The future of beauty: can Amazon replicate the Tmall model?

Retail in China is now Online First. E-commerce accounts for more than 60% of total retail sales. A monstrous number when one considers that in the United States, the share of e-commerce is as low as 20%.

In China, all retail goes online, but not through the web pages of companies, but through marketplaces: in particular JD.com, and Alibaba's two platforms Taobao (a cross between Ebay and Amazon) and Tmall (as we shall see, an evolved and premium version of Amazon).

 The answer to the first question, whether platforms such as Amazon will have the upper hand over the sites of brands or retailers, can be found in the evolution of keyword searches on the web. In China, people who want to buy a consumer product do not search on Baidu (the equivalent of Google) but on Taobao and Tmall. It is like searching directly on Ebay or Amazon and no longer on Google. And if you have any doubts that this is not Amazon's strategy, try its Lens_Ai function: by framing any object with your camera, Amazon will find it and propose it to you!

The battle is won by marketplaces. The real question is the second one: will Amazon's model continue to be somewhat antagonistic, through the aggressive use of price leverage, to brand valorisation efforts?

Is it possible that beauty products, especially luxury ones, continue to be described on Amazon as if they were a colander? Is it possible that the only competitive variable is price and that there is no space for collaboration and enhancement between the American marketplace and luxury brands?

Again, the answer lies in China.

Alibaba asked this question fifteen years ago because it realised that its Taobao platform, despite its great success, was not the appropriate place to sell and value high-end goods and the public used it exclusively for replenishment and not for the discovery of new products (which seen from the brands' side means the recruitment of new consumers). And above all, the Taobao marketplace was being opposed and fought against by the proprietary groups of luxury brands. And so in 2008, Alibaba launched Tmall: a high-end platform where brands could be enhanced through sub-pages that are in fact fully customisable flagship stores, with vertical storytelling pages, in-depth videos and exclusive products and experiences. All functions managed exclusively by the brand owner, who also determines the price.

The success of Tmall was resounding, for all beauty companies it became the first sales channel in China, and subsequently fashion houses also opened up to it, precisely because they found themselves in an environment that leads to enhance rather than devalue the brand, with in addition complete control of the price variable.

I have been wondering since I lived in China a decade ago what Amazon was waiting for to replicate the Tmall model, and I am surprised how little interest it has shown to date in an opportunity that is frankly within its grasp.

Perhaps, however, something is moving with the first timid steps.

A few years ago in the United States, Amazon launched the Premium (sometimes called Luxury) Beauty Program, a programme that grants participating companies two important advantages: price control and the almost total removal of third-party retailers, effectively giving the brand total control over brand positioning.

Successfully launched in the United States a few years ago, the big luxury beauty groups such as L'Oréal or Estée Lauder are not only no longer opposing Amazon, but are making a complete roll-out of their brands on the Amazon Premium Beauty Program, whose sales, according to Reuters, reached $15 billion last year in the United States alone, with an annual growth rate of 20%, far above the 5% average growth of online sales in the industry.

The programme was recently launched in the UK and I would expect it to be subsequently extended to continental Europe because it finally holds the key to unlocking the reticence of the big luxury groups.

Despite these encouraging first steps that suggest that Amazon may in the not too distant future play synergistically and not antagonistically with brands, the Premium Beauty Program still lacks a fundamental element to complete the appeal of the project - the upgrade of the consumer experience, the deepening of storytelling, the enhancement of the brand and its content, in short, the famous User Experience (UX). In this respect, Amazon's look and feel structure is still light years away from Tmall's mini-sites.

The first steps are encouraging, and especially if it works in beauty, which is positioned somewhere between mass consumption and luxury, this could really open the way for other categories such as fashion, accessories and design, which moreover at this time due to the Chinese consumer crisis are looking for new ways to reach and recruit new consumers.

Alibaba paved the way with Tmall. Now it is up to Amazon to retrace it by elevating the consumer experience to open up to this new world.

*Partner at FA Hong Kong Consulting