In July 2021, Sephora purchased Feelunique, one of Europe’s largest online beauty retailers, in a bid to enter the UK market and strengthen LVMH’s beauty ecommerce strategy. The Hut Group, owner of Lookfantastic, Cult Beauty, and Dermstore, also recently announced a plan to spin out and float the beauty division in 2022. THG Beauty is currently the largest online speciality retailer globally and expects to grow sales over 50% year-on-year to £1bn in FY21. We interviewed the Founder of Feelunique to explore how pure-play retailers work with suppliers and the opportunity for a global ecommerce beauty retailer.

There are some attractive attributes to selling beauty products online:

  1. Products have a high-value-to-weight ratio
  2. Return rates are low
  3. Beauty items are perishable goods
  4. Intimate product category

Beauty products are typically small products with a high-value-to-weight ratio which makes delivery cheaper and more efficient relative to general merchandise categories. Most beauty retailers only accept returns if the product hasn’t been opened; once a mascara or moisturizer has been used once, it cannot be returned. This reduces the fulfilment expense per unit below other online categories such as fashion which typically has a return rate over 25%. The combination of attractive product dimensions and low returns leads to a fulfilment expense as a percentage of revenue 5-10% lower than companies such as Asos or Boohoo.

The perishable nature of beauty products leads to a natural replenishment cycle which drives higher order frequency and repeat purchasing. The fact customers apply the product to their skin also lends itself to higher loyalty than other categories. Adore Beauty, the Australian-listed beauty ecommerce retailer, retains 61% of customers and has an average order frequency of 2.1x per year which increases to over 4x in year 5. Beauty almost takes the best characteristics of a category like food (perishable, high frequency, intimate and brand loyalty) but without the logistical challenges.

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