In a recent blog, we made you aware that ‘groceries’ are one of the least disrupted retail categories online, representing a fantastic opportunity for retailers in this field. Similarly, ‘health and beauty’ is another segment that is less prevalent online, but holds a great potential for merchants that are able to meet the growing needs of online shoppers.
Although trialing product samples and seeking professional advice can be important considerations for consumers when buying health and beauty products, these factors are not proving to be a barrier against ecommerce success in this category – health and beauty is now one of the fastest growing categories worldwide.
In 2013, for example, ecommerce sales in health and beauty grew by 29% worldwide, compared with overall retail growth of only 6%; outstripping online apparel, which grew by 25% online over the same period.
In mature markets such as the UK, it is a no surprise that online shopping for ‘health and beauty’ is already widely popular, and a growth of more than 80% is predicted by 2019.
Interestingly, in emerging markets such as Brazil, the online ‘health and beauty’ category is also very well established. It ranks third in online sales and the segment represents as much as 12% of all domestic revenue generated from ecommerce. The situation in Vietnam is similar, as online purchases for cosmetics accounted for 60% of the country’s $4 billion online revenues in 2014.
In other markets, which are less well served by domestic online players offering health and beauty items, the category is also gaining popularity, as cross-border purchases for such products continue to rise.
According to a recent research by PayPal, the U.S. and China are currently the markets that hold the most potential for online retailers operating in the ‘health and beauty’ segment:
In the U.S., where ‘health and personal care’ is the second-largest retail category, valued at $300 billion a year in sales, only 7% of all sales in the ‘health and beauty’ segment occurred online during 2014.
The number of consumers who shopped online for health and beauty products, however, has significantly increased over the last couple of years, reaching 36 million in 2014, up from only 20 million in 2010. This shows that the category offers a fantastic opportunity for online retailers operating in the sector, as U.S. consumers are becoming more and more confident in shopping online for products they would typically buy from a drug store.
While Amazon is the market leader in the ‘health and beauty’ segment in the U.S., a lot of consumers do their online shopping within the category on various websites. This includes purchasing directly from brands that do not have other direct channel to consumers.
According to buyers who already shop for ‘health and beauty’ items online, new ecommerce models, such as subscription services, have proved to be additional drivers in the popularisation of the online shopping within this category.
Although some consumers in the U.S. would still rather sample the health and beauty products before buying them, online sales in this category are expected to increase at a much faster rate than traditional drug stores sales, set to grow at 13% yearly between 2015 and 2020.
As with other online categories such as ‘groceries’, Asia leads the way when it comes to online purchases of health and beauty products. According to recent research conducted by Nielsen,43% of Asian respondents intend to purchase cosmetics online, compared to only 21% in Europe and North America.
Across Asia, China is expected to be the most lucrative online market for the ‘health and beauty’ category. Online spending on these products is set to grow by more than 25% year-on-year in the period 2014-2019; in comparison, the overall retail growth of the category is expected to reach 10.6% in the next five years.
The rising middle classes with a high disposable income, coupled with the growing consumer awareness of health and wellness issues, and an increased demand for foreign luxury products, are just some of the factors that create a fantastic opportunity for online retailers able to cater to the needs of the increasingly sophisticated Chinese consumers.
The opportunity for retailers entering the Chinese online market for ‘health and beauty’ products also lies in upgrading the mobile experience they offer, with Chinese consumers being predominantly mobile.
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