How to Build Beauty Products & Cosmetics Online Marketplace

Last Updated: 10th September, 2024

The world has effectively moved online. As more consumers have been getting comfortable with online shopping as a primary touchpoint, their buying behavior has gone through a fundamental transformation. This change is equally evident in the beauty products niche. What was previously an offline exclusive industry, the beauty and personal care market is emerging as a significant contributor to online retail. According to Statista, $100.30 bn worth of eCommerce beauty sales will be generated this year in the US.

Unsurprisingly, online marketplaces have been consumers’ preferred destination. With fast, convenient shopping experiences and wide-ranging product catalogs on offer, these platforms give consumers holistic experiences. Interestingly, eCommerce marketplaces are now more than shopping platforms, these also work as search engines i.e. the starting part of consumers’ product discovery. Given such trends, brands and retailers are equally keen to explore online shopping channels.

If you are keen to build beauty products and cosmetics online marketplace to encash this trend, read this article for complete information on the process. 

Why Is Beauty Products & Cosmetics a Top eCommerce Niche?

Statistics that show growth of online beauty products and cosmetics industry

• According to Statista, the global beauty industry will generate a revenue of $646 billion in 2024.
• In this figure, the US will have about a sixth of the total share i.e. US$100.30bn.
• Moreover, the share of eCommerce in gross sales exceeds 35% for this niche―which is projected to reach $339 bn by 2029.
• Alibaba has been a preferred option, leading the industry in the health, beauty, and personal care industry with $60 bn in sales, and is expected to double this figure by 2027.
• According to Grand View Research the niche is estimated to grow annually by 7.7 % CAGR in the projection period 2023-2030.
• As per a report by McKinsey the consumption of premium beauty products is expected to grow at an annual rate of 8% between 2022 and 2027.

These statistics reveal an industry that is doing well and will continue to do so in the future as well. Because of this growth, the industry keeps attracting new brands and retailers, making it a thriving ecosystem of robust demand and supply.

Why is the Beauty and Cosmetics Industry Growing?

Despite the global economic slowdown, consumer spending on products in this niche has increased. The industry has been gaining momentum based on some pivotal factors. Some of these are as follows:

• Sustainable, vegan, and organic products in this niche have spurred an increased consumer demand.
• Similarly, an increased focus towards self-care, catalyzed by the post-pandemic awareness of wellness, is spurring the sales of products with probiotic, ayurvedic, or self-ingestible ingredients.
• The sprouting of independent labels across the US and China. These include Direct-To-Consumer (DTC) players.
• The need for brands to go global amidst rising competition in major markets such as the US and China.
• The growing significance of the Gen Z consumer as a pivotal stakeholder in retail consumption, bolstered by social media as a key trigger.

Challenges of the Online Beauty Products & Cosmetics Industry

• The need for greater ingredient transparency, driven by increasing awareness of the long-term side effects of some.
• Instances of spurious products making inroads in unregulated market channels.
• Ticket Sizes can be smaller

That said, there are ways to circumvent these challenges. These include a focus on both the right technology and business management. To know more about it, read ahead.

5 Popular Players in the Online Beauty Products & Cosmetics Industry

Gaining a better understanding of the industry would mean analyzing the leading incumbents. So here are several thriving online platforms for beauty products:

Marketplaces dedicated to the beauty industry vertical:

Sephora

Originating in 1969 from France, Sephora is an omnichannel beauty products marketplace with 2700 stores and 30 websites in 35 countries. It offers products including makeup, skincare, haircare, fragrances, and other beauty and cosmetic products. There are also diverse brands on offer―from luxury to affordable to Sephora’s own private label.

• Headquarters: Paris, France
• Annual Revenue: US$8.0 billion

Ulta Beauty

As their tagline goes “All Things Beauty, All in One Place^®” Ulta Beauty aggregates a selected variety of beauty products from some of the major brands. This includes a diverse range of products, such as makeup, skincare, haircare, and beauty tools. Headquartered in Bolingbrook, Illinois, Ulta Beauty operates primarily in the United States market.

• Headquarters: Bolingbrook, IL, United States.
• Annual Revenue: US$11.0 billion

Bath & Body Works

Founded in New Albany, Ohio, in 1990, Bath & Body Works is one of the leading American marketplaces focused on the sub-niche of bath products. This includes fragranced products, body care, and even home decor. Apart from America, it has a presence in over 40 countries, including online and offline stores and marketplaces. Bath & Body Works is a dominant player in the personal care and fragrance market by offering quality products, limited edition schemes, and curated customer experiences.

