Latest Retail Survey Reveals E-commerce Biggest Channel for Global Health and Beauty Sales

E-commerce companies such as Amazon and Alibaba are driving Health and Beauty Sales to new heights. A new retail survey has revealed the health, beauty and personal care retail category will add US $305 billion in global sales between 2021 and 2026 (and just over 50% of that growth will come from e-commerce). The forecasts were made by the market research and data analytics  arm of Edge by Ascential.

More on Health and Beauty Sales Trends

• Edge Retail Insight analysts forecasts online shopping to account for nearly 30% (26.8%) of global category sales by 2026, up from a fifth in 2021
• Pureplay e-commerce platforms Amazon, Alibaba and JD.com are already major players in the sector and will grow 4 to 5 times faster than the dominant retailers Walgreens Boots Alliance and CVS Health in the space today.
• China’s Pinduoduo and South East Asia’s Shopee will experience the fastest compound annual growth rate (CAGR) between 2021 and 2026 in the health, beauty and personal care category

Health and beauty e-commerce will grow more than three times faster than store-based retail over the next five years as the COVID-19 crisis, lengthy lockdowns and shuttered high street shops and shopping centers reset shopping habits, according to a new report from Edge by Ascential’s research and data insight arm, Edge Retail Insight.

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Forecasts in Edge Retail Insight’s Health, Beauty & Personal Care Report, which are powered by Edge’s proprietary data analytics technology, show that shoppers will buy an additional US $156.1 billion of health and beauty products online over the next five years, with e-commerce sales in the category reaching US $358.4 billion by 2026.

Altogether, the health, beauty and personal care retail category is expected to be worth US $1.34 trillion in chain retail sales worldwide by 2026, the report’s authors forecast.

Reflecting a wider shift to online shopping – a trend accelerated by the pandemic – the Edge Retail Insight report reveals that online category sales will have a compound annual growth rate (CAGR) of 12.1% between 2021 and 2026, far exceeding the growth rate of 3.3% CAGR for store-based sales.

The shift to online in this category is embodied in the Edge Retail Insight figures showing Walmart’s store network adding just 3% CAGR growth between 2021 and 2025, compared  to 13.6% CAGR growth in Walmart’s dot com sales over the same time period.

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Deren Baker, CEO at Edge by Ascential, said: “The health, beauty and personal care category is particularly interesting to follow with entrenched consumer habits having to change overnight as a result of the pandemic. Items that were once bought in-store are not only becoming available online, but in an increasingly mobile-first age, brands have been rapidly experimenting with innovative digital technologies to engage customers remotely, such as using augmented reality to allow customers to try on lipstick virtually and getting involved with seasonal events and shoppable livestreaming opportunities increasingly offered by digital marketplace giants like Alibaba, Amazon, JD.com as well as China’s fast-growing group-buying platform Pinduoduo (PDD), which – with an expected 17% CAGR between 2021 and 2026 – will lead growth in the category over the next five years.

“The continued inexorable rise of marketplace ecosystems means brands operating in the health and beauty space must focus on understanding how to optimize their growth levers. These will include having up-to-date ratings and reviews, packaging design that meets best practice, how to take advantage of ‘subscribe and save’ features and marketplace events like Amazon Prime and Alibaba’s ‘Singles Day’.

“Consumer goods brands cannot win through mass personalization given the huge spending power of these global marketplaces to acquire customers. So, to compete in a new world of retail, brands must leverage marketplace-specific shopper engagement strategies as well as make sure they have strong fulfillment and flexible supply chain strategies to cater for short lead times and meet unexpected surges in customer demand.”

Amazon and Alibaba are forecast to grow rapidly between 2021 and 2026, with 14.2% CAGR and 12.4% CAGR respectively.  

China’s six-year-old mobile app Pinduoduo, which reported at the end of last year that it had 788.4 million users in 2020, ahead of Alibaba’s 779 million, is forecast to grow particularly quickly over the next five years, with a CAGR to 2026 of 17.1%, while South East Asia’s Shopee is expected to grow at a CAGR of 16.8%. Both Pinduoduo and Shopee operate innovative models focused on social engagement and mobile experiences, supporting their growth over the next five years. Shopee is also expanding its cross-border operations in Latin America, while Pinduoduo continues to push its highly successful group purchasing approach to drive further engagement with its users”.

Florence Wright, Senior Analyst at Edge by Ascential and report author, said: “The pandemic ushered in a new era of retail, one in which the store experience is simply one touch–point of many. The lucrative opportunity of e-commerce in health and beauty has not been lost on some of the dominant forces in the category today. In July, the LVMH-owned French beauty chain Sephora, which has one of the largest beauty store networks in the world,  entered the UK market with the purchase of e-commerce firm Feelunique, while in April, US investment firm Carlyle bought Beautycounter, a mostly digital ‘clean’ cosmetics and skincare brand, in a deal worth US $1 billion.

Florence added, “People want to buy brands whose values they align with and ethical, sustainable and socially conscious health and beauty brands have an excellent opportunity to amplify their voice and share of the market through the online and mobile environment.”

While e-commerce sales will grow by 12.1% CAGR over the next five years, sales through Pharmaceutical and Health specialist retailers, the leading sales channel for the category, will grow by just 3.5% CAGR. Pharma and Health is the dominant sales channel today,  accounting for 41% of health and beauty sales in 2021 and the channel will still lead in five years time, accounting for US $500.4 billion of category sales in 2026, but share of sales will decline between 2021 and 2026 with e-commerce growing its share of sales from 20% in 2021 to 27% by 2026.

Key Planning Factors for Brands Within the Health, Beauty and Personal Care Sector

Edge by Ascential analysts have identified three key planning factors for brands within the health, beauty and personal care sector:

• Take an omnichannel approach: The rise in e-commerce and mobile access will lead brands to focus on their online capabilities, and use all digital touchpoints to maximize engagement and increase sales.
• Health and wellness trends: Increasing societal concerns around health, hygiene and wellness will lead brands to focus on more natural and environmentally friendly ranges. Brands should ensure products are differentiated and aligned to emerging consumer demands.
• Invest in fulfillment and supply chain: Brands need to invest in stronger and faster fulfilment to support increased demand. An example of this is L’Oréal implementing a new warehouse management system to drive efficiencies across its global distribution network.

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