Why E-Commerce Marketplace is Disrupting the Beauty Retail Business in India

In the era of mobile-first technological innovations, social media, and digital marketing trends have changed the behavior of consumers in the beauty and cosmetic industry. Indian e-commerce companies disrupted the beauty retail market when they brought multiple global and domestic brands under one roof, erstwhile inaccessible to customers in the country.

Buying off the shelf appears to be a dwindling consumer behavior, as online shopping provides a plethora of consumer-focused conveniences. Virtual try-on, live video consultations, and beauty & health masterclasses, to name a few. The return and exchange policies of such e-commerce businesses have resulted in consumers making online purchases from the comfort of their homes without having to worry about defects and replacements. All of this has led to a shift in retail business perception, as well as in customer loyalty and brand relationship.

Digital marketing was important before the pandemic, but it is now pivotal. According to Statista, a market, and consumer data company, the Indian cosmetics industry is expected to reach $20 billion by 2025 (it was close to $11 billion in 2017). The disturbance caused by the pandemic has made the beauty industry realize that traditional business practices are no longer the only viable solution.

The new growth levers are an omnichannel strategy and a reactive approach to product and consumer engagement. Influencer marketing is one such strategy that evolved with the advent of e-commerce platforms. Many brands work with influencers to help them establish their brand value. They can now create new market trends and have the rest of the world follow them. Alongside, Instagram, the coolest kid in the town, became a leading medium to market beauty products. Furthermore, it appears that many retailers are now not only committed to selling on Instagram but also to using the platform as a compass to explore what products have demand.

According to Google and Bain & Company, beauty and hygiene-related shopping searches are third-most popular after the apparel and cell phones. Astonishingly, these are the categories with a highly fragmented market and few organized players. The beauty and skincare category has traditionally been catered to by multi-brand, multi-category large players, both in brick-and-mortar stores and online. However, certain setbacks of retail businesses such as store travel time, vehicle parking, limited product choices, etc., come to light when we weigh the options. That's when niche category specialists step in to offer a broader range of brands and products, including several global products on their portals.

Within a short period, the rising power of beauty bloggers and vloggers has also created ripples of trends. According to Fashionbi, this group is currently ruling the beauty industry. Consider Bethany Mota; when this YouTube-based beauty influencer with more than 9 million followers recommends a beauty product, the brand receives a 40 percent clickthrough rate to their website. That is more than any amount of advertising could ever buy. According to A.T. Kearney, more and more individuals enjoy browsing peer product reviews or looking for makeover ideas online, resulting in a valid justification for why they choose to make beauty purchases online. But it does not directly lead to people buying cosmetics online. The brands themselves recognized the online potential and saw a need to create an appeal for their products to the digital natives.

The phenomenon of counterfeits and refills was another issue for premium beauty and personal care products. The desire for omnichannel presence is something that all of these online beauty retailers have in common. While these retailers are focusing on the online channel for broad distribution, they are also considering physical brick-and-mortar experience stores as an extension. The disruption caused by e-commerce is a powerful force for change in the consumer products industry. E-commerce is transforming consumer behavior in quite spectacular ways, even in regions where its share is still limited. This, in turn, is straining the ties between producers and retailers.