• Headquarters: Reynoldsburg, OH, United States.
• Annual Revenue: US$7.429 billion

Popular horizontal (multi-industry) online marketplaces driving beauty products popularity:

Amazon

The eCommerce behemoth Amazon offers products under this niche. It offers a selection comprising of skincare, haircare, makeup, and other personal care products. Due to its global presence, one of the largest user bases, and predictable business practices, Amazon attracts a large number of sellers and buyers for this niche.

• Headquarters: Seattle, WA, United States
• Annual Revenue: US$604 billion

Alibaba

The most prominent B2B eCommerce marketplace has a significant presence in this niche also. Its global network of suppliers gives it an leveraging edge. It offers beauty products under multiple product categories, including both raw materials and finished products.

• Headquarters: Hangzhou, China
• Annual Revenue: US$130.35 billion

Business Workflows of a Beauty eCommerce Marketplace Platform

An eCommerce marketplace for beauty products connects sellers with the buyers on a centralized platform. While the marketplace itself acts as a digital middleman ― managing, orchestrating, and streamlining operations for the business. Let’s have a look at the workflow of such a marketplace:

Admin or the marketplace operator

The Admin manages operations on the marketplace platform. The typical workflow for the Admin is as follows:

Admin workflow:

• The Admin configures the eCommerce platform by setting permissible product categories, shipping rules, tax slabs, payment methods, and other various operational functions.
• Sellers are invited to onboard the platform. A registration protocol is set in place. The sellers are verified, vetted, and approved by the Admin.
• Orders and returns are managed.
• The Admin oversees the finances on the platform by dispersing payment to the sellers.
• Further, the platform is managed and maintained by the admin.
• The health of the platform is gauged with various metrics.
• The Admin also leads the marketing efforts via various tools available on the platform.

Sellers

Sellers on a beauty products marketplace platform are typically independent or third-party entities. The workflow of the sellers is as follows:

Seller workflow:

• The sellers sign up on the platform by following the registration process.
• They set up their virtual storefront by adding images and other necessary media.
• Then they add company details, shipping and billing details etc.
• The list of the inventory to sell. Add necessary photos, product descriptions, pricing, etc.
• Once orders are received, they manage the shipping. The Admin can allow sellers to ship themselves, or route it via the platform’s logistics, if available.

Buyers

Buyers on a beauty products marketplace platform engage during and after the purchase process. The buyer workflow is as follows.

Buyers’ workflow:

• Buyers sign up on the platform.
• They search for the desired products.
• Next, they add the desired products to the cart and start the checkout.
• If they have any query, they can engage with the seller or the admin, depending on the query.
• They complete the checkout, by completing the transaction via any of the available payment methods.
• After completing the checkout, they can engage with the platform by leaving product reviews or rating the received products.

Revenue Model of a Beauty Products eCommerce Marketplace

One of the major benefits of a multi-vendor marketplace is the availability of multiple revenue channels. Not only does this open up the scope to earn higher revenue, it also helps in tailoring the revenue strategy according to the market.

So, potentially, a beauty products eCommerce marketplace can earn through multiple revenue channels. These can be split into direct and indirect channels. Let’s discuss the direct revenue channels first:

• Commissions: A fixed or variable predetermined charge is levied on each sale on the platform. This is generally calculated as a percentage value or an absolute figure.
• Subscription fee: Subscription charges are levied, generally in exchange for additional features or services.
• Listing Fee: Some eCommerce marketplace platforms levy a listing fee on the sellers for listing the products.
• Monetizing platform advertisements: Real estate available on the eCommerce platform can be utilized for publishing sellers’ advertisements, in exchange for a fee. These were some of the direct revenue streams, let’s have a look at indirect revenue streams:
• Monetizing the infrastructure: Multi-vendor marketplaces also earn by monetizing their infrastructure which popularly includes shipping and warehouse storage.
• Value Added Services: Services like AWS in the case of Amazon and Pattern by Etsy are some instances of multi vendor businesses scaling their services to generate additional indirect revenue.

These are some revenue channels available for a beauty products eCommerce marketplace. A business can strategize as to what works best for their business in terms of the competition and the needs of the target user base.

Essential Features in a Beauty Products Marketplace

The features in a beauty products and cosmetics online platform allow all the users participating in the platform i.e. the Admin, sellers, and buyers. So the success in a beauty products marketplace depends a lot on how all those involved in the business can engage or/and manage the eCommerce business. All of these need the requisite tools to engage with the platform to orchestrate the workflows.

So let’s have a look at the essential features needed in a beauty products multi vendor marketplace platform:

1. Purpose-built UI/UX

The UI/UX is key for all the users on the platform. For the buyers intuitiveness and logical consistency keeps them engaged, fostering memorable shopping experiences. For the Admin, workflow efficiency is key for effectively managing the operations. And likewise the sellers benefit from seamless selling operations.

