Gartner L2 Digital IQ Index  November 30, 2016

Beauty US 2016

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Social media platforms like YouTube and Instagram and e-tailers like Amazon have dramatically lowered the barriers to entry for small "indie" brands. These brands are quickly encroaching on the Old Guard, evidenced with sales for major players like MAC cosmetics dropping by almost five percent in Q3 2016. But in order to scale, emerging brands can no longer rely on social media alone and have ramped up investments across other digital dimensions, giving even the most sophisticated enterprises a run for their money. The seventh annual Digital IQ Index: Beauty benchmarks 99 Beauty brands across the Color Cosmetics, Fragrance, Nail, and Skincare categories.

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Beauty US 2016

November 30, 2016
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"Indie" newcomers are shaking up the beauty industry, bolstered by platforms like YouTube and Instagram, as well as e-tailers like Amazon.

These brands are quickly encroaching on the Old Guard. M•A•C Cosmetics sales dropped by almost 5% in Q3 2016, a decrease matched by their drop in mentions by top vloggers during the same time period.

While a strong social presence can make or break up-and-coming beauty brands, investments must be made across other digital dimensions in order to scale success—since last year, indies like Anastasia Beverly Hills have invested in sophisticated direct-to-consumer experiences.

Select mass brands have taken a different route, disrupting the industry by taking a page from the book of fast fashion, being first to market with trending product launches, followed by nimble SEO strategies that translate into high search visibility and outsized editorial mentions.

Many of these brands, like NYX and e.l.f., are also going vertical, opening brick-and-mortar retail locations to further enhance brand visibility.

On the etailer front, ULTA and Sephora continue to serve as effective discovery platforms for consumers and register strong E-commerce growth.

However, Amazon offers an outlet for brands to reap returns on replenishment, enjoying higher margins than Sephora and making inroads into the luxury beauty territory. Prestige brands Anastasia Beverly Hills and Elizabeth Arden defied expectations this year by embarking in an official relationship with Amazon.

Urban Decay retains its top spot in the Index this year as the sole genius, using Snapchat filters and a matching Augmented Reality app to support the launch of its Vice Lipstick line.

This year’s Digital IQ Index benchmarks 99 Beauty brands across the Color Cosmetics, Fragrance, Nail, and Skincare categories. Members can download the full report at L2inc.com.

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