Mediaboss Marketing

A central marketing story of last decade was the rise of the ankle bitersstartup brands collectively feasting on slow moving consumer brands despite their well-fed media budgets. Direct-to-consumer sales fueled by digital and social media were part of the story, but the endless digital shelf and low cost of entry at Amazon also played a major role.

But among the many changes wrought by the pandemic has been a reversalof fortunes for smaller competitors, which are increasingly losing share and getting outspent by bigger players at Amazon. The e-commerce giant is also drawing more older buyers, a demographic shift that is favoring bigger, established brands. Making matters worse, smaller brands that traditionally relied on cookie-based digital ad targeting and re-targeting to drive direct-to-consumer sales more than bigger ones will see that capability go away over the next year and need to rely even more on Amazon.

Whats happening on Amazon is in many ways a replay of what happened on Facebook last decade, as Sarah Hofstetter, president of e-commerce analytics firm Profitero, sees it. Ten years ago, organic social media helped upstart brands thrive, but then bigger brands began outspending them on Facebook, bidding up ad costs and making it harder for new brands to break through, Hofstetter says.

Focus has shifted in recent years to a growing number of new products invented largely to be sold on Amazon. But the surge of e-commerce caused by the pandemic led big companies to shift huge amounts of media dollars to Amazon. The result has been to hike costs that smaller players have trouble paying and pushing smaller brands down search result rankings in many categories, Hofstetter says.

For that matter, Amazon is becoming a bit more like traditional retail, where small brands never had much chance at high-visibility endcap displays. Amazon was different, often giving them more visibility, Hofstetter says. Now theyre starting to get nudged out because of the money.

Nowhere is the change more noticeable than in the beauty business, which is among the segments of packaged goods affected most by the influx of startups over the past decade. Last year, the share shift from big brands to small lurched into reverse, with Amazon playing a key role, according to research by Evercore ISI based on Numerator data.

While it was a tough year for makeup brands generally, as people going out less needed less makeup, it was a lot harder for smaller players. Niche brands with online shares below 0.5% saw their collective share of U.S. makeup sales fall five points to 31% last year, according to Evercore. Big established mass brands gained the most, particularly LOreal USA brands Maybelline and LOreal Paris, based in part on their strong Amazon presence. Cotys Cover Girl and Rimmel also gained thanks largely to their strong presence on Amazon, according to Evercore.

Skincare fared much better than makeup in overall sales last year, but the category is even more fragmented online than makeup, with niche brands (each having under 0.5% market share) controlling 57% of the market last year. Here too big brands were the winners, gaining 2.1 share points collectively last year, according to Evercore.

In fragrance, niche brands did better, gaining share, but the middle brands were the losers, and the top 10 brands collectively picked up 10 share points. And in haircare, big brands including Procter & Gamble Co.s Pantene and Head & Shoulders and LOreals namesake brand alongside salon staples Redken and Matrix all gained share online while niche brands collectively shed 7 share points.

Looking broadly across health and beauty categoriesalso encompassing deodorant, vitamins and oral carethe top three brands in each category actually gained share collectively in total retail, including brick and mortar. The leading brands' shares indexed at 104 in 2020 vs.100 in 2018, according to Evercore. But the big brands gains were actually faster in more fragmented e-commerce channels, indexing 45 in 2020, up seven points from 38 in 2018.

At least part of the tougher environment for startup brands and more favorable results for big established ones on Amazon owes to where the influx of e-commerce buying came during the pandemic. Boomers and Generation X accounted for most of the increased online shopping and brought with them preferences for older established brands, Evercore notes.

The shift to older Amazon clientele continues this year. According to Numerator, Amazons share of overall CPG sales is up 1.4% among Generation X and 1.5% among Boomers so far in 2021 to 3.8% and 3.2% respectively. Amazons CPG share among Gen Z shoppers has actually declined this year, 0.6 points to 4.3%.

Worth noting is that Amazons share is much higher in some corners of packaged-goods, accounting for more than 10% of diaper sales. Overall, e-commerce has become a huge business in beauty, accounting for more than 30% of sales last year in the U.S., per Evercore.

Certainly, Amazon still offers plenty of opportunity for challenger brands. For example, the retailer has an Internet Famous section highlighting the latest social-media product sensations, such as U.K. cleaner import The Pink Stuff, propelled to fame by TikTok testimonial videos generating millions of views.

Then again, The Pink Stuff isnt a new product in the U.K. Its 20 years old. And many of Amazons other Internet Famous items arent exactly startups either. One currently on the list is a hydrating cleanser from CeraVe, which happens to be owned by LOreal, the biggest beauty marketer on earth. CeraVe became LOrealsstar of the pandemic last year, generating 89% sales growth. And if anything, CeraVe is a testament to beauty brands from big companies growing robustly on Amazon and beyond because theyre getting much better digital and social marketing support.

CeraVe for most of its 15 years on the market was marketed mainly via dermatologist recommendations and didnt even have an Instagram account when LOreal bought the brand in 2017, says Penelope Giraud, global general manager for the LOreal brand. Turning the usual social-fueled insurgent narrative on its head, the acquisition by LOreal actually helped improve CeraVes social media strategy and execution, which has included growing endorsements by skinfluencers, a strong presence on Twitter, and most recently TikTok videos developed under the guidance of S4 Capitals MediaMonks, Giraud says.

The Amazon shifts comeas smaller brands, which have relied more than bigger ones on digital ad targeting and re-targeting, face the impending loss of personal identifying cookies by next year something that will make retail data and advertising through retailers, including Amazon, even more crucial for them, Hofstetter says.

Weve noticed things have gotten a lot more expensive and frankly hyper-competitive from an advertising standpoint [on Amazon] as a challenger brand to some of the bigger brands, says Halee Patel Newton, VP of e-commerce for Califia Farms, a marketer of oat milk, almond milk, cold brew coffees and juices.

Hostetter says her company recently launched Profitero Pro, an analytics tool aimed at helping smaller brands even the score by managing their e-commerce distribution and marketing effort more efficiently. Newton says the tool is helping Califia identify and eliminate out-of-stocks, which, besides hurting sales can also hurt brands search rankings, as well as identifying keywords it should be buying ads against and tracking how its products are faring against those keywords in searches. Profitero Pro also helps Califia track its sales and competitive share across e-commerce retailers and spot where it needs to direct spending, she says.

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On Amazon big brands are beating small ones in pandemic - AdAge.com