BEAUTY INDUSTRY A Digital Marketing Perspective How to Compete in the Age of Amazon and YouTube Table of Contents

Amazon: Grow Sales with Better 1 Merchant Analytics

Fenty Spotlight: Capitalize on New 2 Product Launches

YouTube: Work with the Right 3 Beauty Influencers Introduction

The beauty industry is shifting rapidly, but with worldwide growth and hundreds of billions of dollars on the table, the market is ripe with opportunity for brands who can adapt. Several factors have dramatically affected the industry in the last five years:

›› As with other retail sectors, Amazon is quickly dominating the beauty sector. Total beauty sales only increased 2% in 2016, while Amazon Beauty sales shot up 47% last year.

›› The barrier to entry for independent beauty brands has lowered, and established brands are fighting to keep pace with consumer priorities. Celebrity-endorsed brands, like , have the ability to define culture and capture market share.

›› Increasingly powerful beauty influencers and vloggers can shape trends and create opportunities for brands to reach new audiences. However, successfully harnessing social influencers remains a challenge for many marketers.

This report helps marketers tackle these challenges, and turn them into opportunities. With examples from brands like L’Oreal, Conair and Crest, merchants will learn how to boost sales on Amazon (and even track competitor conversions). We’ll also break down how brands can capitalize on the Fenty launch, and identify the right beauty influencers to partner with. 1 Amazon: Increase Sales with Better Merchant Analytics

Optimize sales on third-party sites with in-site purchase tracking. What are shoppers seeking, comparing and buying on Amazon? Which of your competitor’s products are converting? vs. L’Oreal - Battle for Mascara Market Share Driving traffic to your Amazon product page is important, but it doesn’t always translate to more sales. For example, mascara is a popular product on Amazon (the 6th most-searched term in the Beauty category), but determining the most “successful” mascara brand is more complex than it first appears. Maybelline and L’Oreal compete closely for mascara market share on Amazon; if we look at product page engagement for each brand’s top-selling mascara, L’Oreal appears to come out ahead by pulling a higher volume of sessions. But digging deeper into purchase and comparison behavior reveals otherwise.

L’Oreal vs. Maybelline Mascara Amazon Page Sessions & Purchase

L’Oreal mascara pulls over 3X sessions to their product page than Maybelline. This number may be bolstered by having the “Amazon’s Choice” label, and from sponsoring several ad placements under search results for “mascara.”

Total Page Total Purchase Rate Last View Rate Sessions Purchases (Per Session) (Per Session)

L'Oreal Voluminous Original 15,975 2,665 21% 5% Waterproof Mascara

Maybelline Lash Sensational 4,786 2,263 47% 21% Mascara, Waterproof

In spite of attracting fewer page sessions, Maybelline gets 2X higher purchase rate than L’Oreal. It also has a higher “last view” rate, meaning it was the last product shoppers saw before converting. This consumer confidence in Maybelline is also reflected in internal search data: “maybelline mascara” searches rank 82nd in the Amazon Beauty category, whereas “loreal mascara” ranks 987th*, suggesting Maybelline has stronger brand equity for mascara.

Source: Page sessions and purchase data pulled using Hitwise’s Amazon Product Tracker (learn more here) during the month of June 2017. Internal Amazon search data pulled 30 days ending 9/30/17. Amazon Flash Sales - Tracking Flux in Product Demand On September 15th Amazon launched a special “buy one get one 30% off” sale for a wide selection of beauty products. Tracking popular searches in Amazon’s Beauty category the day before, during, and after the sale reveals what types of products consumers seek during a sale.

Slightly more expensive beauty products, like hair dryers and teeth whiteners shot up during the day of the sale, while more commonly purchased items like mascara were more popular on regular days. On the following page, we’ll take a look at how merchants selling “big ticket” items can select the right products to promote on sale days (when they are most in demand).

