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Beauty Online - US - December 2010

Mintel’s first Online Beauty report explores and defines a young and growing e-commerce segment that, prior to this decade, was barely a blip on the internet horizon.

Buoyed by wide broadband adoption and improved e-commerce technologies, online beauty now represents 4-5% of total beauty category sales. It is part of the $12 billion CPG e-commerce segment. Its association with trends, fashion and pop culture makes it more attractive to online marketers and consumers than many other categories that fall under the packaged goods umbrella.

The online beauty market is very fragmented, with hundreds of startups specializing in every niche of the business. While some of these pureplays have a following, brand awareness drives the bulk of the business. On both the mass and prestige ends, e-tailers with a brick/click presence dominate the eight online purchasing channels identified in this report.

On the consumer end, key purchasing motivators are convenience, hard-to-find products and, in some cases, price. These drivers of shopper behavior are further broken down by race, gender, income and other parameters. Two special sections take an in-depth look at the undeveloped market for black beauty products and the high incidences of purchasing among households with children.

Other areas examined by the report include:

  • top players in dollars and influence plus top online beauty categories
  • costs of operations, including back-end fulfillment and the impact of promotions
  • “site drivers,” including social networking, search engine marketing (SEM) and cross-channel merchandising
  • the role of free gifts, gifts with purchase and other consumer incentives
  • the role and development of mobile beauty sites, including mobile phone penetration and usage patterns as they relate to product research, purchasing, and demographics.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Consumer survey data
            • Trade interviews
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                      • Insights and opportunities: the black beauty market
                        • Market parameters
                          • Market trends and factors
                            • Innovation and innovators: Mary Kay adapts to current needs
                              • Digital marketing
                                • Search engine marketing
                                  • Mobile sites and apps
                                    • Internet beauty purchases
                                      • Online retailers used
                                        • Initial or repeat purchases?
                                          • Reasons for not making online purchases
                                            • Online shopping associations
                                              • Online shopping this year vs. last year
                                                • Race and Hispanic origin
                                                • Insights and Opportunities

                                                    • Black beauty e-tailers
                                                      • Pros and cons of targeting blacks
                                                        • Blacks are avid mobile users
                                                          • Figure 1: Mobile web access, by race/Hispanic origin, 2007 and 2009
                                                          • Figure 2: Online mobile activities, by race/Hispanic origin, January 2010
                                                      • Inspire Insights

                                                          • Trend: No Middleman
                                                          • Market Parameters

                                                              • Online beauty sales are fragmented
                                                                • Figure 3: U.S. e-commerce market
                                                              • Top five BPC/beauty sites
                                                                • Figure 4: Top five online beauty sites, May 2010
                                                              • Eight types of online beauty retailers
                                                                  • Figure 5: Facts about the direct selling industry
                                                                • Company snapshots
                                                                  • Pureplays
                                                                    • Drugstore.com
                                                                      • Vitacost
                                                                        • Brick/click beauty specialists
                                                                          • Ulta
                                                                            • Sephora
                                                                              • Direct sellers
                                                                                • Consumer direct
                                                                                  • Brick/click drug chains
                                                                                    • Walgreens
                                                                                      • CVS
                                                                                        • Rite Aid
                                                                                          • Online grocers
                                                                                            • FreshDirect
                                                                                              • Peapod
                                                                                                • Brick/click mass retailers
                                                                                                  • Other
                                                                                                    • E-commerce operations costs
                                                                                                      • Gifts with purchase
                                                                                                        • Types of product fulfillment
                                                                                                        • Market Trends and Factors

