
How Amazon Is Changing Beauty Retail As We’ve Known It
After a 2024 in which several large beauty brands in the Estée Lauder portfolio gave in to the urge to join the Amazon ranks, the e-commerce giant is looking to lock in the top spot in American beauty retail this year. Still, despite Amazon’s ascendance, Neil Saunders, managing director of retail at data and analysis firm GlobalData, finds that there remain Amazon holdouts among prestige beauty brands, and he thinks they’re missing out on capturing meaningful demand.
“The one channel that’s growing and taking share is Amazon. If you want to grow, you need to be in the fastest growing channel,” he says. “Yes, it might be different to what you’ve done before. Yes, you may have doubts about Amazon, but to some extent you have to hold your noses and make that jump.”
Even though Sephora continues to fight Amazon launches from brands in its universe, they’re increasingly jumping on the e-tailer earlier in their life cycles, at the very least for defensive and replenishment purposes. The number of brands on Amazon is only expected to expand, posing a threat to Sephora and Ulta Beauty’s positions in the market.
According to information Anna Mayo, VP for the beauty vertical at market research firm NielsenIQ, provided the publication Women’s Wear Daily, Amazon’s share of beauty and personal care sales increased 7.3 points over the last three years. Last year, the financial firm Morgan Stanley predicted Amazon would become the leading beauty retailer in the United States in 2025, with 14.5% market share to Walmart’s 13%.
To understand the retail dynamics in beauty, Beauty Independent spoke with Saunders about why Sephora retains an edge over Amazon (for now), how beauty specialty chains can compete and the themes that will define retail this year.
Which beauty retailer will reign supreme this year?
Sephora will continue to maintain its leadership position. Sephora gets a lot of things right. It gets the store experience. It’s very good digitally. It has a really good track record of showcasing new brands and interesting products, has a great loyalty scheme, and it is very attractive to customers for all of those reasons. And it attracts people from across the spectrum. It has younger consumers, older consumers, middle-aged consumers. Sephora is quite a universal destination for beauty.
I also feel that, as part of a luxury and fashion conglomerate as it were, Sephora has a very good understanding of the intersection of beauty and fashion, and it shows that in terms of the ranges, the products and the way in which it manages its stores. It uses stores as a real hub to create a buzz around beauty. Sephora will face more competition because the market is more competitive, but it’s still going to be the standout beauty destination.
What about the advancement of Amazon? How will that shake things up this year?
Amazon is still growing very, very quickly in beauty, and I think that it will become a more significant force still in 2025. But there’s a slight difference. Sephora has the edge as a place of discovery. It’s where people like to go to have a look around and pick up things that they regularly buy, but they’re also on a mission to find interesting things. Sephora is very good at using its associates to explain new things, so it’s a really good place for discovery. That’s one of the reasons people like it.
Where Amazon is picking up ground is in beauty replenishment. It’s where someone knows exactly what they want from a brand that they buy regularly. They’re running low, and they don’t have time to go out to the store. Interestingly, it’s not just for the basics, although Amazon does do very well in those spaces. It’s also now in the more expensive products as well because it’s made a big, concerted effort. That is one of the very interesting things about beauty, and it’s one of the reasons why Amazon can take more share.
When it comes to luxury brands in, say, clothing or handbags, they’re not routinized purchases. People might buy a handbag once a year, but it’s a different handbag each time. It’s not a regular habitual purchase as it is with beauty. Even with extremely expensive brands that cost hundreds and hundreds of dollars, beauty is still a routinized purchase for a lot of people.
Amazon is perfect for that because, even though it’s a really expensive product, you know what it is, and you don’t need to see it in person. So, it actually doesn’t matter where it comes from in a way. You just want the product so you can continue with your routine. Amazon has discovered that and that’s why they’ve made such a big push on beauty because it works. It’s becoming the go-to destination for replenishment. I think that’s also one of the reasons why Ulta is a little bit more pressured now. They’re a little less about discovery and a bit more about everyday purchases and replenishment.

Do you think that Amazon will have to double down this year, and in the years to come, on becoming a discovery engine to sell through these higher-priced beauty brands? Or can they rely on their huge customer base to drive purchases?
I think that they will. There’s value in having the replenishment business, but if you want to become a true destination for beauty and attract more brands, then you need to really be that place of discovery.
To be fair to Amazon, it is getting there. It’s summarizing reviews better to provide nuance about products. You can use the AI tool to find different things and if you have a problem you can ask, “I’ve got a skin problem, what would you recommend?” It will use AI to troll through reviews and descriptions of products to pull out things that might be relevant to you, but it’s still not quite there. It’s a bit clunky, and there isn’t always the trust because it’s a remote way of shopping.
All of these things will help with discovery because it takes Amazon from being a basic website where you transact to being more of a sort of magazine or providing content that people can digest, which then helps them make decisions or helps them discover new things. I feel Amazon is definitely going in the right direction with these tools. It just takes some time because I think a lot of people still associate Amazon with that basic purchase. But they’re doing things with the experience to really elevate it and to make it a lot more interesting.
