Amazon makes own play for the beauty sector as online brands pick up steam
MARKETWATCH 8:45 AM ET 3/22/2019 Symbol Last Price Change AMZN 1819.26up 0 (0%) ULTA 335.13up 0 (0%) QUOTES AS OF 04:00:00 PM ET 03/21/2019
Amazon's (AMZN) house brand Belei joins rivals such as Kylie Cosmetics and Glossier
Amazon.com Inc. (AMZN) is making a play for the beauty category with a new line of skin-care products at a time when digitally-native brands are driving sales across the sector.
Amazon's (AMZN) Belei features a dozen items including a charcoal balancing mask ($18), a dark spot solution serum ($ 22) and a vitamin C moisturizer ($35).
Brands like L'Oreal and Maybelline are among the wide range of big-name beauty products on the Amazon(AMZN) site. Belei is now being sold among these brands.
Amazon (AMZN) launched its first house brands in the early 2000s and now has more than 125 names, according to the 2019 Amazon Consumer Behavior Report published this week.
"[I]ts focus on continuing the growth of the collection demonstrates their commitment to diversifying their product selection and driving incremental growth to their retail arm," industry tracker Feedvisor wrote.
Electronics, clothing, shoes and jewelry, as well as home and kitchen, and beauty and personal care are the most- purchased categories on Amazon(AMZN).
"For those who shop online daily, the most popular product category is beauty and personal care," according to Feedvisor.
The launch adds to the growing list of industry newcomers in the skin-care category, some that have become blockbusters.
And Ulta Beauty Inc.(ULTA) name-checked self-made billionaire (http://www.marketwatch.com/story/forbes-named-kylie- jenner-the-youngest-self-made-billionaire-ever-haters-disagree-2019-03-05) Kylie Jenner's line Kylie Cosmetics on its earnings call last Thursday.
"Our strategy to be the partner for digitally-native brands like Morphe and Kylie Cosmetics are paying off," said Mary Dillon, Ulta's chief executive, on the earnings call, according to a FactSet transcript. Morphe is a line of makeup, brushes and other tools that also has stores in the U.S. and abroad with more to come.
A search for Kylie and Morphe products on the Amazon(AMZN) site also yields results.
"Both brands drove very strong traffic in stores, suggesting our guests are motivated to make more trips to the store to try these products in person," said Dillion. "To update you on Kylie Cosmetics, which launched in mid-November, we experienced very strong sell-through on the 28 lip products we offer and were essentially out-of-stock for a few weeks at the end of the quarter."
Dillon credited the brand with not just driving traffic, but bringing in more diverse customers and new acquisitions. She said Ulta has gotten more Kylie merchandise and is adding new items.
"Cowen views Ulta's ability to continuously find key brands like Kylie and Morphe as an important way to broaden its customer file moving forward, as both brands brought new, primarily younger, shoppers into Ulta stores in Q4," wrote Cowen analysts led by Oliver Chen.
Cowen rates Ulta shares outperform with a $370 price target.
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Beauty customers are also showing a greater willingness to purchase items online, with Ulta e-commerce sales up 25.1% for the fourth quarter.
Amazon (AMZN) has its Prime program and its status as an e-commerce giant working in its favor. The Feedvisor report found that 45% of Prime members make a purchase on Amazon(AMZN) at least once per week. More than half of the 2,000-plus U.S. consumers polled by Feedvisor (55%) are Prime members. Amazon Prime membership now exceeds 100 million (http:// www.marketwatch.com/story/amazon-prime-membership-exceeds-100-million-2019-01-17).
A majority of customers polled (61%) know Amazon(AMZN) has its own brands, and 99% are satisfied with the quality of Amazon(AMZN)- brand products, according to Feedvisor. Among Prime members, 58% are "highly satisfied."
"Consumers are becoming increasingly aware of Amazon's(AMZN) private-label brands and are tempted to try them because of price," according to the Feedvisor report.
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Amazon (AMZN) stock has gained 21.1% in 2019 while the S&P 500 index is up nearly 14% for the period.
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