The health, wellness and beauty industry is nothing if not resilient. In an industry where the vast majority of products are traditionally bought in person, few would have predicted 2020 to be a successful year. Yet, the coronavirus pandemic proved extremely profitable for digitally-native beauty brands and anyone else in the industry with a strong online retail arm. Direct-to-consumer (DTC) sales soared, social media followings exploded and sales volume records were broken.
It is not too late for other brands to catch up. Now is the perfect time for health, beauty and wellness brands to start selling directly to their customers.
Health, Wellness and Beauty Brands Flourished in the Pandemic
The pandemic accelerated the shift to online shopping by five years, according to IBM’s U.S. Retail Index. Growth was particularly strong in the health, wellness and beauty sector.
Bluecore’s 2020 Retail Trends report found a 112% year-on-year growth, between April 2019 and April 2020) in online sales of beauty products. Further research from Edge by Ascential predicted the share of online health and beauty sector sales to rise to 16.5% globally at the end of 2020 and increase thereafter to 23.3% by 2025.
DTC Brands Were Particularly Resilient
Customers are more willing to try direct-to-consumer beauty brands than ever before. More than one-half (52.1%) of those surveyed by Common Thread Collective had already bought personal care items from DTC beauty brands, writes CTC’s Marketing Manager Reilly Roberts, and many customers report they are likely to continue purchasing from DTC beauty brands in the future.
Skincare brand Tula saw a 400% increase in year-on-year sales during the height of the pandemic, reports CNBC’s Nia Warfield. Sales are not the only area where beauty brands grew, she adds. Skincare brands such as Biossance and Drunk Elephant saw their social media followings explode in 2020. Biossance added 22,000 Instagram followers in 30 days and Drunk Elephant likewise gained 62,000 in April alone.
DTC Offers Major Benefits to Health and Beauty Brands
Richard Kestenbaum, Co-Founder and Partner at Triangle Capital, says a DTC approach offers brands several benefits. “It eliminates the need to share profits with a retailer. More importantly, selling direct-to-consumer enables two-way communication between the brand and the consumer, without interference from the retailer,” he explains. Those benefits alone would be enough to convince most brands to shift to a DTC model, but they are particularly pertinent to the health and beauty industry.
Control the Entire Experience
Shipping partners let down many retailers during the pandemic, but not DTC brands. They were able to keep fulfilling orders and maintain the promises they had made to customers. “DTC beauty brands without wholesale distribution arms have been able to keep orders fulfilled and have avoided some of the headaches of those reliant on retailers,” writes Glossy’s Liz Flora.
Give Customers More
The idea of giving customers significant choice and offering the kind of impartial advice that is rare in brick-and-mortar stores is a central part of U.K-based online beauty store Feelunique’s strategy, says Head of Onsite Experience Carla Martini. Additionally, the brand offers samples at checkout, includes more samples with regular orders and offers a fully refundable “Pick-n-Mix” product trial service.
More Data Makes For Greater Agility
When selling in physical retail stores, health and beauty brands largely miss out on customer data, whereas DTC brands collect a significant amount by selling directly to consumers, says Marcus Startzel, CEO at eCommerce logistics and fulfillment startup Whitebox. This makes them much more agile, even in non-pandemic times. “With the increased attention to their online channels, brands moved fast to help their customers make informed decisions, utilizing backend technology solutions,” Startzel explains. “Those who made decisions based on the data were likely able to better take advantage of the increase in consumer spending.”
L’Oreal attributes its success in 2020 to “a combination of conditions surrounding COVID-19 and the brand’s digital media and content expertise,” writes Melissa Ledesma at Digital Media Solutions. The brand takes a personalized approach and uses customer data to create targeted marketing campaigns.
Health, Wellness and Beauty Brands Should Shift to DTC Now
McKinsey’s Emily Gerstell, Emma Spagnuolo, Sophie Marchessou and Jennifer Schmidt recommend beauty brands prioritize growing digital channels such as online stores, social media platforms and marketplaces in the wake of the pandemic. They will need to improve product innovation speed to match digitally native brands as well.
Making the shift is just the start. The most pressing need for DTC health and beauty brands is to differentiate themselves, writes Sarah Lewen, Chief Experience Officer at online therapy provider Talkspace. Brand values and positioning, customer service and the product itself must be of the highest quality to attract customers. That makes it all the more imperative brands partner with a DTC expert to handle the technical aspects while focusing on the things they are best at.