PARIS — Online marketplaces are increasingly becoming de rigueur for beauty retailers in Europe.
Boots, Farfetch and Douglas are amongst those to have recently adopted that business model involving multivendor platforms to assist expand their product offer, drive volume and update image within the red-hot battle for prestige beauty shoppers today.
For beauty brands, marketplaces can provide great exposure, amongst other advantages. But there are downsides for each parties, too.
“The explanation there’s been a lot interest in marketplaces, from a retailer perspective, is because they see it as a comparatively inexpensive option to drive revenue and growth at a time when the demand environment is becoming slightly bit more sluggish, and so they need something really to pep up the outcomes they put out,” said Neil Saunders, managing director and retail analyst at data intelligence firm GlobalData Retail. “Marketplaces are a really quick solution.”
Many retailers out and in of the sweetness space have a look at the outstanding success Amazon has had overall, and would love a bit of that, he said.
“The most important profit to the retailer is inventory they don’t must take the danger on,” said Emily Pfeiffer, principal analyst, commerce technology at Forrester Research. “They don’t own it and don’t must transport it, which is the most costly and difficult thing you’ll be able to do with goods. It allows them to fill out their assortment in a short time and, importantly, to sell from earlier in the provision chain without delay, [when there are] so many supply chain challenges.”
The marketplace model’s upsides will be huge, but has been eschewed by the likes of Sephora, the world’ largest prestige omnichannel beauty seller.
In early September, British pharmacy and wonder chain Boots announced that the Boots Marketplace will open in spring 2023. The retailer currently carries greater than 500 beauty brands in-store and online, and since 2020 has introduced roughly 70 latest and cult beauty brands.
“We’re really excited concerning the advantages a marketplace model will allow, including helping us to rapidly expand the range of brands and products that we provide on boots.com across a spread of categories, including beauty, health, wellness and baby,” said Paula Bobbett, chief digital officer at Boots. “Marketplace will allow us to reply with agility to market trends with latest emerging brands. We will be first to market with latest services, and respond quickly to customer demand for brand spanking new and progressive product ranges.”
Brands of any size will probably be allowed to list their products on boots.com. The retailer plans to tackle a whole bunch of recent labels, including established and latest names.
“We expect that Boots Marketplace will complement our current product ranges on boots.com, and permit us to supply our customers additional options, including latest and emerging or area of interest brands,” said Bobbett.
“We feel the expansion in our beauty offering goes to come back from offering more of the prolonged range via our current brands, whilst also being faster and easier to work with for the newer emerging brands,” she continued. “These smaller brands flex and update their range more often, and a marketplace model put the brands in charge of optimising their range.”
Boots described the brand new platform as a part of its ongoing digital technique to explore latest and diverse categories for its customers.
“Boots marketplace may even help expand our range of strong beauty adjoining categories, resembling beauty tools, accessories and electrical beauty products,” said Bobbett.
Brands will have the option to affix the platform and, depending on how they perform, have the chance to be stocked in Boots’ brick-and-mortar stores.
British retail platform Farfetch in April launched a beauty marketplace with an assortment of greater than 100 prestige brands. At launch that included 4 fragrances from Off-White, a limited assortment online from Browns Fashion and Violette Grey, the London-based luxury retailer and wonder e-tailer, respectively, that are all a part of Farfetch’s stable.
The e-tailer looks to distinguish itself with a gender-neutral assortment as a part of a technique it calls “Beauty Beyond Boundaries.”
“In the event you think concerning the Farfetch business model, the innovation that José Neves got here up with, back in 2008 when Farfetch launched, was exactly the concept through technology, Farfetch could create a marketplace that may connect directly into the inventory of the brand — or the boutiques, initially — after which add the brands on to this,” said Stephanie Phair, group president at Farfetch.
Farfetch brought the concession model into the virtual realm for fashion. Its stock could possibly be sold to people in-store or online, through the marketplace.
Farfetch tested beauty in 2016, when it teamed with SpaceNK on a limited offering available online. At that time, it tried to duplicate the boutique model.
“But clearly, beauty is a really, very different category,” said Phair. “We realized that the marketplace, concession model was much more suited to beauty since the brands are attempting to maneuver from wholesale into more direct-to-consumer. They don’t have as much opportunity to do it as fashion businesses have had previously, so Farfetch coming along and said: ‘Look, we’ve got the experience on this. We’ve done it for fashion, we’ve got to adapt it to the sweetness category and do it in a particular way.
“Beauty is a really regionally led business,” she continued. “So we’ve got needed to do it with our own warehouse fulfilment by Farfetch, however the stock will probably be yours, and subsequently the margins will probably be higher.’ It was really appealing from a business-model standpoint to the brands.”
That’s a key reason why there’s more movement into the marketplace space. One other plus is that retailers can glean customer intelligence and data about brands and products.
