Marketing & Promotions

The Beauty of the Internet

Several of the first big-name beauty dot-coms came in like lions in 1999, then went out like lambs in 2000. Beauty on the Internet, though, isn’t about to fade away. What does the future hold for online beauty buying?

Amid heady predictions of a retailing revolution, e-commerce sites across all industry segments Crushed online in 1999 with visions of becoming to cosmetics what is to books. In beauty, logged on first, followed quickly by,,, and, to name a few.

These first arrivals appeared to be sitting pretty. Sure, they burned up millions of dollars on multi-media marketing campaigns to build brand recognition. But e-commerce was hot, and investors kept the cash flowing.

On the surface, the strategy worked. By October 1999, reportedly had 305,000 unique visitors a month. By February 2000, the number had swelled to 514,000. The success of the sites was enough to worry the professional beauty industry. If customers could point and click their beauty purchases, would they leave the salons behind? But just a few months later, the sheen on e-commerce sites began to wear off.

The situation turned beastly for beauty e-tailers. In February 2000, announced it had been acquired by In April, was acquired by Estée Lauder, which promptly pulled the site off line for a makeover. (The site has yet to re-launch.) And October 2000 brought much different news from The site quietly logged off, leaving behind this message from co-founders Mariam Naficy and Varsha Rao:

“Dear customers, as you may know, recently closed for business. We really enjoyed serving you, and we thank you for your patronage and passion for shopping at Eve.”

A few weeks later, announced that it, too, was closing.

Lessons Learned in the Garden of Eve

The failure of high-profile beauty dot-coms such as appeared to validate the idea that beauty products were incompatible with the online environment. Particularly when contrasted with Sephora’s resounding success with the open-sell design that invites customers to see, touch, feel, and smell products.

Yet Sephora itself has disproved the notion that beauty doesn’t sell online. launched in October 1999, and by February 2000 was second only to in its number of unique visitors per month, according to Media Metrix. Today, is a key part of Sephora’s selling strategy.

“Through is able to draw a large customer base without opening retail stores in smaller towns and cities,” states parent company LVMH Moët Hennessy Louis Vuitton.

Rather than focusing on what went wrong with the first beauty websites, Dianne Grundt, former merchandising manager at, advises examining what went right. “[] proved women will buy beauty online,” she emphasizes. “People had said we’d never sell colour, but it was more than 30% of our business.”

When shut down, the site was profitable, Grundt says. It was just too little, too late, for investors. “There was no longer tolerance [from investors] for a three-year road to profitability,” she explains. “In our case, we were increasing our profit every month, but the tol­erance disappeared.”

Matt Lucas, senior director of merchandising for and Drug-, says cash flow was a major issue for most foiled dot-coms.

“Cash is oxygen in this business, and [the successful sites] had the time to develop their business models and build a solid foundation of customers,” Lucas says. “Those that created significant partnerships with other online players or with brick and mortar retailers are... flourishing.”

Sitting Pretty

A look at a few of the remaining players substantiates Lucas’ claim. For example, launched in October 1999 with $35 million from Procter & Gamble and another $15 million in venture capital. This past March, the interactive beauty care brand announced it had customized more than one million products since its inception.

Certainly, part of the web-based brand’s success lies in its unique concept.

“Most beauty sites are just selling products that were already available at other outlets,” says Kim Gobel, director of product development and design.” [At Reflect] you help us create the brand.”

Consumers answer a series of specific questions composed by the site’s beauty experts and research scientists. Based on the individual’s responses, recommends a “custom-blended” formulation. The customer has a say in the scent of the product as well as the type and decoration of the packaging—she even chooses the product name to be printed on the container.

A great concept, but one that needed refining. For example, Reflect initially was criticized for making consumers complete a lengthy questionnaire before they could enter the site and for being difficult to navigate. Since its latest redesign in November 2000, has doubled its rate of converting browsers to buyers. But without P&G’s financial backing, would Reflect have had the time to refine the site?

