Much has already been written about Amazon and their seemingly unstoppable domination of commerce. Many other retailers and brands in fashion have faltered by being late to the e-Commerce game while Amazon continues to win share in categories that used to seem beyond the reach of Amazon.
Korean beauty is no different and Amazon is a retailer to watch and, in my opinion, embrace.
K-Beauty Brands Should Get on the Amazon Train
Obviously, Amazon is the e-Commerce (and commerce) player right now for just about any category. In beauty, L2 has written about how Amazon's luxury beauty store is growing and they made an interesting statement that, according to their research, once e-Commerce penetration gets to 20% share of a category, Amazon ends of dominating while traditional players end up closing shop. It happened in the books category (RIP Borders), consumer electronics category (farewell Radio Shack), we're seeing it happen in fashion (Macy's, American Apparel, Wet Seal, etc), and I'm sure it will happen to beauty.
Fung Global Retail & Tech has said that online sales of beauty in 2015 hit 7.7%, and based on the growth trajectory, it will hit 20% and ultimately reach the tipping point. Amazon's marketplace has 21.1% share of online beauty and excluding marketplace Amazon still makes up 14.4% of online beauty sales.
I'm an advocate of digital best practices and K-Beauty brands cannot ignore Amazon as a channel. With the right Amazon strategies, brands can add a strong distribution channel to their channel mix.
But Make Sure Pricing and Sellers Are Under Control
I've written before about how Korean brands have a hard time controlling their distribution and pricing because of their sales first strategy. What happens is grey market sellers undercut legit distributors on price on Amazon and Amazon becomes the wild west of beauty littered with sketchy sellers and sometimes untrustworthy products.
Brands need to control their product distribution and pricing which is also another reason they need to make sure they are in control of their brand's Amazon presence. With the amount of products on the grey market and dubious grey market sellers on Amazon, pricing inconsistencies are everywhere. When left unchecked, this just ends up being a big headache for the brand and will be very difficult to clean up later. Several clients are already faced with the clean-up problem.
It's much better to be on the offensive than defensive, and it is critical to a brand's success to ensure they have control over pricing and distribution.
Amazon Is Already Embracing K-Beauty
Amazon is smart. They know that K-Beauty is a hot buzz word in beauty, trending in SEO, so they created an entire sub-category for it. They see potential in this category which is why they acted quickly to get in on the trend. While many marketplace sellers exist, Amazon is quickly getting Korean brands on board for Amazon to sell directly to customers as well.
Insiders estimate Amazon K-Beauty sales to be about $30-$35MM. Still small but growing quickly, I'm sure. As they continue to win in retail, Korean beauty brands need to embrace Amazon.