Top Searches on Amazon Beauty Before, During & After Beauty Sale

Day Before Sale Day of Sale Day After Sale

Term Share Term Share Term Share makeup brushes 0.61% hair dryer 0.58% essential oils 1.41% mascara 0.42% teeth whitening 0.48% makeup brushes 0.56% unscented deodorant 0.38% tattoo ink 0.42% hair dryer 0.43% essential oils 0.37% makeup brushes 0.37% mascara 0.40% eyeliner pencil 0.36% polish 0.37% perfumes for women 0.29% 0.36% essential oils 0.37% face mask 0.24% charcoal face wash 0.34% face mask 0.36% flat iron 0.22% body wash 0.32% korean 0.36% beard oil 0.21% beard trimmer 0.32% mens wet dry electric shaver 0.33% hair clippers 0.20% essential oil set 0.28% pro comb 0.30% shampoo 0.20% 0.27% hair straightener 0.29% edens garden essential... 0.20% pre teen toothbrush 0.27% sunscreen 0.26% castor oil 0.20% maybelline color sensational... 0.26% deodorant 0.26% waterpik 0.19% eyeliner 0.25% straight razor 0.26% curling iron 0.19% hair dryers 0.25% beard oil 0.26% gold earrings for women 0.19% beard oil 0.24% magnetic eyelashes 0.25% hair brush 0.19% magnesium 0.24% glass spray bottle 0.25% paul mitchell tea tree... 0.18% barber 0.23% lace front wigs 0.24% hair clips 0.18% hair dryer 0.21% sulfur shampoo 0.24% teeth whitening 0.18% 0.21% makeup 0.22% deodorant 0.18%

Source: Pulled using internal Amazon site search data (learn more here) on September 14th, 15th and 16th of 2017. An Obvious Choice Conair’s choice is fairly obvious when it comes to selecting the right hair dryer to promote during the Amazon sale. The “Vagabond” dryer pulls slightly fewer product page sessions than the “Soft Touch,” but it converts better. People who visit the “Vagabond” are also more likely to purchase without shopping further, making it an ideal item to drive traffic to during a sale.

Total Page Total Session Last View Title Sessions Purchases Purchase Rate Rate (Session)

Conair Vagabond Compact Hair Dryer; Teal 11,993 3194 27% 31%

Conair Hair Dryer; White 11,680 2887 25% 5%

Conair Ionic Conditioning Styler / Hair Dryer; Blue 12,792 2264 18% 8%

Conair Soft Touch 2-in-1 Styler / Hair Dryer; Black 14,323 1940 14% 8%

A Less Obvious Choice Teeth whitening is also a great product to promote heavily during a sale, but it poses a more complex decision for Crest. Their “White Luxe” kit initially appears to be the winner, with more sessions and total sales. But “Noticeably White Whitestrips” has a higher purchase rate and last view rate, suggesting this product may convert better if it gets more attention and traffic.

Total Page Total Session Last View Title Sessions Purchases Purchase Rate Rate (Session)

Crest 3D White Luxe Teeth Whitening Strips 15,256 83,096 18% 12% Kit, 14 Treatments

Crest 3D White Professional E ects Teeth Whitening 7,980 41,782 19% 10% Strips Kit, 20 Treatments

Crest 3D White Gentle Routine Teeth Whitening 1,568 7,376 21% 8% Strips Kit, 14 Treatments

Crest 3D White 1 Hour Express Whitestrip Teeth 1,405 13,167 11% 3% Whitening Strips, Sample Kit

Crest Noticeably White Whitestrips, 10 Treatments 1106 4264 26% 13%

Source: Sessions and purchase data pulled using Amazon Product Tracker (learn more here), pulled the month of June 2017. 2 Fenty: Capitalize on New Product Launches

Rihanna’s line launched in September, and has taken the cosmetics industry by storm. How can beauty brands compete? Or even better, how can they take advantage of Fenty’s success? After years of anticipation, launched her line on September 8th, 2017 in partnership with . Demand for Fenty products shot through the roof, and many of her most popular products sold out in days. Let’s explore the ripple effects of this influential launch, and how other cosmetics brands can ride the Fenty wave rather than drowning beneath it.

Searches At their peak 3 of 5 in September, for the word “fenty” top searches driving traffic to increased by Sephora.com “fenty beauty” searches drove 916% include the word 6% of all traffic in the month of Sept “fenty” to Sephora.com

Source: Search and clickstream data pulled using Hitwise Intelligence over 4 weeks ending 9/30/17. Fenty Fans Flood Sephora - Shifting Cosmetic Demographics Sephora is a massive website, but the influx of Fenty seekers still managed to affect Sephora’s overall site demographics, albeit slightly. Compared to August (pre-Fenty launch), audience cross-over between Rihanna fans and Sephora site visitors increased by 199%* in September. Let’s explore how else their audience shifted.

