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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | DECEMBER 5, 2000 PERSPECTIVE By Ellen Neuborne What's Killing the E-Beauty Biz Big brands that withheld top products from the Web -- and sites that tried to succeed without them -- are the culprits. Still, it's too early to count out e-beauty
What's killing e-beauty? Don't blame consumers. This is a segment tailor-made for busy working women. True, lots of women like the attentions of a well-groomed cosmetics sales staff. But plenty more just want to replenish their supply of eyeliner and get it over with. As it is today, the beauty-retail business is an experience best had when out for a day of shopping with the girls. When you're in a hurry, it can be a drag. An online option would be a savior. Replenishment is not the only possibility for the Net. I was thinking of trying a new line of body-care products I had heard great things about -- until I saw the fine print in the magazine ad: "Available in fine department stores." No way am I elbowing department-store crowds at Christmastime to try a new hand cream. And my husband will not be giving me the gift of moisturizer this holiday season (at least he had better not). Will I still be interested in trying this stuff in January? Maybe. Maybe not. Now if they sold it online, I might act on my interest now. NO OBIT YET. So if consumers are at the ready, what's the problem? First, blame the big beauty brands. Companies such as Estée Lauder and L'Oréal were in no hurry to irk their traditional retailers by offering all their products to these Internet upstarts. Most online beauty companies opened for business without the familiar product lines of Clinique and Lancômbe. By staying out of the online game, the beauty giants hobbled the Internet stores from the start. Brand loyalty is bigger in beauty than in perhaps any other category. E-tailers couldn't pry our fingers loose from the brands we trust. Second, blame the online beauty companies for thinking they could make a go of this business sans big brand names. That was a misreading of the beauty consumer, says Wendy Liebmann, president of WSL Strategic Marketing, a New York-based consulting firm. The burst of newness in the cosmetics industry over the past few years, with companies like MAC and Sephora making a splash, created a false sense of security for the e-tailers, she says. "They saw it as the rise of beauty democracy. Women were willing to try all kinds of new products, so they must be willing to try them in this new environment as well," she says. But it turns out consumers were willing to experiment with a new product in a familiar environment -- a store. Or they would experiment at an online store with a familiar product. But not both at the same time. "That was asking a bit much," Liebmann says. "This, too, shall come, I believe. But not this year." Still, don't write the obit for e-beauty yet. Unlike pet food and furniture, this is one dot-com retail segment that will make a comeback. The big brands, so slow to join the Internet Age, will lead this second wave. While the first movers are running low on cash, the industry giants are launching their own online efforts. "The first mouse to the cheese doesn't get to eat because the trap closes," says Fred H. Langhammer, CEO of Estée Lauder. His company not only bought out pure play gloss.com but also has its own e-commerce site. "Credibility of brand will drive success on the Internet," he says. The message in the wake of the e-beauty bombs is not that women don't want to buy beauty products online -- they do. The message is that brands matter. And building a brand takes more than a Web site: It takes time. And time may be something only a decades-old company can afford to pour into an online business. Others will go down in history as just another pretty face.  Neuborne comments monthly on Net marketing issues for Business Week Online  | | |
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