2. Product Catalog

Beauty product marketplaces involve multiple products. Moreover, these are products that rely on the desirability factor. A rich featured and easy-to-use product catalog facilitates detailed product listing and also eases the process of creating the listing, enhancing efficiency.

3. Dedicated User Panels

Independent user panels allow each platform participant to self-service their needs. The sellers get better work efficiency and likewise, the buyers can better manage their activity and engagement on the platform.

4. Independent Storefronts

The beauty and personal care products industry has multiple big labels. Moreover, quality DTC brands keep sprouting up, looking for opportunities to build their brand in the online market. All these sellers need robust platform capabilities to do so. The ability to own a microstore or an independent storefront on the platform gives them opportunities to propel their brand image.

5. Product Recommendations

Beauty products often interest buyers when they are looking for related products on the platform. With this feature, the buyers get suggestions on products based on customer preferences enhancing user experience and creating opportunities for higher conversions.

6. Loyalty Schemes and Discounts

The beauty products niche is a dynamic industry. Unlike some other industries, it thrives on various promotional offers and schemes. Here Bath & Body Works is a prime example of such strategies. Upcoming beauty products Marketplaces should prioritize this feature and the strategy for implementing it.

7. Multi-Cart Checkout

For reasons similar to the features mentioned above―multi-cart allows buyers to conveniently checkout with products from multiple sellers. Since beauty products are often bought this way, this feature encourages buyer satisfaction and higher conversions.

8. Reports & Analytics

With multiple products and their types, you will need to understand and earmark the products and the sellers that can engage the buyers. Reports and Analytics gives you the business intelligence to gauge the performance of your platform based on multiple metrics, and take data-driven decisions accordingly.

9. Tax management

Beauty and Cosmetics marketplace can have a large number of SKUs. This means that taxation can be a tedious task, especially for the US, where every state has its own VAT rules. Hence an automated taxation system in the online beauty and cosmetics marketplace is key for easing Administrative workload.

10. Shipping Management

In a price sensitive market such as beauty products and cosmetics, shipping costs can be a key differentiator between your platform and a competitor’s. Moreover, seamless shipping is essential for customer satisfaction, and hence their loyalty. To manage shipping, allow the Admin to set custom rules, and give live shipping status to the buyers with the help of automated business APIs such as Shipstation.

11. Delivery Apps

Late deliveries can lead to unsatisfied buyer experiences. Moreover, delayed deliveries can also lead to order cancellations. Hence deliveries form an integral part of eCommerce. Consider adding delivery apps to your business. Developed for the delivery agents, these apps ensure the deliveries are well managed.

Features to overcome challenges in the Beauty Domain

Let’s find out critical features that allow you to navigate challenges in the beauty products domain:

Challenge 1 : The need for greater ingredient transparency.

Feature Solution: Downloadable Digital Products

A marketplace platform for beauty products can allow sellers to upload downloadable digital certifications to prove the authenticity of their products. This would help sellers to be transparent about the products they offer on the platform.

Challenge 2: Instances of spurious products making inroads.

Feature Solution: Decisive Admin Control

To avoid such situations, the marketplace has to be regularly audited and regulated. Apart from user reviews, a complete Admin control on the eCommerce platform allows the Admin to be vigilant and proactive in outmaneuvering malicious intent on the platform.

Challenge 3: Ticket size can be smaller

Feature Solution: MultiCart Checkout

As discussed above, multicart checkout helps to increase the ticket price per sale on the platform.

How to build a beauty eCommerce platform

Alright! Now that you have information on how a beauty products marketplace works, let’s move on to the next big question on your mind. How do I build a multi vendor marketplace for the beauty niche?

The process can be eased by following a few steps. Let’s walk through these steps:

Step 1: Market Research

The first step to take is to make a thorough analysis of the market you are about to enter. This means identifying the key players. The leading players are mentioned in this blog. However, competition for your business can be beyond that as well. Analyze what makes them successful, what is it that they are doing well and what can be done better.

Next, take stock of the emerging trends in the market. Trends give you a higher chance of getting traction with the target consumers.

Also, explore existing market gaps. If any trends are igniting consumer fancy but not yet explored by businesses, you have an opportunity to cash in. Likewise, evaluate the buyers’ needs: if the consumers have a problem that can be solved by your business.