                                                                                                          • Key points
                                                                                                            • Broadband penetration
                                                                                                              • Figure 6: U.S. broadband and dial-up penetration, 2003-16
                                                                                                            • Online beauty research
                                                                                                              • Figure 7: Frequency of online beauty research—women, June 2010
                                                                                                              • Figure 8: Frequency of online beauty research versus other categories—women, June 2010
                                                                                                            • Research paths and directions
                                                                                                              • Figure 9: How consumers research beauty purchases, by gender, August/September 2010
                                                                                                              • Figure 10: Reasons women seek and share beauty information
                                                                                                              • Figure 11: Top five sources women rely on for cosmetics and personal care info.
                                                                                                            • Social networking and media
                                                                                                              • Social media give marketers direct feedback
                                                                                                                • The perfect promotional vehicle
                                                                                                                  • Figure 12: Beauty e-tailers with the highest social media engagement rates, November 2010 *
                                                                                                                • Social media ROI
                                                                                                                  • Figure 13: Social media metrics used by B2B & B2C firms, August 2010
                                                                                                                • Social media strategies by brand
                                                                                                                  • Sephora
                                                                                                                    • AXE
                                                                                                                      • Estée Lauder
                                                                                                                        • Burt’s Bees
                                                                                                                          • P&G’s multi-pronged initiative
                                                                                                                            • Social media, the perfect medium for startups
                                                                                                                              • Specialized social media
                                                                                                                                • Specialty Facebook beauty pages
                                                                                                                                  • Beauty blogs impact purchasing decisions
                                                                                                                                    • Walmart’s Moms bloggers
                                                                                                                                    • Innovation and Innovators

                                                                                                                                      • Mary Kay adjusts to changing times
                                                                                                                                        • Trusted brands that know me
                                                                                                                                          • Top 15 loyalty leaders
                                                                                                                                            • Mary Kay online—Hispanic and rural appeal
                                                                                                                                              • Figure 14: Unique visitors—Mary Kay vs. Avon, May 2009-May 2010
                                                                                                                                            • Recession-savvy products, site functionality
                                                                                                                                            • Digital Marketing

                                                                                                                                              • E-commerce must-do’s
                                                                                                                                                • Improved site functionality
                                                                                                                                                  • Beauty site strategies by company
                                                                                                                                                    • Brick/click beauty specialists
                                                                                                                                                      • Ulta
                                                                                                                                                        • Sephora
                                                                                                                                                          • Beauty Central and Beauty Talk
                                                                                                                                                            • Brick/click chain drug
                                                                                                                                                              • CVS
                                                                                                                                                                • Figure 15: CVS’ e-commerce beauty query
                                                                                                                                                              • Walgreens
                                                                                                                                                                • Direct sellers
                                                                                                                                                                  • Virtual makeover
                                                                                                                                                                    • E-catalog
                                                                                                                                                                      • Match Department Stores Shades
                                                                                                                                                                        • Consumer direct
                                                                                                                                                                          • Search engine marketing
                                                                                                                                                                              • Figure 16: Strategies employed by U.S. online marketers, June 2010
                                                                                                                                                                              • Figure 17: Value of North American search engine marketing industry, 2004-10
                                                                                                                                                                              • Figure 18: Markets’ preferred search engines, April 2010
                                                                                                                                                                            • SEM and beauty
                                                                                                                                                                              • Site-specific ads increase sales
                                                                                                                                                                              • Mobile Sites and Apps

                                                                                                                                                                                  • Figure 19: Mobile vs. desktop/laptop shopping habits, April 2010
                                                                                                                                                                                • Which app is best?
                                                                                                                                                                                  • All age groups use mobile web
                                                                                                                                                                                    • Figure 20: Mobile web audience profile, by gender and age, July 2009
                                                                                                                                                                                  • Direct m-commerce
                                                                                                                                                                                    • Figure 21: E-commerce revenue via web-enabled mobile phones—U.S., 2009-15
                                                                                                                                                                                  • Beauty marketers’ apps and mobile sites
                                                                                                                                                                                    • Promotional apps/sites
                                                                                                                                                                                      • Commerce-enabled apps/mobile sites
                                                                                                                                                                                      • Internet Beauty Purchases

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Bath and shower lead online beauty purchases
                                                                                                                                                                                            • Men’s grooming grows
                                                                                                                                                                                              • Figure 22: Beauty categories purchased online, by gender, August/September 2010
                                                                                                                                                                                            • Age of online purchasers vs. offline popularity by category and age
                                                                                                                                                                                              • Baby Boomers and beyond
                                                                                                                                                                                                • Figure 23: Beauty categories purchased online, by age, August/September 2010
                                                                                                                                                                                              • Low household income groups dominate holiday spending
                                                                                                                                                                                                • Figure 24: Beauty categories purchased online, by household income, August/September 2010
                                                                                                                                                                                            • Online Retailers Used

