Discover why luxury beauty and cosmetics brands are under increasing pressure to maintain visibility of the digital ecosystem in the interest of product and brand protection.
The global luxury cosmetics industry is made up of four key segments; skincare, haircare, makeup and fragrances. These products are manufactured using superior quality or organic ingredients, and therefore are marketed and sold at premium prices across the globe.
In order to meet high demand, brands use authorized sellers to service specific market segments. Sounds simple right? But how can brands guarantee that counterfeits do not enter the market, that each seller is authorized, and that authorized sellers are respecting the terms of their online sales agreements? Online monitoring and brand protection is key!
Before we dive into the threats to online sales, let's take a look at the latest consumer behaviors and trends, and new technologies which are impacting the online sales strategies of luxury beauty brands:
Today's consumers favor eco-friendly, and socially responsible luxury beauty and as a result brands are adopting these principles. They are creating clean and safe products which utilize natural ingredients and often targeting either non-gender specific audiences, or creating ranges for males and females.
It's perhaps no surprise that the sale of luxury cosmetic products is greater in developed regions where disposable income is higher.
Digital commerce is the fastest-growing channel for luxury beauty product sales, driven by global internet penetration, smartphone ownership, and a shift in consumer behavior.
We are setting ourselves up for a world where half of the business is ecommerce and 80 percent of consumer interactions will happen online. Lubomira Rochet, the Chief Digital Officer of L’Oréal
But despite this migration from offline to online, it doesn't necessarily translate into what we know as mainstream shopping. Luxury brands are selective in regards to the channels that their products are made available, often avoiding mainstream marketplaces which may not be aligned with, or reflect well on their brand value or image.
Artificial intelligence (AI) and augmented reality (AR) is providing new ways for luxury brands to engage with consumers, facilitating an increasingly targeted shopping experience. Here we can see two examples of market leading luxury beauty brands investing in an immersive shopping experience:
Dior recently launched digital collections in the metaverse to attract younger generations to their beauty business. Through this virtual world, consumers can enjoy live shopping experiences, access to limited-edition collections of customized cosmetics and perfume products, virtual showrooms, and augmented reality try-ons with 24/7 global access.
The Estée Lauder Companies also reported an increase in online sales. Concerns about a lack of interaction and personalisation led them to invest in new technologies to bring the in-store experience online, allowing video chat with consultants, and shopping together with friends.
Sustainability is also a key factor for both brands and consumers alike, and these new technologies not only help to reduce the use of plastics, products, and waste associated with in-store testing, but also limit the number of product returns. Thanks to these tailored virtual recommendations and experiences, online shoppers have greater knowledge of the products which they are buying.
But it's not just reducing waste and packaging which is high on the consumers agenda. A study by Capgemini in 2021 found that 69% of Gen-Z health and beauty shoppers are willing to spend more on products that contain natural and clean ingredients.
It's clear that the world of beauty and cosmetics is evolving, not only as a result of economic factors, but also as younger generations favor targeted, immersive digital shopping experiences. Brands who take note will achieve greater long-term success. However, attention must also be paid to brand protection to fight the threats to intellectual property which are growing in parallel as luxury beauty sales move online.
Digital commerce is clearly driving the industry, and opportunists have seen their chance to exploit the beauty and cosmetic brands which operate online. Those that do not have visibility of the digital ecosystem, or fail to act to monitor or safeguard their business through online product and brand protection are likely to feel the full force. There are two key threats to the industry which include intellectual property infringements, and online sales control. Let's take a closer look at the two:
Beauty and cosmetics brands carefully select the channels where they sell their products. They are cautious when it comes to working with third-party sellers, and draw up detailed contracts to protect their brand value and reputation online. These agreements define who can sell their products, in which channels and markets, pricing, and discounts, amongst other conditions.
These details are important when it comes to brand protection and its online sale strategy. This is perhaps the biggest challenge they face in today's expansive digital world is maintaining visibility of their brand and products to identify unknown sellers, avoid grey market situations, and prevent parallel imports.
Failure to monitor and detect illicit or unapproved activities through brand protection can harm the relationships you have with third-party sellers, and impact your future plans when expanding into new markets. It can also cause significant and lasting effects to your brand reputation.
Products which are designed for a specific market may not be suitable or adhere to the strict regulations in another. They might also be missing important translated copy on packaging or supporting information sheets which could result in misuse, leaving the consumers health at risk. Such situations can develop into a PR nightmare.
Counterfeiters have been targeting luxury beauty brands and their products ever since we can remember, but as online sales have increased, the issue has spiraled, highlighting the need for product and brand protection.
Fake branded luxury products are becoming increasingly difficult for brands to monitor, and for consumers to detect online due to the illicit use of the brands intellectual property. This includes the unauthorized inclusion of brand logos, slogans, product names, designs, colors, and images.
