Much of the retail world puts emphasis on sales in the fourth quarter, following the credo that it’s the “make or break” period for the entire year. Because everyone is spending within a shorter time period – approximately between Thanksgiving and Christmas Day – it’s the one time of year when everyone’s gift-giving schedules are aligned. So it’s easy to think that Q4 vastly outweighs other quarters, when in reality it’s only slightly higher than others.
For Health & Beauty, Q1 is the New Q4
But for beauty, health and wellness brands, Q1 really is a critical time. New Year’s resolutions are the primary driver for spending in this category, as exercise, diet and general self-care dominate consumers’ lists and they spend money on products to help them achieve those goals.
There is also a flow of spending in this category because many do not spend money on themselves in these categories in Q4, choosing to buy gifts or food and beverage instead. It’s a bit like pinching a garden hose and then letting it go: The built-up water shoots out faster.
And this year, more than ever is going to be flowing online. The online share of sales in the health and beauty sector should end up being measured at 16.5% in 2020 and to increase each year until it hits 23.3% by 2025. It’s the second-fastest ecommerce growth rate, after Household and Petcare.
Impact of COVID-19 on Health & Wellness Consumer Habits
Why is this category growing so quickly? One major reason is that global lockdown measures and physical distancing meant that Cosmetics (e.g., makeup) became less essential, and it seems that someone who normally would buy, say, mascara, shifted their spend to skin care. Dollars that pre-COVID would go toward a new fragrance went to purchase in-home hair coloring treatments.
Additionally, the pandemic further accelerated the trend of wellness and self-care; nearly 9 in 10 Americans now practice some form of self-care, with more than one-third of consumers increasing their self-care in this past year. This is due in part to having more time at home in which to indulge and treat themselves but also out of necessity. Stress and anxiety were on the rise due to the environment so consumers look to take care of their health more proactively.
Within self-care activities, Health (90%), Beauty & Personal (86%), and Food & Beverage (82%) are the most common categories, vs. Sleep (47%), Home Remedies (44%) and Wearable Devices (23%), so it’s clear to see where the money is going.
Demand Went Up… But So Did (Access To) Supply
While consumer demand for Beauty, Health and Wellness products went up during the pandemic and are set to increase this quarter for seasonal reasons, the other reason the category exploded was because of emerging pure play retailers. Amazon invested heavily in healthcare, and even before the pandemic was growing its Health & Beauty category like wildfire.
This year, Alibaba and JD.com added third-party health and beauty brands to their marketplaces, and Alibaba is expected to be #1 with category sales of $43.2 billion. Combined, the four giants (plus Pinduoduo) will account for 65% of all health and beauty online sales added globally between 2020 and 2025.
The dominance of these massive marketplaces means that private brands that you have never heard of can simply pop up one day and become your competition. And, because these third-party sellers are shipping directly to fulfillment centers, they can present prices that many brands that do have distribution centers cannot compete with.
What Will Change – And Not Change – in 2021?
If you had looked at Amazon’s Best Sellers in the category a year ago today and saw items like face masks and giant refills of hand soap, you’d probably wonder what was going on. But now it’s completely normal. We believe that in 2021, sanitation, self-care and immunity-boosting products will continue to be high-demand items.
But the larger trend is not about product types that are in demand, it’s about the kinds of brands that are supplying these products. Say you’re looking at hair care, and you want to look at brands like L’Oreal, Procter & Gamble (e.g., Head & Shoulders, Pantene) and Unilever (e.g., Suave, Dove). In stores, these brands might have a significant market share, thanks to traditional distribution methods that allow for economies of scale. In the online world, however, these are the brands that suffer most from operational inefficiencies and fees that kill margins on single items.
Your Competition Is Not Who You Think It Is...
So who is dominating the Amazon listings? These third-party sellers we mentioned above, many of which originate in China and are “born of ecommerce,” that is, they are operationally geared toward online vs. brick and mortar. Some have name brands on their own and capture sales due to competitive prices, but there is also the problem of fakes, or even products at dangerously low quality levels, both of which have been well-documented by mainstream media over the past few years.
A Wall Street Journal investigation, for instance, found 4,152 items for sale on Amazon that have been declared unsafe by federal agencies, deceptively labeled or even banned. Many of these are in the health and beauty categories. Among today’s listings, the #1 best seller of body oil, Bio-Oil, has over 60,000 reviews, but recent reviewers note: “This is definitely NOT the actual Bio-Oil brand. Consistency and scent is very different.”
Point being? Don’t ever assume you know who your competition is, no matter how many studies you read or historical SWOT analyses your team has put together. Make sure you know, in real-time, which players in beauty, health and wellness are actually the ones succeeding in your product category.
Actionable strategy? Search term rank optimization is a key tactic that can be employed to better position brands to gain market share in the competitive first-page results of digital marketplaces. To see how Tradeswell helped a personal care brand optimize their search term rankings, read our new case study.
Looking for an actionable strategy? Search term rank optimization is a key tactic that will better position you to gain market share in the competitive first-page results of digital marketplaces. To see how Tradeswell helped a personal care brand optimize their search term rankings, read our new case study.