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Women lead prestige purchases
                                                                                                                                                                                                  • Figure 25: Online retailers where BPC purchases were made, by gender, August/September 2010
                                                                                                                                                                                                • Mass and drug lead for all ages
                                                                                                                                                                                                  • Figure 26: Online retailers where BPC purchases were made, by age, August/September 2010
                                                                                                                                                                                                • Households with higher income lead online purchases
                                                                                                                                                                                                  • Figure 27: Online retailers where BPC purchases were made, by household income, August/September 2010
                                                                                                                                                                                                • Online grocery shopping, by income
                                                                                                                                                                                                  • Figure 28: Online grocery shopping, by household income, 2010
                                                                                                                                                                                                • Preferred beauty sites, by region
                                                                                                                                                                                                    • Figure 29: Online retailers where BPC purchases were made, by rural/urban status, August/September 2010
                                                                                                                                                                                                • Initial or Repeat Purchases?

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Replenishment
                                                                                                                                                                                                      • First-time purchases
                                                                                                                                                                                                        • Gifts
                                                                                                                                                                                                          • Figure 30: Initial or repeat purchase, by category, August/September 2010
                                                                                                                                                                                                        • Facial skincare
                                                                                                                                                                                                          • Anti-aging
                                                                                                                                                                                                            • Men’s skincare
                                                                                                                                                                                                              • Figure 31: Facial skincare purchased online, by gender, August/September 2010
                                                                                                                                                                                                            • Facial skincare by age
                                                                                                                                                                                                              • Figure 32: Facial skincare purchased online, by age, August/September 2010
                                                                                                                                                                                                          • Reasons for Not Making Online Purchases

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Respondents prefer in-person shopping
                                                                                                                                                                                                                  • Figure 33: Reasons for not making online purchases, by gender, August/September 2010
                                                                                                                                                                                                                • Don’t want to share credit card information
                                                                                                                                                                                                                  • Figure 34: Reasons for not making online purchases, by level of education, August/September 2010
                                                                                                                                                                                                              • Online Shopping Associations

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                  • Phrases associated with online shopping
                                                                                                                                                                                                                    • Figure 35: Associations with online shopping, by gender, August/September 2010
                                                                                                                                                                                                                • Online Shopping—This Year vs. Last Year

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • Spend remains the same
                                                                                                                                                                                                                      • Figure 36: Online purchases—this year vs. last year, by gender, August/September 2010
                                                                                                                                                                                                                    • Shoppers aged 18-34 plan to spend more this year
                                                                                                                                                                                                                      • Figure 37: Online attitudes—this year vs. last year, by age, August/September 2010
                                                                                                                                                                                                                    • Buying higher-priced items—this year vs. last year
                                                                                                                                                                                                                      • Figure 38: Attitudes towards buying higher-priced items—this year vs. last year, by gender, August/September 2010
                                                                                                                                                                                                                    • Buying items on sale—this year vs. last year
                                                                                                                                                                                                                        • Figure 39: Buying items on sale—this year vs. last year, by gender, August/September 2010
                                                                                                                                                                                                                      • Younger respondents buy on sale
                                                                                                                                                                                                                        • Figure 40: Buying items on sale—this year vs. last year, by age, August/September 2010
                                                                                                                                                                                                                      • Higher household incomes bought on sale
                                                                                                                                                                                                                        • Figure 41: Buying items on sale, by household income, August/September 2010
                                                                                                                                                                                                                    • Race and Hispanic Origin

                                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                                        • Categories purchased online, by ethnicity
                                                                                                                                                                                                                            • Figure 42: Beauty categories purchased online, by race/Hispanic origin, August/September 2010
                                                                                                                                                                                                                          • Types of online retailers preferred, by ethnicity
                                                                                                                                                                                                                              • Figure 43: Online retailers preferred, by race/Hispanic origin, August/September 2010
                                                                                                                                                                                                                            • Research and purchasing habits
                                                                                                                                                                                                                                • Figure 44: Research and purchasing habits, by race/Hispanic origin, August/September 2010
                                                                                                                                                                                                                              • Hispanics’ online research habits
                                                                                                                                                                                                                                • Figure 45: The internet’s role in Hispanics’ pre-purchasing research, 2010
                                                                                                                                                                                                                            • Cluster Analysis