Countless fakes are being shipped around the world every day, and it's an activity which costs the industry billions every year. The sheer number of distribution channels, sellers, products, and buyers across the digital ecosystem makes it difficult to retain visibility of any harmful or illicit activities without the use of purpose built, automated product and brand protection technology.
The availability of counterfeit products is without doubt limiting growth within the luxury cosmetics market and leaving brand reputation, consumer confidence and consumer health all at risk.
Social influencers, who typically boast huge followings of young consumers on social networks, heavily impact the products which younger generations purchase. In fact, a survey conducted by Capgemini found that 69% of the Gen-Z demographic would spend more on health and beauty products due to the opinion of online influencers.
Younger generations (Millennials and Gen-Z´s) are also more likely to buy counterfeit products than other groups, many doing so due to their (generally) lower disposable incomes, and a desire to keep up with the latest trends by wearing or associating themselves with the most sought after brands and products.
It´s therefore somewhat concerning when we hear that influencers are utilizing social channels to actively promote counterfeit beauty products to their followers. It seems the stigma of wearing or using fake branded products is no more. This changing trend is becoming greater as economic pressures brought about by a global cost of living crisis adds more fuel to the fire.
Some influencers may feel that they are doing their followers a favor by pointing them in the direction of “great deals” whilst generating likes, shares, and growing their audience at the same time, however they are actually putting their followers' health at risk.
Influencers have been known to create content which compares fake luxury beauty products with genuine items. This has become common practice across YouTube, TikTok, and Instagram, despite the real risk that they may be promoting products which could cause significant and lasting damage to the end user.
On the other hand, some social influencers have spoken out against the use of fake beauty products, sharing images of damaged skin, or swollen eyes brought about by the harmful ingredients which are contained within the item.
Kylie Jenner once took to social media to warn her fans about a fake (rogue) website which had been brought to her attention. This site was selling fake products which infringed on her intellectual property, leaving her fans and her brand reputation at risk. Here's what she said:
I’ve come across this website called kyliecosmeticsoutlet.com. It looks exactly like mine, but it’s not. I want to be really, really clear and let you guys know that the only place to get my products is kyliecosmetics.com. Everywhere else is fake. Make sure you guys check the URL because these other websites are selling fake products. It might look exactly like mine, but it’s not mine.
Kylie later shared a photo that she had received from a fan which showed the results of using a fake product which she had purchased from the rogue website. Her lips had been stuck together due to the harmful ingredients which were used in the product.
Despite the obvious issue related to brands and their intellectual property, when it comes to fake luxury beauty products the dangerous or even toxic ingredients are what make the headlines.
Counterfeit luxury cosmetic sales soared during the pandemic as more consumers shopped online, many of whom would have otherwise bought in-store. These less tech savvy consumers were far less aware or equipped to identify fakes and sophisticated scams, leaving them exposed to the risks which go far deeper than monetary loss.
As a result, custom control, governments, and even the police have been known to step in to raise awareness, and to ensure that fakes do not enter the market. Some regions clearly take the issue of counterfeiting far more seriously than others, however countries such as China where much of these copycat beauty products are produced have increased their efforts in recent times to stem the flow of the problem.
Marketplaces such as Amazon, eBay, and even Alibaba are taking the issue of fakes seriously across their platforms. In fact, Amazon invested over 900 million US dollars in 2021 and employed in excess of 12,000 people including machine learning scientists, software developers, and expert investigators to protect brands whilst keeping their shoppers safe online. eBay recently expanded it´s authenticity service, investing millions of dollars to prevent counterfeits from appearing on their site. Whilst Chinese e-commerce giant Alibaba has updated its AI tech platform so it can identify counterfeit logos of luxury goods brands.
Public safety takes center stage, and regardless of whether or not online shoppers are intentionally purchasing fake luxury beauty goods, removing access to these harmful items is paramount in controlling this harmful practice.
Despite the efforts from third-parties, when it comes to controlling online sales it's vital that brands within the industry retain visibility of who is selling products labeled with their brands, as well as which online sales channels and markets they are being sold in.
Gaining and maintaining visibility, and implementing robust scalable product and brand protection solutions which can allow luxury beauty brands to take swift and appropriate action against these infringements is a primary requirement as the digital world expands. Failure to do so leaves consumer health at risk, and brands teetering on the edge of a PR nightmare. Perhaps secondary is the market share and revenue which is lost to counterfeiters, or the damage that unauthorized, or non-compliant resellers can cause to future expansion plans, particularly when entering new markets.
Counterfeiting is clearly a primary threat, but so too is the sale of authentic products by unknown sellers, and even unauthorized actions by approved sellers. All of these threats must be considered if you, as a luxury beauty or cosmetics brand, are to deliver an effective online distribution strategy.