Finance Consumer Beauty market in the eye of Amazon Australia’s executives

Beauty market in the eye of Amazon Australia’s executives

A make-up bag branded with the Amazon logo, surrounded by cosmetics.
Amazon Australia has unveiled plans to enter the luxury cosmetics market.
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Buying high-end cosmetics in Australia is about to become much easier, with Amazon poised to add 200 luxury beauty brands to its digital shelves.

The trillion-dollar empire has unveiled plans to roll out “luxury and salon” beauty products across Amazon Australia, with 200 brands, including Chanel, Clinique, Oribe, Diptyque, Eve Lom and more slated for release through the site.

“We know that Aussies take their beauty regimes seriously,” Amazon Australia’s country manager Rocco Braeuniger said.

“We hope that customers will be pleased with the extended range of beauty products giving them access to new and established luxury beauty brands.”

It’s an unexpected move, says IBISWorld senior industry analyst Kim Do, who said Amazon was not a name typically associated with ‘luxury’ brands.

But surprising or not, the announcement is likely to put a squeeze on brick-and-mortar retailers such as David Jones and Myer.

Competition heating up

Amazon’s entry into the market will add to the already numerous challenges faced by department stores by introducing yet more competition, Ms Do said.

“They’re already seeing increased competition from online retailers in segments like fashion and homewares, and now they’re going to see even more significant pressure in the cosmetics segment as well,” she said.

An aisle within Myer's cosmetics floor on a Wednesday afternoon.
Myer’s cosmetics sales are being hurt by rival specialty stores. Photo: Killian Plastow

Myer and David Jones aren’t alone though.

University of Tasmania marketing lecturer Dr Louise Grimmer said that Amazon’s luxury cosmetics section could be an effort to poach consumers who would otherwise make the pilgrimage to specialty stores, such as Mecca or Sephora, for beauty products.

“They’re taking this fight up to the specialty stores,” Dr Grimmer said.

“I think they’ve recognised that the likes of Mecca are leading the charge, [so] I think they’re trying to take some market share from Mecca.”

Ms Do agreed that Amazon’s latest announcement would put pressure on Mecca and Sephora “because they also operate in the higher end of the market”, but wasn’t convinced that high street retailers were the specific target.

The voracious competition within the cosmetics section recently claimed the scalp of Australian-grown make-up manufacturer Napoleon Perdis.

No end to department store suffering

Though Myer has managed to turn its fortunes around after posting a $486 million annual loss in 2018, Inside Retail’s Australian Retail Outlook 2019 report cautioned the business – and department stores generally – will still face a challenging 2019.

“The department store model, a model that is over 100 years old, is under siege as customers lose patience with sub-standard service, poor pricing and product range parameters that are limited by their physical store environment,” the report said.

Competition from online retailers was a major contributor to the declining sales at Myer and David Jones, and 2019 is shaping up to be the “defining year” for the department store model, the report said.

An industry insider told The New Daily that Myer’s cosmetics sales have struggled in the new aeon of digital sales and specialty retailers.

The effect that tougher competition is having on the department store model is evident in the stores themselves too, said Dr Grimmer, who added in recent years these once-beloved stores have become “empty and joyless”.

David Jones in Melbourne.
David Jones has become ’empty and joyless’ in recent years. Photo: Killian Plastow

Glancing into Myer or David Jones from Melbourne’s Bourke St Mall will show two bustling cosmetics stores, seemingly brimming with customers. But from inside each store it becomes apparent many of these are simply pedestrians, waltzing from door to door with little interest in the wares.

This latest blow from Amazon won’t help, Dr Grimmer said, but it’s equally unlikely to be a death knell for the beleaguered retail icons, for a very simple reason.

“These are products you need to try in the flesh first,” Dr Grimmer said.

“You have to match colour and see if you like it. They’re very expensive products and they’re not products that you can just look at online.

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