Marketplaces also allow retailers to broaden their brand and product range, including more progressive labels.
“[Retailers] will not be going to place something on a shelf, which could be very limited real estate, unless they’re confident it’s price it in dollars per square foot over a certain quantity of time, if it’s going to maneuver fast enough,” said Pfeiffer. “It is far more cost-effective to make use of their digital infinite aisle to usher in potentially the total catalogue, use it as a testing ground … [to] then make a more informed decision about what to do on the shop shelves.”
Further, a marketplace “could make your website more of a destination,” said Saunders. “You may actually increase traffic, and that will be helpful for the core brand.”
“As a marketplace, we cater to plenty of different personas, and subsequently the sweetness brands are capable of work with us across their entire assortment of product,” said Phair. “Beauty could be very much focused on the hero product, the hero brand. But as beauty brands are attempting to diversity, to open up as they’re trying to accumulate more hero products, that visibility right into a broader assortment is incredibly beneficial.”
She said a marketplace platform like Farfetch is interesting to brands, as well, because it offers a highly targeted luxury audience, which is essential as privacy laws have increasingly limited brands’ ability narrow in on specific audiences online. This has helped give rise to brands wanting to advertise — with “creative solutions” — to Farfetch’s audience and latest consumers.
To sell beauty, the platform worked on its technology and logistics, and brought in an ecosystem of experts.
“We couldn’t just paste beauty on top of our existing offer; we needed to create something bespoke,” said Phair.
One essential learning has been that when customers see each a fashion and a beauty page, Farfetch has a better conversion than once they see only one category.
“We’re acquiring latest consumers through beauty,” she said.
Douglas has opened a marketplace, too. In late October 2019, the German beauty seller said it was launching an exclusive beauty partner program online in a bid to change into the biggest marketplace for beauty products in Europe.
On the time, Tina Müller, Douglas Group chief executive officer, said in an announcement: “Platform economy is the business model of the longer term. With the launch of the marketplace and its partner program, we’re ringing within the decisive phase of our digital transformation. Douglas is becoming a platform, which allows us to successfully consolidate ourselves because the number-one beauty destination.”
There isn’t any a method e-tailers earn a living on their marketplaces. Mostly, they may take a cut of the sale of a product or charge sellers a subscription fee for the likes of selling, product placement or fulfilment.
Marketplaces can have correlated risks, including a possible cannibalization of products.
“It will probably take away sales from the core, because someone may resolve that they discover a product you don’t sell that they like – and it’s on the marketplace,” said Saunders, adding there could possibly be overlapping products, and consumers resolve to purchase from the marketplace slightly than a retailers’ own site. “Retailers can manage that, because they still ultimately control the marketplace.”
One other risk he underlined is the confusion marketplaces could cause consumers — about who’s selling the product and may treatment problems. Searches can change into confusing, as well.
“You may wind up with decision fatigue, with folks having no idea what the product they need is, which one is correct for them,” said Pfeiffer. “It will probably impact the trust that [retailers have] built — and trust is difficult to construct and straightforward to lose.”
Careful curation should be top of mind for sellers of beauty, which is a fancy category.
“The job of retailer is to actually sift through a variety of fat and to bring the interesting things to the market and guide customers through the decision-making as to what they buy,” said Saunders. “The marketplace is, in essence, a free-for-all.”
For brands and retailers, Pfeiffer said: “It’s a lack of control for each in alternative ways.” When retailers outsource their fulfilment, they may lose a hold of a big a part of their customer experience.
“On the opposite side, a brand that sells on to consumers is now handing off that piece of the experience to their retailers,” she added.
“A challenge of the marketplace model is ensuring the shopper experience, including the returns and delivery service, meets our high standards,” continued Bobbett. “We’ll address this by having strict filtering in place, in order that anytime customers buy or interact with Boots via our website, app and stores they may have and consistent experience.”
One other challenge could be the backlash that may stem from a retailer’s taking intelligence from a marketplace to bolster its own business. And on account of supply chain issues nowadays, brands could be not have the option to maintain up with demand.
“Often for the brand, in the event that they’re smart, they’re holding back some portion of inventory for their very own selling channels to replenish their very own stores, to sell on their very own web sites, for his or her key partners,” said Pfeiffer.
“When a consumer is most concerned with price, a marketplace could be very appealing,” she continued. “When [it] is most concerned with quality and authenticity, it could not.”
Competition is rife.
“There’s already a variety of retailers which are selling products right into a marketplace,” continued Saunders. “So that you’ve started working really hard to get people to come back to your site.”
In certain cases, retailers fixing their core businesses should take precedence over launching a digital marketplace, he added.
That said, the upsides to the marketplace model remain huge, and more launches are expected within the near future in the sweetness space.
“Retailers will probably be keen so as to add additional strings to their bow,” said Saunders.
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