Merchant Innovation

Beauty Market’s Digital Pure Play Shifts To Bricks

Within the U.S. beauty market, eCommerce has been among the fastest growing segments, with a compound annual growth rate of about 24 percent over the past six years.

Yet according to a report by consulting firm Kline, there’s a shift afoot: Now, brick-and-mortars are posed to grow as digital properties move into the realm of tangible stores.

In a Tuesday (July 28) announcement, Kline said its findings from its recently released report, “Beauty Retailing USA: Channel Analysis and Opportunities,” show numerous online firms moving into physical locations.

"The flurry of online retailers entering the physical world signifies yet another paradigm shift in beauty retailing," Karen Doskow, Kline's consumer products practice director, said in a statement. "While everyone else has been flocking online, online pure plays are becoming physical. Omnichannel retailing strengthens both ways as retailers and marketers strive to offer channel agnostic consumers the convenience of shopping in physical stores and online."

Among the examples noted in the report: Birchbox, which has been a player in online subscription sampling, and in 2014 opened its first physical location in New York City. The company is also moving into pop-up shops with seven locations nationwide. In another urban move, Violet Grey, with beauty collections online, has opened a store in Los Angeles. And though not a beauty company per se, no less a household name than Amazon opened a campus-based pick-up and drop-off system at Purdue University .

Kline said Tuesday that physical retail itself is being impacted by technology. There are diagnostic tools like Sephora Color IQ, augmented reality mirrors and, of course, beacons.

Yet there is room to grow, as Kline estimates that virtual channels account for only 8 percent of industry-wide U.S. beauty and personal care sales while physical stores dominate. "This movement underscores the continued relevance of bricks-and-mortar in an increasingly digital world," Doskow said in the release.


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