This post is by Michael Butcher, a Senior Account Manager at SellerEngine. His career in ecommerce dates back to 2001, taking in both online retailers and digital marketing agencies. Michael has been with SellerEngine since 2011, and has helped dozens of health and beauty sellers grow their revenues on Amazon, while avoiding the many pitfalls of selling in this challenging category.
The health and beauty market is a huge force in retail, both online and off. It incorporates a wide range of products including health and personal care, nutritional supplements, medicines and creams, as well as beauty and cosmetics. Sales are high. In the US, health and beauty accounts for $300bn a year in sales, beaten only by groceries.
Amazon is the dominant online retailer for health and beauty products, as it is for many categories. I’ve seen a huge influx of sellers going into health and beauty on the Amazon marketplace, particularly in the last three years.
Its popularity among sellers is somewhat surprising, because health and beauty is one of the most challenging categories to sell in. These are products that go on or in the body, so safety and quality are of paramount importance. Brand names drive a lot of buying decisions, so counterfeiting is a big issue. And many items are liquids or creams, and contain organic ingredients, so they are fragile and can go bad if left in storage too long.
In this post, I’ll look in detail at the health and beauty market on Amazon, particularly the challenges that are unique to this category. I’ll cover what those challenges are, why they matter, and how you can overcome them to become a successful health and beauty seller on the Amazon marketplace.
What do we mean by health and beauty?
Amazon uses different names at different times for these categories. Right now, you find HPC by navigating to the Health, Household & Baby Care category, which they abbreviate to Health & Household in some areas of the navigation. This category contains:
- Household Supplies: Cleaning products and other consumables other than food.
- Vitamins & Diet Supplements: Nutritional supplements and weight loss products.
- Baby & Child Care: Diapers, and children’s products including medicines and skin care.
- Health Care: Medicines such as pain relievers, allergy treatments and cold remedies.
- Sports Nutrition: Protein bars and powders, energy drinks and amino acids.
The Beauty category, which is called Beauty & Personal Care in the category navigation, includes:
- Makeup: Foundation, eye makeup, lip gloss, nail polish etc.
- Skin Care: Moisturizers, body scrubs, sun screen etc.
- Hair Care: Shampoo, conditioner, styling products, hair color.
- Tools & Accessories: Hair appliances, makeup equipment, mirrors.
- Personal & Oral Care: Shaving, hair removal, teeth whitening etc.
Beauty also covers Men’s Grooming, Perfume & Cologne, Salon & Spa and Professional Skin Care.
It’s a broad spectrum. But in my experience, the majority of new sellers going into these categories concentrate on two main product types:
- Nutritional supplements: The health and sports supplements market is projected to reach $278bn by 2024 and from what we’re seeing online sales are going to be a big part of that.
- Skin care and hair care: I see a lot of sellers concentrating on consumable beauty products like creams, hair colors, shampoos, conditioners and lotions.
Baby care and small electricals also attract attention from entrepreneurial sellers, but not to the extent of the categories above.
As sellers gain experience in health and beauty, they might start to specialize in a narrow niche such as vitamin C products, if they find a great distributor and start to work closely with them every time they launch a new product.
Other sellers let themselves expand organically from health and beauty to new categories. For example, one of my sellers focuses predominantly on health and beauty, but has also reached out into baby products. From there she has moved into items such as baby carriers, which don’t fit into health and beauty at all. Often, the product sourcing options that are available are just as influential as the seller’s own product knowledge and expertise.
Who sells health and beauty products?
I don’t see a lot of brand new online sellers coming into this category. Most are established online entrepreneurs, but they may have shifted to health and beauty within the last couple of years. They often understand the process of selling through an Amazon, but perhaps lack knowledge about this specific sector.
Health and beauty is a really difficult category for newcomers. Brands have historically prized exclusivity.
Then there are sellers who are health professionals by trade. I have clients who are dentists, medical assistants, nurses – people who have knowledge of the products, and access to distributors and manufacturers. I see professionals coming in and selling products related to their work a lot more in health and beauty than other categories on Amazon. It’s pretty unique in that way.
Finally, there are brick and mortar sellers. They often have successful local businesses, and maybe sell on their own website as well.
In one way or another, most of the health and beauty sellers I see are established in some way. They might have years of experience selling another product category online, or of working in a related profession, or of selling similar products in a physical store.
Health and beauty is a really difficult category for newcomers. Brands have historically prized exclusivity. They want to appeal to the high-end of the market and for that they need to be extremely protective of their reputation – including restricting who can sell their products.
You’ll see products available only through salons which insist on the seller having a hairdressers’ license. Companies selling nutritional supplements often only want to be found in medical offices or health-related outlets. That thinking has transferred to the online world. These brands crave exclusivity, and that desire can sit uncomfortably with an open marketplace like Amazon.
Challenges of selling health and beauty
1. Counterfeit claims from buyers
One of the biggest challenges is customers’ fear of non-genuine items. Buyers will readily send you messages, make A-to-z claims, write product reviews and post seller feedback claiming the item they received was fake. If that happens too often you could get your selling account suspended – even if your products are actually genuine.
