The biggest name in e-commerce is about to make a big push for your vanity counter, according to a report in today’s issue of WWD. Amazon already offers most, if not all, of the products you can find at your local CVS, but when it comes to higher end brands (“prestige”, in industry lingo), you’re stuck with Amazon Marketplace, where third-party retailers can sell Tom Ford‘s $50 lipstick or La Mer‘s $200 face cream at a discount, without the companies themselves turning a profit on the transaction.
While this model clearly isn’t ideal for the brands who want to control the image, price, and distribution of their products to maintain a public perception of exclusivity, most aren’t leaping at the chance to sell directly through the e-commerce giant either. As Neil Stern, a senior partner at consulting firm McMillan Doolittle, tells the trade:
“The issue is price control and price protection. What most prestige brands don’t want to see is an item that is $50 at Macy’s and $39.99 at Amazon. It’s happening now, through Marketplace. Prestige brands don’t like it, but at least they can say, ‘It’s not us doing that.’ If you are going to establish direct relations, you want to make sure you are controlling the equity of the brand.”
At the same time, you want to make sure you aren’t missing out on consumer dollars — it’s all about the money, after all — and Amazon is undeniably where more and more shoppers are directing their spending. Wendy Liebmann, founder and chief executive officer of WSL Strategic Retail, points to a recent report put out by her firm called “How America Shops 2012”, which asked people if they had “made purchases from a retailer’s physical store or Web site or both” and found that while 12 percent of respondents shopped at both Wal-Mart and the retailer’s site, 49 percent purchased something from Amazon in the same time period. Numbers like these, she says, can be a wakeup call of sorts for certain brands:
“In general terms, you look at that and say, ‘Boy! I’ve got to get my Web site up to speed or I’m going to lose those people.’ You can understand why people might say, ‘I’ve got to have some kind of relationship with Amazon or I’m going to have this drain of shoppers who are going there for other things, and who, while there, might buy my stuff, too.’”
The convenience and familiarity of Amazon makes it an obvious draw for many consumers, along with the sense of community provided by user reviews, ratings, and related product suggestions. While all of these factors are integral to the beauty business, they aren’t the site’s strongest suit. Chance Wales, Amazon’s director, category leader for health and beauty is out to change that, declaring that “2013 is Amazon’s year of beauty,” and offering the assurance that “we are planning on ending the year with a much different customer experience and selection than the one we currently have.”
So what does this entail? Well, image and user experience are key, and Wales admits that these are currently areas in which Amazon lags behind other online beauty retailers. “The beauty experience on Amazon looks a lot like the kitchen or housewares experience, he says. “We have some catch-up to do and that is what we’re working on.” Indeed, “Beauty” is currently a subset of “Grocery, Health, & Beauty” on the homepage — a change that the exec says is on their currently on their “wishlist”.
“When we find functionality to enable a customer to make a better purchase decision, we are going to provide that information. There is a lot of innovation we can add, particularly in prestige, but also in the mass space…The things we are thinking about are cleaner detail pages, additional functionality to help customers choose products, like taking your own image or skin type and matching it to a particular color,” he says. “Think about the ability to create a virtual counter experience on- line. Once we have solved that challenge, that is what the brands are looking for.”
The brands on their prestige “wishlist” include big names like Clinique, MAC, Chanel, Estée Lauder and Lancôme, although it remains to be seen whether Amazon will be able to put together the kind of offers these companies would need to sign on. One top-20 company chief executive was cagey about the idea:
“At this stage, I don’t know. Consumers will help us decide. But the basic principle remains that we are very happy in the way we deal with our partners today, offline and online. It depends on if Amazon comes with the right proposal as well. We’re not stupid. But if they think they own the place and we can’t live without them, maybe we don’t need them.”