Luxury Beauty Brands On Amazon
Many luxury brands have resisted the lure of selling on Amazon
Now these brands are playing catch up. Practically all shopping activities shifted online during lockdown, and some of those behaviors are going to stick. High-end department stores like Neiman Marcus have filed for Chapter 11 bankruptcy protection, and we’re only seeing the start of that.
But customers are buying luxury beauty items on Amazon, and they have been for some time. Sales on Amazon of products from prestige brands like La Mer, Chanel, and Dior are still brisk in recent months. The lipstick effect is at play, and customers who desire a small indulgence during hard times are not necessarily the same ones who would be buying up Birkin bags.
SHANGHAI, CHINA – 2019/08/31: Lipsticks is being displayed at a French luxury fashion and perfume … [+]
A Salvation For Prestige Brands: Brand Gating
Amazon’s “Premium Beauty” program has a unique benefit for the brands that are enrolled: brand gating. This means that Amazon will restrict third-party resellers from selling gated brands’ products.
The program solves huge headaches for brands, including channel conflict that comes from under-pricing products, the potential for resellers to be selling expired items, using off-brand product and brand content, and providing a poor customer experience that damages the brand.
Amazon offers gating to a tiny number of brands, typically high-end ones that experience a lot of counterfeiting like Apple and other high-end consumer electronics brands. Amazon famously refused to provide brand gating to Birkenstock, ultimately prompting the footwear company to abandon the platform. Amazon actually agreed to provide gating services to Nike, but this didn’t appear to eventuate and Nike also stopped selling on Amazon directly.
So why did Amazon carve out an exception for an entire category of products? It was the only way that Amazon could lure the likes of Chanel, La Mer and Dior onto the platform—thus encouraging other prestige beauty brands to bite the bullet. Amazon understands the effect of FOMO very well. Once they can attract a few high-ticket brands in a category, others will follow in order to not miss out.
The effectiveness of gating
In our experience at my company Bobsled Marketing, brand gating has been very effective for prestige beauty brands. It can take a little time to onboard—up to six months—but once a brand is enrolled, the effects are dramatic. One brand only had control of the Buy Box (the algorithm that determines which party gets the sale) 40% to 60% of the time prior to gating; after gating this increased to over 90%.
An Amazon product page for a product in its “Premium Beauty” program.
It’s not a perfect system, and most brands in the program still need to monitor their product listings and report offenders to the Amazon program manager. But the volume of resellers on product listings is dramatically lower, and Amazon will remove these sellers from listings themselves rather than the brand needing to contact the reseller.
The Amazon toolkit
Selling directly on Amazon opens up a world of merchandising and marketing opportunities for brands. Amazon, now the third-largest advertising platform behind Facebook and Google, has invested in advertising vehicles that span the full “funnel,” from brand awareness to targeting competitors to retargeting past buyers when they are due to restock.
Brands can also create ever-richer product and brand content through branded stores, live video streams, and Instagram-like “posts.”
Still, Amazon offers a uniform experience for brands and shoppers. Brands cannot customize the experience to any degree close to what they could on their own e-commerce site—no sampling, no way to interact with customers pre-purchase, little insight on the customer journey.
Revlon was one of the first movers of nationally sold luxury brands that are also sold on Amazon. Oshiya Savur, head of U.S. marketing and education, luxury division at Revlon, says that prestige beauty brands may have hesitated to be on Amazon because they could not control the shopping experience. “Coffee filters appear in the same way as a lipstick—the romance is lost,” she said.
Brands also don’t get to develop a one-to-one experience with customers: Amazon shoppers are Amazon’s customers. That extends to the amount and quality of data that brands can collect on Amazon. While the data set is improving, Amazon is one of many digital “walled gardens” that brands need to contend with.
Luxury brands in other categories don’t fare as well
Amazon has made efforts to cut through in other luxury categories, especially fashion. This year, Amazon and Vogue partnered on a program called Common Threads, a digital storefront for alumni of its Vogue/CFDA Fashion Fund competition. The Cut reported that some designers have seen success from a selling on the site, but the response from the industry overall was lukewarm.
To be successful in other luxury categories, Amazon needs to take a leaf from its already successful Premium Beauty program: offering features and assurances combined with its 50% market share of e-commerce sales that brands won’t be able to resist.
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