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Today’s customers want their limited edition lipsticks fast. Speed and convenience are the new obsessions in the beauty sector as brands compete to stand out in a booming and ultra-competitive marketplace. And they’re also ready to broaden their retail distribution, even if that means relaxing the conventional luxury fixation on exclusivity of access.
For prestige beauty brands, this requires thinking out of the box. It means exploring partnerships with unlikely parties and the potential of different retail models.
In May, the Estée Lauder Companies became the first beauty company to link with Uber in the US. Uber couriers deliver ELC-owned brands such as Origins directly to customers for a fee, on par with food orders, typically between $0.50 and $5. Sephora also teamed up with Instacart in summer 2020 to provide same-day delivery of its products.
Meanwhile, Ulta Beauty is expanding its reach by debuting at more than 100 Target locations this year, with plans to scale to hundreds more over time. Luxury fashion multi-brand retailers are also testing the waters with beauty products: Mytheresa has been testing beauty on its app, starting with the launch of a curated edit of Estée Lauder back in March, while Farfetch is launching beauty in 2022.
Experts say the opportunities are multiple. “The beauty category — including colour cosmetics, skincare, haircare and personal care — has been experiencing strong growth, especially at the prestige end, and was less impacted by the pandemic than many other non-essential categories, particularly apparel,” notes Sarah Willersdorf, global head of luxury for the Boston Consulting Group. “We expect this growth to continue presenting an attractive opportunity for online retailers to enter the space or strengthen their existing offerings.”
The shift towards more adventurous partnerships was stepped up during Covid-19 as people worked from home. However, the signs of change were already evident before the pandemic, says Kayla Villena, a consultant at research firm Euromonitor. “Brands are realising that it’s important to meet the customer where they are at.”
Innovative partnerships create customer excitement and enable brands to stand out in a crowded market, she adds. “We’ll start to see more of this as we approach the fourth quarter, because these partnerships can help reinvigorate excitement in beauty that has had to take a backseat for the past year and a half.”
Rapid delivery
Retailers’ faster delivery services go beyond next-day or same-day options to offer one-hour delivery — a speed that is also happening in luxury fashion. Audrey Depraeter-Montacel, global beauty lead at Accenture, points to Gucci’s partnership with Farfetch, launched in 2017, to offer 90-minute delivery in specific cities. More recently, a global stock point initiative enables reduced shipping distances from Gucci to Farfetch customers.
Instant customer gratification is becoming the new norm as brands look for ways to stand out, she says. LVMH’s 24S offers a white glove service delivering orders within an hour, and the courier will wait for 30 minutes while customers try clothes on. “If the delivery and returns are easy, you will buy more easily,” says Depraeter-Montacel. “It’s become a race to offer the best services. Everyone is asking themselves how they can do better and how they can be faster.”
The rise of shopping through digital channels also has implications for brands’ supply chains, notes BCG’s Willersdorf. “Consumers are more demanding with shipping times and the ability to make returns seamlessly across channels. Elements that were once ‘nice to have’ are now firmly table stakes, including a strong digital ecosystem for inspiration and purchase, sustainable and responsible business practices, real, demonstrated focus on diversity, equity, and inclusion, and more personalised customer interactions and product recommendations.”
Estée Lauder Companies’s partnership with Uber follows a similar approach to that launched by Mac Cosmetics last October with its introduction of a same-day delivery via Postmates, launched shortly before Uber acquired Postmates for $2.65 billion. Mac, which already offers curbside pickup, is the latest ELC brand to join Uber's direct service this month, offering same-day delivery. Uber is already providing same-day delivery options for H&M, the Body Shop and Walmart in select US cities under its Uber Direct programme. Its delivery business has grown 150 per cent year-on-year, the company says.
André Branch, senior vice president and general manager of Mac Cosmetics in the US, emphasises the need for digital innovation and the acceleration of omnichannel capabilities. “Fast and easy on-demand service is now a basic consumer expectation, so we are embracing new ways to make our shopping experience even more accessible and convenient,” he says.
Some 500 Sephora stores across the US are powered by Instacart, which reportedly generated net revenue of $1.5 billion in 2020. “An area where we’ve recently seen incredible customer demand is in the convenience category, and speed is a central component of a world-class convenience experience,” says Asha Sharma, chief operating officer of Instacart. The onset of the pandemic, she says, was a crucial moment for Instacart. “Almost overnight, we went from a convenience to a lifeline for millions of people.”
As with Amazon Prime, Instacart offers quicker shipping for a price. Shoppers either pay a delivery fee to Instacart ($3.99 for same-day orders over $35) or opt for Instacart membership, priced at $9.99 a month or $99 a year. Sephora Beauty Insider members can earn points on Sephora purchases via Instacart. The partnership offers access to more than 400 Sephora brands and 15,000 products.
Instacart is currently investing in shortening its delivery times further, down from two hours to under an hour – to make its service “the most dependable”, says Sharma. It recently introduced Priority Delivery, which is as fast as 30 minutes, used by 15 per cent of its customers today.
New retail channels
Besides competing on delivery speed, beauty brands are also exploring new retail channels to reach new customers. In July, Revlon announced a partnership with StockX to sell limited-edition lip gloss, eyeshadow palettes and other products from its Megan Thee Stallion collaboration. Though best known as a resale marketplace, over the last year StockX has added more categories to its DropX model, where brands sell new products directly to consumers, although this is the platform’s first beauty drop. “It’s riding on the mentality that we saw with fast fashion: if you want this, you better buy it now, because it might not be around [that long],” says Euromonitor’s Villena.
Other beauty companies are also looking to widen their distribution. Ulta Beauty, which began rolling out into more than 100 Target stores and on Target.com this August, plans to reach a total of 800 stores in the coming years. The shop-in-shop concept features more than 50 brands, including Anastasia Beverly Hills, Morphe and Sunday Riley.
This month Sephora also unveiled a first shop-in-shop concept with Kohl’s, with 70 more to come this month and 200 more by the end of the year. Besides the Kohl’s partnership, Sephora is working with Zalando in Germany to bring more than 300 prestige brands to Europe from the fourth quarter of this year. The partnership will be rolled out to other Zalando markets by 2022. “This partnership is definitely the first of its kind,” says former Walgreen Boots exec Joanna Rogers, who joined Zalando as vice president of beauty in February. “Our desire is to be a leader in beauty in Europe by 2030, and to be in the top three by 2025.”
While these partnerships may reduce the aura of exclusivity for premium brands, they’re becoming necessary, says Accenture’s Depraeter-Montacel. Brand positioning is always a delicate balancing act. Brands must carefully consider where their customers are and who else they can reach, experts say. “For prestige or luxury beauty brands, consideration must be given to the target customer, level of curation and overall brand matrix of the online multi-brand platform,” says BCG’s Willersdorf.
Euromonitor’s Villena agrees companies need to pay attention to their target consumer, because “an ordinary shopper is obviously going to want accessibility, but a La Mer customer, for example, might prefer a different path to purchase”, she says. “It’s important for brands to look at consumer segmentation overlap because there’s always going to be risks with these partnerships, whether it’s with another retailer or a collaboration with an influencer, for example. I do expect some course correction to happen if premium brands become too accessible.”
Although speed of delivery isn’t essential for all brands, it’s a much more important factor in a post-lockdown world. “I think you need to have a super powerful brand to make sure that people will wait… If you don’t want to offer the service, you will really need to compensate with unique niche products where people will be ready to wait, or even get on the waiting list,” says Depraeter-Montacel. “There are not a lot of brands that are able to do this. That’s why convenience service is increasingly becoming part of the beauty experience.”
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