A recent study finds 88% of Australian online spending in cosmetics and beauty is going to overseas retailers. Kate Morris founder of Adore Beauty explains why.
A recent study by the Commonwealth Bank of online shopping in Australia, reported that 88% of Australian online spending in the Cosmetics and Beauty sector is going to overseas retailers. Having been an online retailer in the Australian cosmetics industry for over 11 years now, it came as no surprise to hear that 88% of online spending in the vertical is going overseas. The underlying cause is that Australian consumers are demanding a new level of responsiveness, and the Australian beauty industry is struggling to keep up with the new global paradigm.
1. It’s all about the timing.
Global brands have traditionally staggered their new product launches across different markets, so that Australia would sometimes not get new products until 6-12 months after Europe or the USA; and consumers were informed via glossy mags with long lead times.
These days, the hype is global and instant – think Twitter, Facebook and blogs – and if Australian customers can’t buy the product here, they will seek to procure it from overseas. Brands and retailers need to be much faster in getting the product in front of Australian consumers to keep those sales in the country.
2. Customers are online – why isn’t your brand?
Consumers are brand loyal – but many brands don’t offer their products online in Australia yet. If an Australian online shopper wants to buy her favourite Dior lipstick, for example, she has no choice but to order it from overseas.
Access to brands has been Adore Beauty’s biggest challenge over the last 11 years, and many brands are only now begrudgingly acknowledging that “this Internet thing” is here to stay. Unfortunately the response is often to attempt to “control the brand image” by having single-brand sites (such as Estee Lauder), ignoring the customer demand to shop across a variety of brands in a single cart.
Exclusive distribution deals also have the effect of restricting domestic supply – but consumers expect to be able to buy a product where they want, when they want.
3. The Australian pricing bubble
Global price disparity is a significant issue in cosmetics, where retail pricing and distribution is tightly controlled by the brands. Pre-Internet, local markets were insulated to such a degree that differential market pricing was possible, in order to let brands compete at a lower price point in countries where the average wage and disposable income was lower. Australians were happy to pay double the US price for prestige cosmetics, because they didn’t know there was a difference, unless they actually visited the US.
Now that a customer can do a global price-check in less than a minute, brands need to achieve global pricing parity – or face further haemorrhaging of their local sales.