Younger Audience During Fenty launch, a higher percentage of younger consumers visited Sephora compared to month before, whereas segments over the age of 45 decreased.

Sephora.com Audience Composition

28.2% 27.4%

23.1% 22.3%

15.4% 13% 14.4% 14% 14.1% 12.8%

7.8% 7.6%

18-24 25-34 35-44 45-54 55-64 65+

August - Before Launch September - Fenty Launch

More Diverse Throughout Fenty’s conception and launch, Rihanna made a point of emphasizing that “Fenty Beauty is for everyone, all skin tones and races.”* Her line offers 40 different shades, and as we’ll see on the next page, has become Fenty’s star product. The decision to place inclusion at the core of Fenty’s product development and advertising helped drive a more diverse customer base, not only to her products, but to the site where her products are sold.

6% Increase in the percentage of African Americans visiting Sephora.com

Source: Audience data pulled using Hitwise AudienceView. Before Fenty Launch (month of August) measured 07/30/2017 - 08/26/2017 and During Fenty Launch (month of September) measured 09/03/2017 - 09/30/2017. *Quoted in: Times of London Fenty Product Take-Over - A Competitive Merchant Strategy

As you’d expect, 6 of the 10 most-visited product pages on Sephora during September were Fenty products, with the LongWear Foundation page pulling a huge concentration of engagement (offering 40 different shade options on a single page certainly didn’t hurt).

How can other beauty brands compete with the likes of Fenty? Rihanna’s beauty line has grabbed a lot of consumer attention, but it also spawned renewed interest in several cosmetic products, creating opportunities for other brands to step in.

BEFORE LAUNCH (August) FENTY LAUNCH (September)

Term Visit Share Brand Term Visit Share Brand 1 Subculture Palette 0.66% Anatasia 1 Pro Filt'r Soft Matte Foundation 6.90% Fenty

2 Give Me Some Nude Lip 0.57% Multiple 2 Killawatt Freestyle 2.13% Fenty

3 Contour Kit 0.55% Anatasia 3 Match Stix Trio 1.41% Fenty

4 Everlasting Liquid 0.53% 4 Match Stix Shimmer Skinstick 1.16% Fenty

5 Naked Smoky Palette 0.50% 5 Gloss Bomb Universal Lip Luminizer 0.88% Fenty

6 Amuse Bouche Lipstick 0.46% Bite Beauty 6 Peach Perfect Matte Foundation 0.79% Fenty

7 MatteTrance Lipstick 0.46% Pat McGrath 7 Everlasting Liquid Lipstick 0.67% Kat Von D

8 Ultra HD Invisible Foundation 0.44% 8 Match Stix Matte Skinstick 0.67% Fenty

9 Radiant Creamy Concealer 0.40% NARS 9 Just Peachy Eyeshadow Palette 0.58% Too Faced

10 Skin Twinkle Lighting Palette, Vol. II 0.38% tarte 10 Glitter Flip 0.55% Ciaté

Concealer search clicks Highlighter search clicks increased 28% since launch increased 27% since launch

The NARS concealer page dropped on Tarte released two all-in-one Sephora from 9th place to 18th post- collector’s sets in September, which Fenty launch. However, the products include blush, highlighters and actually pulled slightly higher visit eyeshadow. Considering the growing share (.43%) in September. Interest popularity of highlighters (likely in foundation and skin products has amplified by the Killawatt Freestyle increased since Fenty’s launch, and Highlighter), Tarte might tweak NARS should capitalize on that by search campaign keywords to include promoting this product, as well as “highlighter” rather than emphasizing their staple Sheer Glow Foundation. other elements of these makeup sets.

Source: Product page visits measured using a Hitwise Custom Analysis (learn more here). Fast-growing search clicks measured 4 weeks ending 10/7/2017. 3 YouTube: Work with the Right Beauty Influencers

Every brand wants to harness the power of social media celebrities to promote their products. But how can you choose the best influencer for you? Beauty influencers attract massive audiences on YouTube with their make-up tutorials and how-to’s. How can a brand evaluate the best YouTube Influencer to partner with? In the example below, we compared the audience overlap between women with strong lifestyle interests (i.e. Fashionistas, Weddings, Job-Seekers, based on their search behavior), and their engagement index* with different YouTube influencers. As we see below, Beauty vloggers are a great match for Costume seekers and Fashionista audiences.

