, they’ll lose sales to resellers. Brands like La Mer don’t even officially sell on the platform yet, and are already generating tens of millions of dollars of revenue through resellers - authorized or unauthorized.
So why - despite the growth, the risk, the opportunity, the customer intent - are premium brands not selling on Amazon?
A big part of it why many of these brands are holding out is to preserve the brand’s presentation and consumer perception.
Personally, I’ve never really understood this argument: if a customer is shopping on Amazon, they surely won’t place less value on your brand for being on Amazon - that would create cognitive dissonance about their own status for shopping on Amazon. And customers who do perceive Amazon as low perceived status won’t be shopping there in the first place. But perhaps I’m not the right audience.
Anyway, I’m sure there is a lot of thought going into this trade-off. I’d personally love to be a fly on the wall in the executives’ discussion about the value of Amazon potential sales vs. degradation of brand value from launching on Amazon.
There’s a lot more to it, though.
Amazon is a very complex and expensive channel to sell on, let alone differentiate yourself on.
Also, a lot of these brands have a very strong DTC presence, likely with high LTVs and profits, and they’d be nervous about cannibalizing that.
Sure, you can achieve growth on the channel, but at what expense - unprofitable growth, having to build out a specialist team, eat into your DTC presence?
I do wonder how long these brands will be able to maintain their brand loyalty in this marketing environment, and with that, many will be forced to tap into Amazon to fill the omnichannel gap. I suppose time will tell.
Regardless, L’Oreal Groupe and Estee Lauder Companies’ recent launches on the platform are a strong signal that this is a segment that’s not going away.
A few takeaways about Amazon Premium Beauty in 2024
→ Amazon is * actually * a premium retailer
Aside from their partnerships with luxury brands, Amazon is capturing more premium beauty customers — both compared to their mass category, and compared to the overall market.
Although Amazon positions itself as a Walmart competitor, it has a much larger selection and it’s platform is much more advanced. It’s user base is younger, more educated, more loyal and frequent shoppers, and importantly… higher income.
Sure, you can get a box of dishwasher pods and a new yoga mat delivered to your door in two days, but Amazon has quietly been building a reputation for luxury retail as well.
→ Premium beauty brands - and the trends they rely on - will influence the future of Amazon
Even some of the biggest brands on Amazon have very little sway with the online retailer.
LiquidIV and Crocs are two of the biggest brands on the platform, but they’re subject to the same rules and communication channels as a regular brand.
It seems to be a bit different for Premium Beauty brands.
From the start of this category, Amazon knew these brands won’t give up control of their brand easily; they are obsessive about their image, and they’re likely willing to walk away if they don’t get what they want.
This would not be good for Amazon in their quest to reach a high-end shopper and dominate the beauty world.
I bet that these brands have influence over Amazon’s platform and policies, just like they did with the merchandising and gating discussions.
For example, social and live commerce is a massive trend in the beauty space right now, and I’m sure this is a hot conversation with brands. Brand stores and PDPs will continue to evolve, too, not without a push from premium brands.
→ Then there’s the question around social media and commerce
Both traditional brands like Clinique and newer brands like Charlotte Tilbury are seeing massive success with driving awareness on TikTok, and TikTok shop is exploding in the US, especially for beauty.
TikTok Shop has proved out the social commerce model: the average TikTok shopper has already made two purchases on the platform since August, with beauty making up 80% of purchases.
Amazon is paying attention, and has launched a partnership with TikTok Shop to allow users to make purchases from Amazon in-stream.
With the rise of TikTok Shop, we’re not yet sure how customers will shift demand away from Amazon.
But I do know that seeing a new lipstick being applied on one of your favorite influencers is very close to consulting with a department store clerk, and that’ll only exacerbate the shift online.
Amazon may be able to tap into that.
→ Nothing will replace in store sales — but smart brands will use Amazon to drive repeat and retention
There's something to be said for trying on that new fragrance or getting a personalized foundation consultation. Stores will still be the place to go for exclusive SKUs and newness, too.
However, once a customer finds their perfect product online, the ease of reordering with a few clicks is a powerful force. Brands should — and will — focus on Amazon for replenishment purchases for returning customers, and do everything that requires: good inventory management, great discoverability, smart and profitable advertising, brand defense.
If they don’t master this, there’s a real risk they’ll lose their customers to other brands who are available when the customer is browsing to replace the night cream they just finished.
→ Brands on Amazon will steal market share from those that aren’t
As a millennial consumer, I perceive Estee Lauder as a well-established, innovative, but somewhat old-fashioned brand. Within the industry itself, I think they’re trying very hard to remain relevant, especially next to L’Oreal Groupe.
Estee Lauder’s move onto Amazon is a bold one, but I think that ultimately its a smart one in terms of their potential market share.
I predict that a lot more premium brands will be forced to make the move over the next 3 years, but it’ll be a push-pull as Amazon continues to build out capabilities to differentiate brands online and create a more seamless experience from off-site media.
Brands on Amazon have the opportunity to tap into the massive growth Amazon is going to drive in premium beauty in coming years, and outpace their peers who are holding off the platform.
They have the opportunity to control the customer journey. Not only is this a retention play for their existing customers, but also an acquisition play for middle-of funnel customers. Just like a sales consultant in store (but even more targeted and less annoying), brands can strategically put their products in front of curious shoppers when they have high intent and convert them with their stunning brand visuals.
There’s a clear route to success for these premium beauty brands on Amazon. And it’s not very different from what mass CPG brands are doing: getting data savvy, becoming expert marketplace operators and marketers, and create outstanding brand presence.
The question is: which brands are going to lead the pack?
I won’t share my hunches here (I’ve shared enough predictions, and this one may not age well).
But I’d love to hear yours.