Many luxury brands have resisted the lure of selling on Amazon AMZN +0.6% for a long time. A oft-cited argument was that they didn’t want their products to be sold in the same place as people are buying their toilet paper. (Ironically, toilet paper became a luxury item in 2020.)
Now these brands are playing catch up. Practically all shopping activities shifted online during lockdown, and some of those behaviors are going to stick. High-end department stores like Neiman Marcus have filed for Chapter 11 bankruptcy protection, and we’re only seeing the start of that.
But customers are buying luxury beauty items on Amazon, and they have been for some time. Sales on Amazon of products from prestige brands like La Mer, Chanel, and Dior are still brisk in recent months. The lipstick effect is at play, and customers who desire a small indulgence during hard times are not necessarily the same ones who would be buying up Birkin bags.
Amazon’s “Premium Beauty” program has a unique benefit for the brands that are enrolled: brand gating. This means that Amazon will restrict third-party resellers from selling gated brands’ products.
The program solves huge headaches for brands, including channel conflict that comes from under-pricing products, the potential for resellers to be selling expired items, using off-brand product and brand content, and providing a poor customer experience that damages the brand.