There are several reasons for beauty e-commerce’s steady ascent, but the biggest change agent is Amazon. Its growth as a veritable mass and premium beauty retailer is raising the bar across the beauty industry — particularly for speciality retailers and department stores.
Future success in beauty will be less dependent on brand exclusives — a historic stronghold for traditional retailers — and instead on convenience and the online shopping experience.
Other players outside the US such as Europe’s Zalando, the Czech Republic’s Notino and India’s Nykaa are also seeing robust growth and expansion, while prestige sellers like Mecca and Space NK continue to grow their store footprints. Retailers should understand their consumer funnel and optimise for discovery, replenishment and gifting.
Travel retail may also see renewed interest, particularly if tariffs persist. This channel can be lucrative for brands that take it seriously — assessing the profile and preferences of consumers passing through and investing in a dedicated travel retail strategy tailored to each location. Travellers from India, the Middle East and China are some of the most likely to buy beauty in duty-free.
Marketplaces are leading the channel shakeup
Marketplaces can maintain momentum by elevating the experience
- Thanks to convenience and affordability, general marketplaces that sell more than just beauty have outpaced other online beauty channels. Morgan Stanley expects Amazon to overtake Walmart as the largest beauty retailer in the US by end of this year.
- Marketplaces have the potential to move beyond replenishment if they improve the shopping experience. Platforms like Tmall are doing so through customisable digital brand flagships, advanced search features and exclusive products and experiences, such as La Mer’s private livestreams.
- Elevating the presentation of high-end beauty online presents retailers with another opportunity. Consider Coupang, which launched a dedicated premium beauty app with a luxury design, dedicated service centre, fast delivery and special packaging.
Special offers, wide choice and free delivery are top drivers
- Consumers currently shop twice as often in omnichannel retailers’ physical stores compared to their websites but show greater intent to spend online in the future, highlighting clear room for digital growth. There is also continued appetite to shop on brands’ websites.
- A sustainable online strategy will need to go beyond competing on price alone but will need to be mindful of other platforms’ strategies. On TikTok Shop, brands are often sold at large discounts to entice users to shop, with TikTok paying the brand the full RRP and taking a margin hit themselves.
Social media sales are rising, and emerging markets see the most traction
Authentic content can drive results on social platforms
- Social commerce is a core sales channel for 31 percent of beauty executives and used by a further 21 percent of executives as a non-core channel. The advent of TikTok Shop, which has put down roots throughout the US, UK, Europe and Latin America is reshaping virality. It can offer otherwise small brands a bigger platform on the app and assist with logistics, allowing indie names to quickly reach critical mass.
- Retail associates and brand staff can play a powerful role here, creating relatable, brand-aligned content that does not feel overproduced. For example, Tree Hut’s TikTok Shop performance is fuelled by videos made by a small in-house team, whose personalities foster a sense of trust and familiarity; UK brand Made by Mitchell hosts hours-long live selling sessions with product demonstrations and tutorials.
Sustainable scaling in live commerce requires a measured strategy
- China remains the most developed live commerce market. Over a third of beauty e-commerce is expected to take place on platforms like Douyin and Kuaishou in 2025, according to Goldman Sachs. Other high-potential regions include India, Brazil, the UAE and KSA.
- Live selling platforms like Douyin can be difficult to build profitable sales growth on because of the high cost of gaining traffic. Global brands are also often outflanked by domestic players’ agility.
- Brands should pay attention to each market’s local preferences. While much of today’s livestreaming is led by key opinion leaders, which often weighs on brands’ profitability, a paced in-house livestreaming strategy can attract Chinese consumers who prefer official brand-originated and behind-the-scenes content. Indian consumers prefer celebrity features.
Speciality retailers can double down on playful, immersive experiences
Ongoing store innovation cements speciality beauty retailers as destinations for discovery and delight. Design and layout updates that incorporate editorial-style storytelling have helped these players stand out. Consumer satisfaction with speciality retailers is high — 82 percent of shoppers rate their experience positively.
Retailers are also expanding assortments across price points, and 53 percent of consumers now view speciality retailers as ideal for both mass and premium products. Douglas, for instance, has moved beyond its traditional focus on high-end beauty to offer a greater variety in line with how consumers shop today. Meanwhile, Ulta Beauty has pushed its assortment more upmarket.
Private label brands also prove popular at speciality retailers. Mecca has multiple owned lines, while Sephora Collection is a consistent top-seller. Brands, in turn, should stay attuned to shifting merchandising strategies. As stores move away from brand-dedicated gondolas and towards themed, cross-brand displays, competition for standout positioning will intensify.
