Beauty in Distress - Cosmetics Web Sites

American Demographics, Jan, 2001 by Alison Stein Wellner

COSMETICS WEB SITES TOP THE LIST OF DOT-COM FAILURES. BUT INNOVATION AND NEW TECHNOLOGY COULD PROVIDE A MAGICAL POTION FOR LONGEVITY ON THE NET.

Everyone knows that beauty fades eventually, but in the case of San Francisco-based cosmetics retailer Eve.com, no one expected it to happen so soon. The e-tailer, founded in June 1999 by business school buddies Mariam Naficy and Varsha Rao, offered an array of some 200 high-end cosmetic brands, including Versace, Calvin Klein, and BeneFit. Their target: working women aged 18 to 44 who have money to spend on high-end cosmetics, are Internet savvy, and pressed for time.

As its first anniversary approached, Eve was attracting over 600,000 visitors a month - more than three times the traffic of any other Web-only beauty site. In June, the company inked a deal to make Eve a featured shop in Yahoo's very popular cyber-stores, and had plans to expand their offerings to include the rest of what's typically on the first floor of a department store: handbags, jewelry, and other accessories. Cosmetic industry trade publications reported that the company was on track to make more than $10 million by year's end.

But Eve.com didn't survive to see the holidays. By October, the site was shut down and the company was finished. After a little more than 16 months in operation, visitors who clicked on Eve.com hoping to charge themselves up a little pretty, were instead faced with a somber message: "Dear Friends of Eve, we hope that shopping with us has been a `beautiful' experience. Thanks for your support." By November, the remains of Eve, including its domain name and database, were sold to one of its biggest rivals online, Sephora. Today, if you're one of 200,000 who still click onto Eve.com, a brief message encourages you to visit Sephora, "a company for whom we have a great deal of respect." After a few minutes, you're whisked away from Eve's site forever.

Of course, Eve.com isn't the only cosmetics e-tailer in recent months to close its cyber-doors. It joins beautyjungle.com and beautyscene.com as early casualties in the battle to gussy up American women through modem and mail. In fact, according to the NPD Beauty Trend report, only one-third of the Web's cosmetics, fragrance, and bath and body sites that were online in the fall of 1999 were still in business the following year. Although there are plenty of small, unknown e-tailers that fade away without as much of a raised eyebrow, the rapid demise of Eve.com - the Web's first, major, prestige beauty presence - is startling. In fact, the end of Eve highlights a key challenge that many e-marketers share: convincing consumers to buy products that are all about color and smell, in the vacuum of cyberspace. Until beauty e-tailers figure out how to use technology to make a cold computer feel more like a chichi cosmetics counter, the combination of modem and makeup may not be enough to convince consumers to part with their money.

A heightened interest in making money is part of what brought down the likes of Eve.com. The general malaise that affected dot-coms in 2000 has been a major factor in the shuttering of many prestige beauty sites, says Judith McGregor, vice president at Beauty.com. Investors' desire for profit meshed poorly with a hard reality about the online cosmetics market: it's tiny. Although women now make up the majority of Web surfers, the percentage of Internet users who purchase prestige cosmetics online is minuscule. Consider that in October 2000, just 2.6 million unique visitors clicked to a retail fragrance or cosmetics e-store, compared with more than 17 million who visited Amazon.com alone, and more than 78 million Internet surfers in total, according to Media Metrix. Although the health and beauty e-marketplace generated revenues of about $192 million in the third quarter of 2000 - of a total $9.6 billion according to Harris Interactive's eCommerce Pulse data - the percentage of these sales that fall in the high-end cosmetic category is minute. And in fact, Harris Interactive data confirms that the most visited sites in the health and beauty category were not "prestige" beauty sites, but those like PlanetRx.com, and Drugstore.com. Little wonder then, that in a profit-focused environment some online beauty marketers would fall away.

Demographics may also be what's behind today's less-than-pretty online beauty picture. The demographic profile of a cosmetics e-shopper is somewhat different than common wisdom would suggest, according to Media Metrix data. Out of all consumers that visited a retail cosmetics Web site in October, the largest share skewed older than Eve.com's stated target market: More than 42 percent of female visitors to beauty sites are aged 35 and older, compared with just 28 percent aged 34 or younger. Visitors to online beauty sites are also unlikely to be upscale: A 58 percent majority of all Web surfers who log on to beauty sites have incomes of less than $60,000 - making these consumers somewhat less affluent than the Web population as a whole, and more likely to search out discount cosmetics online. And don't forget a not-too-shabby percentage of "Adams" who shop beauty sites: A significant 23 percent of adult visitors to retail cosmetic sites are male, the largest share not teenagers, but men aged 35 to 54.