                                                                                                                                                                                                                                • Beautifiers
                                                                                                                                                                                                                                  • Demographics
                                                                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                                                                        • Onliners
                                                                                                                                                                                                                                          • Demographics
                                                                                                                                                                                                                                            • Characteristics
                                                                                                                                                                                                                                              • Opportunity
                                                                                                                                                                                                                                                • Triers
                                                                                                                                                                                                                                                  • Demographics
                                                                                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                                                                                        • Cluster characteristics
                                                                                                                                                                                                                                                          • Figure 46: Online beauty clusters, August/September 2010
                                                                                                                                                                                                                                                          • Figure 47: Beauty categories purchased online, by online beauty clusters, August/September 2010
                                                                                                                                                                                                                                                          • Figure 48: Research and purchasing habits, by online beauty clusters, August/September 2010
                                                                                                                                                                                                                                                          • Figure 49: Associations with online shopping, by online beauty clusters, August/September 2010
                                                                                                                                                                                                                                                        • Cluster demographics
                                                                                                                                                                                                                                                          • Figure 50: Online beauty clusters, by gender, August/September 2010
                                                                                                                                                                                                                                                          • Figure 51: Online beauty clusters, by age, August/September 2010
                                                                                                                                                                                                                                                          • Figure 52: Online beauty clusters, by household income, August/September 2010
                                                                                                                                                                                                                                                          • Figure 53: Online beauty clusters, by race, August/September 2010
                                                                                                                                                                                                                                                          • Figure 54: Online beauty clusters, by Hispanic origin, August/September 2010
                                                                                                                                                                                                                                                        • Cluster methodology
                                                                                                                                                                                                                                                        • Custom Consumer Groups

                                                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                                                              • Households with young children are big online beauty purchasers
                                                                                                                                                                                                                                                                • Frequently purchased categories
                                                                                                                                                                                                                                                                  • Top-selling family brands
                                                                                                                                                                                                                                                                      • Figure 55: Categories purchased, by presence of children, August/September 2010
                                                                                                                                                                                                                                                                    • E-tailers for BPC purchases
                                                                                                                                                                                                                                                                        • Figure 56: Online retailers preferred, by presence of children, August/September 2010
                                                                                                                                                                                                                                                                      • Researching products online
                                                                                                                                                                                                                                                                          • Figure 57: Researching products online, by presence of children, August/September 2010
                                                                                                                                                                                                                                                                      • Appendix—Trade Associations