One of the fascinating things about Amazon is that SKU optimization isn’t really a thing for them. They don’t care if they have 1,000,001 different products because, what often happens is, especially with third party sellers and brands, those sellers pay Amazon to be on the site. They will pay Amazon to stock their products in the warehouse. They’ll pay Amazon to fulfill their products and for the marketing needed to go into the buy box or go further up the listings.
The more sellers Amazon has, the more brands it has in beauty and the stronger its third-party sales or revenue is from all of these different brands. Now, if they happen to sell the products as well, that’s great because that’s still making percentage on that sale. But even if they don’t sell, it doesn’t really make much difference to them because it’s ultimately the brands that are paying. It has a very interesting business model in that it doesn’t really care about having a massively long tail of products in the same way that a Walmart or Target or Sephora would.
That means that they will almost want to become a place of discovery because that’s ultimately what drives more brands to go onto the site and transact. So, the rudiments are there for Amazon to become this place of discovery, but they’ve just got to pull it together to be more of a premium destination for beauty.
If Amazon gets to the point where it can nail discovery, how can beauty specialty retailers like Sephora and Ulta compete with it in the long run?
Specialists can compete by investing in stores and creating an experience. While shopping for beauty online is very convenient, a lot of consumers enjoy the thrill of doing it in person where they can test products, interact with staff and enjoy the sensual nature of beauty. Traditional beauty retailers have to lean into things that Amazon can’t.
How will Amazon’s position in beauty affect prestige and luxury brands’ distribution strategies this year?
Amazon is viewed in two different ways. Sometimes it’s viewed as a threat by brands, especially brands that want to control distribution or have strong partnerships with other retailers. Sephora makes some brands sign exclusives, so they couldn’t go on Amazon even if they wanted to.
The other way that I think Amazon is increasingly being viewed is a channel for selling and a channel for success. The bottom line of it is the vast majority of Americans shop on Amazon. If you want to get yourself in front of customers, Amazon is one of the routes that you can go down to do that.
It actually is in some ways easier to do that with Amazon, especially if you’re a young brand. You have all kinds of issues and complexities to manage with Target and Sephora when you’re going into wholesale. You’ve got slotting fees, returns fees, rejection fees. It’s really complicated for a young brand to get into retail through a wholesale route. With Amazon, you have very few of those complications. Yes, there are costs attached to it, but anyone can go on to Amazon and set up a shopfront.
It’s difficult to make a great success of it, but it’s not difficult to implement, and you can scale up or down with Amazon. So, Amazon is becoming a much more attractive channel, not just because of the customer exposure it gives brands, but also because it is a relatively easy channel for younger brands to access.

For some of the more mature brands like the Estée Lauders of the world, the decision there is really simple. That’s where your customers shop. The half a million dollar a year salary woman is shopping for premium beauty. You can’t afford to be sniffy and overlook it because, if it’s good enough for her to shop there, then you should be there as well. That’s the realization that a lot of these premium brands are coming to. It’s a growth channel that they just cannot overlook. If they keep overlooking it, they will get locked out.
Amazon has had a reputation of being aggressive when it comes to dealing with brands and sellers.
Amazon isn’t quite as bad as people make it out to be. If anything, Amazon is a little bit easier to deal with. If you’re a third-party seller, you do have somewhat greater control over your storefront and everything else than you would do if you were wholesaling into a Target or something like that.
Target’s a very aggressive company, and it’s not particularly nice to deal with from a supplier point of view. There’s nothing wrong with that. They’re doing their job, but they’re very hard-nosed. If you are a smaller brand trying to go into retail, every retailer makes life difficult to a certain extent.
Interestingly, one of the more pleasant ones is actually Walmart from a supplier point of view, especially in a category like beauty. I think it’s because Walmart has to lure the brands in more and work a little bit harder. Everyone wants to be in Target as a beauty brand, but no one quite says the same about Walmart.
Last year was a tough one for retail. Some players thrived while others buckled under various pressures. What do you think is going to define the retail industry this year?
The broad themes for retail are going to be defined by connecting more deeply with the customer. We’ve gone through a period of great change in the pandemic and then we had this period of inflation. A lot of retailers during that time have been running just to stand still. There’s been a lot of change within organizations. There’s been a lot of change within the way businesses do things, but retailers now have a chance to sort of pause and catch their breath.
What a lot of them will be doing is looking very carefully at the businesses and saying, “Well, how are we really connecting and adding value to our customer?” Some have lost sight of that and are not doing as good a job as they should. You’ve got to put the customer at the heart of the decision-making in a market where spending growth is a little bit more constrained, and you have to steal market share from other people to make superior gains because there isn’t enough organic growth to propel them.
I think that’s one of the things that retailers are really focusing on now. You can already see evidence of it like with Macy’s, for example. Not perhaps the most successful retailer, but a lot of the decisions they’ve made of late are customer-centric. How can we make stores better? How can we introduce private labels that resonate with our shoppers? This will happen much more deeply in 2025.
Every retailer says customers are at the heart of decision-making, so in some ways it doesn’t sound new. The reality is it’s very hit and miss, though. A lot of retailers pay lip service to the customer right now, but I think we will see more of that customer centricity. It is the way to generate growth, and more retailers have come to really understand that.
This interview has been edited for clarity and brevity.
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