Amazon: the beast luxury beauty brands should tame rather than fight

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Late 2013, Amazon decided to step out of the mass market and launched The Luxury Beauty Store, a beauty products sales site to attract prestige brands. This site competes directly with luxury cosmetics brands and leverages the marketplace’s muscle power (e.g. free shipping for orders above 35$ and free 48h-delivery for Prime customers).

Many premium brands initially refused to join Amazon’s new site, which they perceived as a grey market and low-price channel. They hoped to continue controlling their distribution and pricing, but had to rapidly review their strategy upon realizing their products were actually widely sold on the marketplace by third-party sellers. By officially listing on the Luxury Beauty Store, many of these brands managed to better control the distribution of their products on the platform.

Premium brands officially joining the Luxury Beauty Store significantly reduced the number of products listed on the marketplace. In the case of Chanel, the number decreased from 454 to 20 SKUs.

Premium brands officially joining the Luxury Beauty Store significantly reduced the number of products listed on the marketplace. In the case of Chanel, the number decreased from 454 to 20 SKUs.

In order to mitigate the Amazon threat, Burberry strategically traded the official distribution of a limited number of fragrances on the marketplace in exchange for restricting third-party listings. The deal further illustrates the versatility of the British brand to evolve in a digital and omnichannel commerce world (see our blog article on Burberry Beauty).

Other high-end houses opted for affiliate strategies. Lancôme as an example, redirected Amazon shoppers back to their own website for purchase through a series of affiliate linked advertisements.

Scott Galloway, NYU Stern School of Business Marketing Professor, explains the different options Amazon offers premium brands to list and advertise on the platform.

Scott Galloway, NYU Stern School of Business Marketing Professor, explains the different options Amazon offers premium brands to list and advertise on the platform.

According to an AT Kearney survey, Amazon was the number 1 online beauty-shopping destination in the U.S. in 2014 (78% of respondents, up from 28% in 2012). In the third quarter of 2014, 39% of U.S. online shoppers began researching their purchases on Amazon.

Luxury brands can no longer ignore the fact that this platform has become a fierce rival. If they are to remain in control of their destiny then they need to give due consideration to it when devising their distribution and marketing strategies.

Sources

Google Shopping to Counter Amazon – wsj.com
Beauty and the E-Commerce Beast – At Kearney
Beauty brands would do well not to underestimate the power of Amazon
Amazon Luxury Beauty Store – not quite plain sailing?