                                                                                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                                                                                        • Ace Hardware Corporation
                                                                                                                                                                                                                                                                        • Ahold USA
                                                                                                                                                                                                                                                                        • Amazon North America
                                                                                                                                                                                                                                                                        • American Marketing Association (AMA)
                                                                                                                                                                                                                                                                        • American Medical Association (AMA)
                                                                                                                                                                                                                                                                        • American Pharmacists Association (APhA)
                                                                                                                                                                                                                                                                        • Amway Corporation
                                                                                                                                                                                                                                                                        • Anthony Logistics For Men
                                                                                                                                                                                                                                                                        • AOL
                                                                                                                                                                                                                                                                        • Apple, Inc
                                                                                                                                                                                                                                                                        • Avis Budget Group, Inc.
                                                                                                                                                                                                                                                                        • Avon USA
                                                                                                                                                                                                                                                                        • Bath & Body Works
                                                                                                                                                                                                                                                                        • Beiersdorf, Inc. (USA)
                                                                                                                                                                                                                                                                        • Burt's Bees Inc.
                                                                                                                                                                                                                                                                        • Clorox Company , The
                                                                                                                                                                                                                                                                        • Consumer Healthcare Products Association (CHPA)
                                                                                                                                                                                                                                                                        • Coty Inc
                                                                                                                                                                                                                                                                        • CVS Caremark Corporation
                                                                                                                                                                                                                                                                        • Dunkin' Brands
                                                                                                                                                                                                                                                                        • Eckerd Drugstores
                                                                                                                                                                                                                                                                        • Estée Lauder Companies Inc. (The)
                                                                                                                                                                                                                                                                        • Facebook, Inc.
                                                                                                                                                                                                                                                                        • FreshDirect Inc
                                                                                                                                                                                                                                                                        • Gatorade
                                                                                                                                                                                                                                                                        • Giant-Carlisle
                                                                                                                                                                                                                                                                        • Google, Inc.
                                                                                                                                                                                                                                                                        • Harbinger Capital Partners
                                                                                                                                                                                                                                                                        • Henry J. Kaiser Family Foundation
                                                                                                                                                                                                                                                                        • Hyundai Motor America
                                                                                                                                                                                                                                                                        • J C Penney Company, Inc
                                                                                                                                                                                                                                                                        • Jean Paul Gaultier SA
                                                                                                                                                                                                                                                                        • John Frieda
                                                                                                                                                                                                                                                                        • Johnson & Johnson
                                                                                                                                                                                                                                                                        • Kohl's Corporation
                                                                                                                                                                                                                                                                        • L'Oréal Canada
                                                                                                                                                                                                                                                                        • L'Oréal USA
                                                                                                                                                                                                                                                                        • Lancôme
                                                                                                                                                                                                                                                                        • LVMH Moët Hennessy Louis Vuitton SA
                                                                                                                                                                                                                                                                        • Macy's, Inc.
                                                                                                                                                                                                                                                                        • Mary Kay Inc.
                                                                                                                                                                                                                                                                        • Max Factor
                                                                                                                                                                                                                                                                        • MTV Networks
                                                                                                                                                                                                                                                                        • National Retail Federation (NRF)
                                                                                                                                                                                                                                                                        • Neutrogena Corporation
                                                                                                                                                                                                                                                                        • Nivea
                                                                                                                                                                                                                                                                        • Olay Company, Inc.
                                                                                                                                                                                                                                                                        • Ole Henriksen Of Denmark Inc
                                                                                                                                                                                                                                                                        • PayPal Inc.
                                                                                                                                                                                                                                                                        • Peapod
                                                                                                                                                                                                                                                                        • Peter Thomas Roth
                                                                                                                                                                                                                                                                        • Procter & Gamble Company (The)
                                                                                                                                                                                                                                                                        • Procter & Gamble USA
                                                                                                                                                                                                                                                                        • Research In Motion (USA)
                                                                                                                                                                                                                                                                        • Revlon USA
                                                                                                                                                                                                                                                                        • Rite Aid Corporation
                                                                                                                                                                                                                                                                        • Safeway Inc
                                                                                                                                                                                                                                                                        • Sally Beauty Company, Inc.
                                                                                                                                                                                                                                                                        • Samsung Electronics (USA)
                                                                                                                                                                                                                                                                        • Sephora
                                                                                                                                                                                                                                                                        • Snapple Beverage Corporation
                                                                                                                                                                                                                                                                        • SoftSheen Carson
                                                                                                                                                                                                                                                                        • Stop & Shop
                                                                                                                                                                                                                                                                        • Target Corporation
                                                                                                                                                                                                                                                                        • The Art of Shaving
                                                                                                                                                                                                                                                                        • The Body Shop - Retail Sales
                                                                                                                                                                                                                                                                        • Twitter, Inc.
                                                                                                                                                                                                                                                                        • U.S. Bureau of the Census
                                                                                                                                                                                                                                                                        • Ulta Salon, Cosmetics & Fragrance, Inc.
                                                                                                                                                                                                                                                                        • Unilever USA
                                                                                                                                                                                                                                                                        • US Department of Commerce
                                                                                                                                                                                                                                                                        • VH1
                                                                                                                                                                                                                                                                        • Vichy Laboratories
                                                                                                                                                                                                                                                                        • Walgreen Co
                                                                                                                                                                                                                                                                        • Walmart Stores (USA)
                                                                                                                                                                                                                                                                        • Women's Wear Daily (WWD)
                                                                                                                                                                                                                                                                        • Yahoo! Inc
                                                                                                                                                                                                                                                                        • Yankee Candle Company Inc., The
                                                                                                                                                                                                                                                                        • YouTube, Inc.
                                                                                                                                                                                                                                                                        • Yves Saint Laurent
                                                                                                                                                                                                                                                                        • Zappos.com Inc.

                                                                                                                                                                                                                                                                        Beauty Online - US - December 2010

                                                                                                                                                                                                                                                                        £3,277.28 (Excl.Tax)