Similarly,’s acquisition of gave the company a needed infusion of cash, web expertise, and exposure to’s cus­tomer base. In Lucas’ view, the fact that many of’s brands are avail­able through other retail outlets—both online and off — is irrelevant

“ is building its brand by delivering some of the best news in the beauty industry,” he says. “We’re not about price,” he emphasizes. “We’re about relevant news and relevant tips at the right time of year — coupled with the right kind of products. Consumers respond very well to what’s hot and what’s new.”

What is new included widespread access to the niche brands that consumer magazines love to talk about but that are available only in certain areas of the country. “The niche brands had lots of exposure in the consumer magazines, but they weren’t available to people in Ohio,” Grundt notes. “It was a boom for the niche brands and the websites. It gave those brands exposure they’d never had before.”

“People who are makeup savvy and who want to be in the know don’t just reside on the East Coast,” Lucas agrees. “We find that if makeup artist Kevyn Aucoin recommends Tarte [cosmetics] or other specialty brands, it plays well.”

The Best of Both Worlds

In fact, the beauty websites we spoke to say consumers not only follow such recommendations, they seek them out, along with advice, problem-solving techniques, and information on the latest trends. Lucas says celebrity and fashion makeup artist and author Aucoin drives a lot of consumer traffic to the site, where he provides step-by-step makeovers and personal responses to beauty questions.

Surprisingly, consumers aren’t turned off by specific product recommendations, a discovery that surprised Philip Pelusi, owner of Pittsburgh-based Philip Pelusi and Pelusi 2 salons and of the Phyto-Life product line, which he began selling on his website last year.

“Women are looking for answers, and if we recommend our own products as part of a solution, it’s not a turn off,” he says. “We provide general suggestions as well, but we also recommend products we have that fit a need, and I was surprised at the positive feedback,” he says.

“Women are bombarded with news and information—on TV and in news­papers and magazines, from friends, and from other sources online,” adds Azadeh Ghotbi, marketing director of “But we’re delivering a wealth of expertise and information at the point of sale.”

That information influences consumers to buy, Grundt says. “Any time we had a problem-solving article on, say, how to solve acne or frizzy hair, we had a huge response.”

The Internet also enables consumers to interact with products in ways they otherwise could not “Granted, you can’t smell fragrances and you can’t feel the texture, but you can use our search tool to narrow your search by any variable you can possibly fathom,” Ghotbi says. “You’d never have someone in a store who could point out all the fragrance-free products immediately and put them in one place for you to learn about and compare”

Consumers’ favourite features at include its U-Magazine, a service-oriented magazine on beauty and style with step-by-step how-to’s and illustrated tips and product recommendations. Other top attractions are’s Solutions area and the Ingredients Glossary.

Think Customization and Personalization

No one we asked was willing to go into detail on how beauty websites will evolve in the future, but “customization,” “personalization,” and “one-to-one marketing” were general buzzwords consistently mentioned. The terms sound exciting, but translated into salon talk they mean nothing more than “client consultation,” “professional recommendation,” and “personalized cross-marketing”—services the salon industry (in theory, at least) has always provided.

In that sense, beauty websites should do no more than provide salon professionals a reminder of how much value clients place on home- care education, personalized advice, and product recommendations.

Ghotbi says salons have nothing to fear from beauty dot-coms. “We’re not going to make you go less frequently to a salon,” she says. “You still need your manicure. Consumers will still need service providers as much as ever, and probably more as they gain awareness of service options.”

Salons face a similar issue in that they offer similar same products and services. The answer lies in offering value-added services that can’t be found down the street. For salons, this means “customizing” their experiences with a client consultation that results in a service that fits their individual needs and desires; “personalize” the service by making professional recommendations on home-care practices and products that extend the service and their expe­rience; and finally, do a little “one-to-one marketing” by making them aware of other products and services the salon offers that answer their needs.

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