Create a destination
Mecca’s new mega flagship, set to open in Melbourne in 2025, is slated to be one of the largest brick-and-mortar beauty stores globally.
The retailer chose its location carefully and designed it as a 360-degree beauty playground, featuring a beauty carousel in the centre, an “atelier” for makeup, hair and nails, an apothecary with a focus on natural products and an expansive fragrance section.
Services and technology, such as skin diagnostic tools, will play a role in boosting foot traffic. The store will also include an aesthetic clinic offering dermal treatments such as lasers and injectables.
Invest in events, real and virtual
In 2018, Sephora created Sephoria, a beauty extravaganza, which now has editions in Paris, Milan, New York City, Shanghai, Dubai and Rio de Janeiro. Sephora reports events attract up to 6,000 in-person attendees at some editions and tickets often sell out in minutes.
The events offer playful, immersive, multi-sensory interaction between shoppers, influencers and buzzy brands carried by the retailer, including its own private label. Founders are often on site to host masterclasses or greet attendees.
Virtual formats can build on the excitement. Sephora’s digital Sephoria expansion offers a gamified exploration and live interaction to more than 80,000 registrants.
Mass retailers can differentiate by broadening their assortments, including private label brands
Retailers like Marks & Spencer, Waitrose and Sainsbury’s have steadily scaled their beauty aisles. Curating a dynamic assortment to reflect popular brands in regional markets can help drive success. Daiso Korea collaborates with brands on smaller formats to offer popular products at lower prices. Meanwhile, multi-level players like Walmart can further expand their venture beyond mass into high-end beauty, but may need to consider more experiential formats to meet consumer expectations as price points rise.
For cost-conscious shoppers, robust private label ranges can offer significant value. Aldi’s private label line has seen viral traction and double-digit growth, according to Kantar. The private label brands from retailers like Costco, Sam’s Club, BJ’s Wholesale and Target can also tempt shoppers looking to save. Private label brands allow retailers to better leverage consumer data for marketing and product development. There is also an inherent perception of affordability, which will resonate with shoppers focused on results and price.
Mass retailers such as Australia’s Chemist Warehouse are expected to continue attracting consumers looking for affordable beauty. As retailers seek to expand their brand assortments, they should still ensure strategies are anchored to their core value proposition. In 2024, Boots UK launched 55 new brands across price points but also added a private label colour range priced 20 to 50 percent below alternative products.
Loyalty programmes and disciplined promotions can help meet consumer demands sustainably
Globally, 48 percent of beauty consumers say they enjoy looking for a great deal, while around 35 percent say they have to shop on discount to afford what they want. Attractive promotions therefore rank highly on consumers’ minds when shopping for beauty both in-store and online.
While price competition remains high, especially online given the ease of price comparisons, reducing discount is a growing priority; 33 percent of beauty executives say they want to reduce the amount of discounting they currently do online. Beyond impacting margins, blanket promotions can influence longer-term earnings and devalue both platform and brand image.
Retailers should experiment with more tailored and targeted promotions, such as subscribe-and-save on high-replenishment items, unique codes for select brands and consumers, or online and in-store exclusives for different product sizes. Multi-buy or gift-with-purchase is especially useful for high-end brands that do not want to be seen on discount. Brand executives should also consider when their biggest retailer partners offer promotions and decide when direct sales should occur on their owned sites.
Loyalty schemes can play a role here, too. Special programmes can help to attract consumers in the longer term, even in cases when the unit price is slightly lower or delivery is faster at other retailers. Retailers should combine their loyalty tactics and pricing strategies for better personalisation. They should also understand consumer desires, such as a preference towards early sale access, exclusive merchandise, free delivery, birthday giftings or cash savings — and communicate these benefits early and often. The process of signing up and collecting loyalty data needs to be frictionless; retailers can consider making loyalty cards available for smartphone wallets or via an easy-access widget.
How should executives respond?
- Double down on a unique shopping proposition, such as immersive experiences for speciality retailers or on-the-go convenience for mass retailers.
- Drive foot traffic and time-in-store in innovative ways. Consider integrating services, expanding the range of buzzy brands or redesigning the store layout to increase browsability.
- Create a compelling virtual shopping experience by including online-exclusive offers and an easy-to-navigate personalised assortment, while exploring automated AI agents.
This article first appeared in The State of Fashion: Beauty Volume 2, an in-depth report on the global beauty industry, co-published by BoF and McKinsey & Company.