Step 2: Decide the niche

The more you narrow down to a particular product category on your platform, the higher the chances you have of differentiating your brand. Additionally, marketing such businesses gets easier as well. For instance, take the success of Bath & Body Works. These are the product categories that can be your operative sub-niche:

• Skin Care.
• Hair Care.
• Makeup.
• Fragrances.
• Wellness Products.
• Personal Care Tools and gadgets.
• Cater to specific demographics for instance products catered specifically to Asian or African origin.
• Men’s Grooming.
• Sustainable, vegan, animal-cruelty free products

Step 3: Decide the business model and revenue streams

While we discussed the basic workflow of a multivendor marketplace business, there can be a variation in the business model. Let’s discuss the four options available:

1. B2B2C: In this type of an eCommerce marketplace, your business is the digital middleman. Third party vendors sell to the customer base of your platform. All eCommerce operations are the responsibility of your business. For example: Sephora.

2. Hybrid Model: This is a business model that is similar to a B2B2C marketplace, except that you have your inventory apart from third-party sellers on the eCommerce marketplace platform. Eg: Amazon and Ulta Beauty have third party vendors and their private labels on the respective platforms.

3. Aggregator Model: You aggregate smaller manufacturers with no significant branding. While you do not maintain an inventory, the products sold on the platform will be under your marketplace brand. Needless to mention that an aggregator model can be hybrid as well. For eg: Bath & Body Works.

4. B2B: These are not consumer-facing platforms. Like Alibaba, you are part of the supply chain connecting businesses (suppliers) with other businesses (buyers). So the transactions take place between businesses. For example: as shared, Alibaba.

Based on your market research, decide on the best business model for your target market.

Similarly, decide on the available direct revenue streams. You can consider incentivizing one of the revenue streams to gain traction at the start. Indirect revenue streams will be feasible, only once your business scales.

Step 4: Build your Beauty Products eCommerce Marketplace

There are two approaches available to achieve this:

• Custom Development: Custom development is developing the eCommerce marketplace platform from the ground up. It means ideating, designing, prototyping, and testing the entire website. However, it requires a significant investment of time, money, and technical expertise. This approach is ideal for those with unique or highly specific requirements.
• Turnkey Solution: Opting for a turnkey solution provides a faster, more cost-effective way to launch your marketplace. These solutions come with pre-built features, and essential tools to manage vendors, products, and orders. While these can give you a quick start, the best marketplace turnkey solutions also give you the opportunity to customize the solution to cover any specific business requirements. Even if you choose this route, you will still be saving the time and money required when compared to custom development.

So, turnkey eCommerce multi vendor marketplace solutions are more popular because they give the benefits of quick time-to-market, lower upfront costs, reliable support channels, tried & tested product, and scalability. Turnkey solutions are particularly beneficial if you are looking to enter the market quickly without the hassle of extensive development.

Step 5: Marketing

By defining the presence of the eCommerce business in the digital ecosystem, you are driving initiatives that foster brand visibility, drive customer engagement, and spur online sales growth. Consider the following channels for effective marketing:

• Content Marketing: Create content such as beauty tips, tutorials, product reviews, and industry news.
• Social Media Marketing: Utilize popular platforms like Instagram, TikTok, and Pinterest to enhance the visibility of your brand.
• SEO and SEM: Optimize your website for SERPs.
• Email Marketing: Connect with your audience with promotions, discounts, or newsletters.
• Influencer Partnerships: Influencer collaboration is a high-percentage strategy for the beauty niche.

These are the steps that can be a blueprint for your go-to-market strategy.

How Yo!Kart can help in Launching Online Beauty Products & Cosmetics Marketplace

Yo!Kart is a leading turnkey solution that can power a multi vendor eCommerce marketplace platform. It offers pre-built functionalities, which are included by default. For a beauty products eCommerce marketplace it offers a range of features that cover the essential eCommerce operations for the industry, and also gives advantage over challenges in the industry. Furthermore, Yo!Kart offers pre-integrated business APIs and payment gateways that ease and automate operations, and enhance capabilities of the eCommerce business.

Having powered 5500+ eCommerce platforms globally, Yo!Kart is trusted to be robust, secure, and customizable. So tailoring it to specific business requirements can also be achieved by the in-house team. The solution is self-hosted and can be owned for lifetime use with one-time price packages.

In short, entrepreneurs and enterprises can get started with a future-ready beauty products eCommerce platform in a quick time and cost-effectively.

Wrapping Up

The industry for beauty products and personal care is growing steadily. With the accelerated eCommerce adoption in recent years, it has received a growth impetus of CAGR 7.7%, which is very promising. Entrepreneurs or enterprises considering to build beauty products and cosmetics online marketplace platform have good opportunities, with this favorable growth.

That said, if you want to start a business in this niche, the steps mentioned can give you a roadmap for success. Moreover, to get started efficiently and effectively, you can have an advantage with the readymade capabilities of Yo!Kart.