RCLBeauty101, who attracts more school-age girls, has the lowest concentration of wedding followers and job seekers.

Audience Interests vs. Beauty Vloggers

Job Wedding Costume Fashionistas Seekers Nightlife

Jeree Star

Zoella

RCLBeauty101

Michelle Phan

Grav3YardGirl

Index* <250 250-349 350-499 500+

The Wedding audience is niche and has lower cross-over, but Michelle Phan and Grav3yardGirl pull the most influence with this segment.

* What is “index”? Job Click here for definition. Wedding Costume Fashionistas Seekers Nightlife

Sephora

Sally Beauty

Younique

Clinique

Kylie Cosmetics

Index <250 250-349 350-499 500+ Job Wedding Costume Fashionistas Seekers Nightlife

Jeree Star

Zoella

RCLBeauty101

Next,Michelle we break Phan down the most engaged audience segments for top cosmetic brands, like Sephora, and Sally Beauty. While Wedding is generally a strong audience for makeup brands, Kylie CosmeticsGrav3YardGirl shares even higher engagement with Fashionistas. , in the meantime, has the lowest overlap with Fashionistas as well as three other audiences: Nightlife, Job-seekers and Costume.

Index* <250 250-349 350-499 Sephora500+ attracts Night Life lovers Audience Interests vs. Top Brands

Job Wedding Costume Fashionistas Seekers Nightlife

Sephora

Sally Beauty

Younique

Clinique

Kylie Cosmetics

Index <250 250-349 350-499 500+

Kylie Cosmetics has a lot of Strong alignment between Wedding audiences cross-over with Fashionistas and cosmetics brands, especially Kylie Cosmetics, Sephora and Clinique When brands better understand how their audience composition — and customer’s interests — overlap with social influencers, this provides direction on who to partner with, and for which products.

For example, Sephora might want to promote their “Girls Night Out” line with Grav3yardGirl, or Kylie Cosmetics might partner with Michelle Phan to produce a makeup tutorial on the Deer Snapchat Filter costume using Kylie’s Bronze Palette.

Shared Audience Interests

Selected Beauty Brands Top Correlation Matching Influencers

Nightlife Grav3yardGirl

Costume Michelle Phan

Fashionista oella

Wedding Grav3yardGirl

Source: YouTube influencer segments based on internal site searches for each influencer on YouTube.comlearn ( more here). Audience segments (i.e. “Wedding” “Fashionista”) based on search behavior indicating interest in particular theme. Segments built exclusively based on female consumers. Pulled over the month of June, 2017. Key Takeaways

Advanced Amazon analytics are crucial for merchants to get ahead: Amazon is a rising force in the beauty industry, and getting a peek behind the curtain is a key advantage. Measure not only how your products are performing, but their relative purchase rate in relation to competitors. Learn how Hitwise can help with that here.

Use data to capitalize on a new product launch: Not every beauty brand can be Fenty, but they can take advantage of market shifts created by major product releases. Keep an eye on rising search terms in the wake of a major launch, and re-evaluate which products to promote based on the rising tides of consumer interest.

Audience analysis is essential for choosing the right influencer: Not every social influencer in your industry is ideal to partner with — always conduct an audience overlap analysis first. Understand the interests of both your audience and a social influencer’s audience in order to align specific products with the right influencer. Where can I get insights like this? We help clients get ahead using the most advanced competitive analytics on the web, including:

Internal Search: Hitwise offers internal site search data from within search engines on Amazon, YouTube, Target and more. Data can even be segmented by demographic or location.

Journey Mapping: Get a full map of your customer’s path to purchase, across the entire web. Intercept the your competitor’s audience during the research phase to conquest their customers.

Conversion Points: Benchmark your traffic and conversion rates against your competitors, and evaluate your performance across different third party sites.

Retail & Product Tracker: Track fast-selling products and popular categories across multiple retail sites. Identify product demand and determine gaps within your own categories.

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For more information visit us at: www.hitwise.com