Platforms for pure play ecommerce Amazon, Alibaba, and JD.com are already important participants in the industry, with Amazon, Alibaba, and JD.com anticipated to expand 4 to 5 times faster than Walgreens Boots Alliance and CVS Health by 2026. Following the pandemic’s acceleration, online purchases are expected to account for about a third of worldwide health and beauty revenues by 2026. (up from a fifth in 2021). Over the next five years, Pinduoduo in China and Shopee in Southeast Asia will have the fastest growth rates in the health, beauty, and personal care sector.

According to a new report from Edge by Ascential’s research and data insight arm, Edge Retail Insight, health and beauty ecommerce will grow more than three times faster than store-based retail over the next five years as the COVID-19 crisis, lengthy lockdowns, and shuttered high street shops and shopping centres reset shopping habits. 

Online purchasing is growing at a double-digit rate. 

Between 2021 and 2026, the health, beauty, and personal care retail sector will add $305 billion in worldwide sales, bringing the total to $1.34 trillion, according to the report’s authors. Just over half of that growth will come from ecommerce, reflecting a larger shift to online purchasing, which has been hastened by the epidemic.

According to Edge Retail Insight, between 2021 and 2026, online category sales would rise at a compound annual growth rate (CAGR) of 12.1%, considerably above the 3.3 percent CAGR for store-based sales. The transition to online is reflected in the numbers from Edge Retail Insight, which show Walmart’s retail network adding just 3% CAGR growth between 2021 and 2025, compared to 13.6 percent CAGR growth in Walmart’s dot com sales during the same time period. As a result, by 2026, online shopping will account for over a fifth of worldwide category sales (26.8%), up from a fifth in 2021.

“Items that were once bought in-store are not only becoming available online, but in an increasingly mobile-first age, brands have been rapidly experimenting with innovative digital technologies to engage customers remotely, such as using augmented reality to allow customers to try on lipstick virtually and getting involved with seasonal events and shoppable livestreaming opportunities increasingly offered by digital marketplace giants like Alibaba, Amazon, JD.com as well as China’s fast-growing group-buying platform Pinduoduo (PDD), which – with an expected 17% CAGR between 2021 and 2026 – will lead growth in the category over the next five years,” said Deren Baker, CEO at Edge by Ascential.

Because of the inexorable expansion of marketplace ecosystems, health and beauty businesses must focus on figuring out how to optimize their growth levers in this channel. “To compete in a new world of retail, companies must employ marketplace-specific consumer interaction methods, as well as ensure that they have strong fulfillment and flexible supply chain plans in place to accommodate short lead times and unanticipated surges in customer demand,” Baker added.

Players from Asia are expected to rise at the fastest rates. 

While Amazon and Alibaba are expected to expand at a quick rate between 2021 and 2026, with 14.2 percent and 12.4 percent CAGRs, respectively, Asia is expected to grow at the fastest rate. According to Edge by Ascential, China’s six-year-old mobile app Pinduoduo, which recorded 788.4 million users in 2020, ahead of Alibaba’s 779 million, will expand at a CAGR of 17.1 percent to 2026, while Shopee in Southeast Asia will grow at a CAGR of 16.8 percent.

Pinduoduo and Shopee both have novel social engagement and mobile experience strategies. Pinduoduo continues to push its very successful group purchasing model to promote more interaction with its consumers, while Shopee expands its cross-border activities in Latin America.

“Some of the category’s biggest players haven’t overlooked the lucrative potential of ecommerce in health and beauty. In July, LVMH-owned French beauty chain Sephora, which has one of the world’s largest beauty store networks, entered the UK market with the purchase of ecommerce firm Feelunique, and in April, US investment firm Carlyle bought Beautycounter, a mostly digital ‘clean’ cosmetics and skincare brand, in a deal worth US $1 billion,” said Florence Wright, Senior Analyst at Edge by Ascential.

To meet changing customer buying patterns, companies in the health, beauty, and personal care sectors must embrace an omnichannel approach, utilizing all digital touchpoints to maximize engagement and revenue.