Health and beauty ecommerce will grow more than three times faster than store-based retail over the next five years as the COVID-19 crisis, lengthy lockdowns and shuttered high street shops and shopping centres reset shopping habits, according to a new report from Edge by Ascential’s research and data insight arm, Edge Retail Insight .
Double digit growth for online shopping
Altogether, the health, beauty and personal care retail category will add US $305 billion in global sales between 2021 and 2026 to US $1.34 trillion, the report’s authors forecast. Reflecting a wider shift to online shopping - a trend accelerated by the pandemic - just over 50% of that growth will come from ecommerce.
According to Edge Retail Insight online category sales will have a compound annual growth rate (CAGR) of 12.1% between 2021 and 2026, far exceeding the growth rate of 3.3% CAGR for store-based sales. The shift to online in this category is embodied in the Edge Retail Insight figures showing Walmart’s store network adding just 3% CAGR growth between 2021 and 2025, compared to 13.6% CAGR growth in Walmart’s dot com sales over the same time period. As a consequence, online shopping will account for nearly 30% (26.8%) of the global category sales by 2026, up from a fifth in 2021.
“Items that were once bought in-store are not only becoming available online, but in an increasingly mobile-first age, brands have been rapidly experimenting with innovative digital technologies to engage customers remotely, such as using augmented reality to allow customers to try on lipstick virtually and getting involved with seasonal events and shoppable livestreaming opportunities increasingly offered by digital marketplace giants like Alibaba, Amazon, JD.com as well as China’s fast-growing group-buying platform Pinduoduo (PDD), which - with an expected 17% CAGR between 2021 and 2026 - will lead growth in the category over the next five years,” said Deren Baker, CEO at Edge by Ascential.
The continued inexorable rise of marketplace ecosystems means brands operating in the health and beauty space must focus on understanding how to optimise their growth levers in this channel. “To compete in a new world of retail, brands must leverage marketplace-specific shopper engagement strategies as well as make sure they have strong fulfilment and flexible supply chain strategies to cater for short lead times and meet unexpected surges in customer demand,” added Baker.
Asian players to record highest growth rates
While Amazon and Alibaba are forecast to grow rapidly between 2021 and 2026, with 14.2% CAGR and 12.4% CAGR respectively, the highest growth rates are forecast in Asia. According to Edge by Ascential, China’s six-year-old mobile app Pinduoduo, which reported at the end of last year that it had 788.4 million users in 2020, ahead of Alibaba’s 779 million, will grow at a CAGR of 17.1% to 2026, while South East Asia’s Shopee is expected to grow at a CAGR of 16.8%.
Both Pinduoduo and Shopee operate innovative models focused on social engagement and mobile experiences. Shopee is also expanding its cross-border operations in Latin America, while Pinduoduo continues to push its highly successful group purchasing approach to drive further engagement with its users.
“The lucrative opportunity of ecommerce in health and beauty has not been lost on some of the dominant forces in the category today. In July, the LVMH-owned French beauty chain Sephora, which has one of the largest beauty store networks in the world, entered the UK market with the purchase of ecommerce firm Feelunique, while in April, US investment firm Carlyle bought Beautycounter, a mostly digital ‘clean’ cosmetics and skincare brand, in a deal worth US $1 billion,” said Florence Wright, Senior Analyst at Edge by Ascential and report author.
To address the shifting shopping habits of consumers, brands within the health, beauty and personal care sector more than ever need to take an omnichannel approach and use all digital touchpoints to maximise engagement and increase sales.