Although still dominated by the retail sector, the Beauty & Cosmetics industry has made an undeniable shift to online marketplaces like Amazon, Walmart & eBay.

Globally, the Beauty Industry is enormous and continues to grow exponentially.

From 2020 to 2021, global revenue increased from $438 Billion to $511 Billion and numbers are expected to continue to climb, with an expected global revenue to exceed $716 Billion by 2025.

The catalyst for this growth in the US has been online sales.

Although e-commerce sales in the US have only increased slightly over recent years, the Beauty & Cosmetics industry is expected to grow by 48% in the US by 2023.

What is Driving E-commerce Growth for the Beauty & Cosmetics Industry?

One word: EXCLUSIVITY…. You want to have online marketplace exclusivity to protect your brand IP.

The one thing big box stores and retailers cannot offer is Direct to Consumer sales & online marketplace exclusivity.

The most successful brands on Amazon manage their distribution channels carefully.

Smart brand owners understand that to succeed, they must give consumers what they want – convenience and quality products.

While extremely important, price is not always the driving force influencing consumers to purchase a branded item.

Typically, buyers who focus on the quality of the item they’re purchasing are approximately three times (3x) more likely to make a purchase directly from the manufacturer rather than a big box store with a better price.

The consumer experience has become vital to success on Amazon for brands of all sizes.

Consumers demand quality, support, fairness and selection.

Maintaining online marketplace exclusivity is the only way brands can ensure products that are safe to use & of the highest quality. 

Online marketplace exclusivity with consumer experience.

Why is maintaining online marketplace exclusivity so important?

Imagine ordering your favorite shampoo from Amazon only to open the packaging and find that the item is damaged and leaking all over the place.

As a consumer, you would likely feel frustrated / angered by the inconvenience (which could have been avoided). Even more, your experience with a brand you thought you loved has been hindered.

The result? You leave a scathing review on Amazon. What you do not know, however, is that this experience may not have been the fault of the brand.

This scenario is all too common for brands, especially the Beauty & Cosmetics industry. An industry where products are typically viscous liquids that require special handling and packaging to ensure they’re not damaged in shipping.

Brand owners sell their products directly to consumers and via properly managed authorized reseller programs. They work hard to ensure the products they sell online reach consumers in the condition they intend. However, they cannot control the haphazard practices typically employed by unauthorized sellers.

It goes without saying that an unauthorized seller will not take the same care in storing, packaging and shipping branded products as brands themselves. Authorized sellers adhere to heightened quality controls and engage in pre and post sale product education.

E-Commerce Enforcement – Using Brand Protection to Protect Sales & Maintain Online Marketplace Exclusivity.

Most Beauty & Cosmetic companies offer products through various distribution channels. When branded products are sold through distribution and wholesalers, brick & mortar stores and online, there are a number of ways in which products can “leak” to unauthorized sellers.

As unauthorized sellers join branded listings on Amazon, the probability of a negative consumer experience and in turn, harm to the brand increases exponentially.

Unauthorized sellers only care about their own profits and not the long term success and reputation of a brand.

How can Beauty & Cosmetics brands protect themselves from unauthorized sellers to maximize profits & protect their reputation?

Beating the First Sale Doctrine.

The First Sale Doctrine generally allows the resale of authentic products by any seller as long as the item matches “manufacturer” condition.

Many unauthorized sellers will improperly argue that the First Sale Doctrine protects them. This is because Amazon and other platforms do not take action in response to claims of violations of exclusive distribution agreements.

However, the First Sale Doctrine does NOT apply when unauthorized sellers offer products that may be authentic, but are “materially different from manufacturer condition.”

With this in mind, we have helped many brands “beat the First Sale Doctrine” by creating distribution agreements or brand-exclusive policies that build in mechanisms to create disputes.

Online Marketplace Exclusivity Secret: products that are authentic but materially different from the manufacturer’s condition are not protected by the First Sale Doctrine.

Courts all over the US have found that material differences can include whether the manufacturer honors their warranty / guarantee when products are purchased from unauthorized sellers.

Courts also have held that materially different products include those sold without manufacturer-implemented quality control requirements, which can include but is not limited to :

• Temperature & Humidity controls for storage of products;

• Batch checks to ensure products are not expired, defective, or damaged;

• Restrictions on Commingling of Inventory at FBA;

• Restriction on use of the FBA repackage and return feature;

• Customer service training;

• Ability to receive notice of and implement recalls;

• Packaging requirements (ex; pump lock, poly bog, secondary boxing);

• Labeling requirements (batch codes;

Brand Enforcement on Amazon

Once a brand has properly implemented material differences into their products, the brand is in a position to begin enforcing their rights against unauthorized sellers.

Our team has unmatched experience removing unauthorized sellers from ecommerce platforms.

Our data driven processes and focus on e-commerce has helped us develop one of, if not the largest index of Amazon sellers in the Beauty and Cosmetics industry in existence.

We conduct high level investigations of every unauthorized seller to ensure we are making the most effective communication possible when sending cease and desist letters.

We also work intimately with our clients and their brand(s) to ensure we understand their weak points and where products are being diverted to and from.

Stopping existing unauthorized sellers is only half the battle to control your online sales.

Identifying distribution leaks and sources of diversion is key to ultimate success.

Our firm uses a cost effective approach to ensure unauthorized sellers are removed as efficiently as possible.

Our knowledge of Amazon and the Amazon Brand Registry program is what differentiates our team from others engaged in the brand protection practice.

We know how to escalate the unauthorized seller situations properly with e-commerce platforms to take the decision to sell out of the unauthorized seller’s hands.