Counterfeiting is a big worry for brands, sellers and customers alike. For customers these exclusive brands can be hard to come by. They can go into Walmart or a Walgreens drugstore and buy VO5 shampoo for $3, but will spend a lot more money for a salon brand or exclusive product. They are happy to do that, as long as they get what they paid for. If a product doesn’t look or feel genuine, they’ll be quick to complain.
Sellers who source using retail arbitrage (buying products from ordinary retail stores) can get buyer complaints simply because the customer notices the remains of a price sticker, or even just traces of glue. The buyer then asks for a refund because they think the product is used, when it was sold to them as new. It has nothing to do with the product they received, it’s simply a case of not getting what they expected, and therefore not fully trusting that the product is genuine.
Another scenario is when a brand owner makes a change to their product. That happens often, perhaps to make it safer or improve the formulation, or just to boost sales. The result might be a change in the color of a liquid or the design of the packaging. Customers can be very loyal to a particular brand and product, and alarm bells will ring if the item they receive varies from what they were expecting. It’s not always easy to spot when product changes happens, especially if you’re a large seller processing 10,000 different items. But the onus is on you to be diligent and ensure the product pages you are listing against exactly match the items you send out.
Amazon deals with counterfeit issues via an automated system which catches certain keywords or keyphrases.
Always work hard to handle a customer’s complaint. If you don’t and they are not satisfied they may well submit an A-to-z claim or leave negative feedback. Sometimes it’s best just to issue a refund rather than turning a molehill into a mountain over a $20 sale. Sometimes sellers can be reluctant to agree to a refund – perhaps because they think a customer is being dishonest – but that can just cause more problems than it solves. Protracted wrangling with buyers can be detrimental to your business in several different ways.
Amazon itself deals with counterfeit issues via an automated system which catches certain keywords or keyphrases. If there are enough, it will trigger some form of action such as a warning or suspension. If the system flags up enough issues they will automatically suspend your account. Once that happens they will stop your sales and hold any funds in your account while you go through the process of proving yourself to them.
When Amazon communicate with you they will ask some very specific questions. They might ask for evidence about the origin of your products, including invoices or contracts with your suppliers. They will want to know as much as possible about your internal processes to reassure themselves that you run your business responsibly. For example, how reliable are your distributors, and what measures are you taking to ensure complaints do not recur?
2. Counterfeit claims from brands
Many established brands, particularly in the health and beauty sector, are not entirely comfortable with the world of online retail, and online marketplaces in particular. While ecommerce offers a new way to reach consumers, it can also impact their reputation. This is why it’s so important to have good relationships with your suppliers and to know where your products come from.
If you don’t then you may face a claim of trademark infringement. If a brand does not recognize you as a seller, or for any other reason feels that your products may not be genuine, they can raise this issue with Amazon. Basically they will say, “This person is selling counterfeit items.” Amazon will alert you to the problem, and if they receive enough of these messages, they may well suspend your selling privileges and trigger an account review. Once that happens it can be a lot of work and trouble to get the suspension lifted.
If you’ve received an infringement claim what should you do? The first piece of advice is simple: don’t panic. These problems are common. Indeed, I don’t think there is a single seller I’ve worked with who hasn’t had an issue of this type at some point. What matters is how you react – how will you deal with the problem at hand, and what measures will you take to minimize the risk of it happening again?
Just the thought of counterfeit claims and complaints is enough to make many sellers extremely nervous.
The most important thing is to work closely with your suppliers. Understand the quality they are providing and where their products come from. Develop a close and open relationship with the company and earn their trust. Even then, if you’re working with a distributor rather than a manufacturer you need to understand who they are, and where they are getting their stock from. If they are sourcing fake goods, knowingly or unknowingly, you will be too. Provenance is everything.
Infringement claims come from the brand, not distributors, so your supplier’s relationship with the brand is just as important as your relationship with the supplier. If the brand does not know the distributor is selling to you, then you might still receive an infringement claim. And if you do, it’s the distributor who will need to contact the brand and let them know that you got the product legitimately from them. Although Amazon does not help brands enforce distribution agreements, often brands will file a claim on the basis that any products being sold by a business they don’t know about must be counterfeit.
Brand complaints are likely to trigger a warning only. The message from Amazon will tell you that they have received a trademark infringement claim, and say which listings have been removed. If they only receive only one or two messages from a brand they may stop at warnings, but if they get a flood of messages they may resort to more extreme measures up to and including account suspension.
As with your customers the secret is to be as open and helpful as possible. Keep Amazon informed and show them how you’re dealing with the issue.
Just the thought of counterfeit claims and complaints is enough to make many sellers extremely nervous. But that doesn’t mean you have to stop selling any product you’ve had a problem with. It simply means you have to be more careful about how you distribute it and to demonstrate clearly how you are working and addressing any issues.
3. Finding suppliers
Most of the health and beauty sellers I work with are resellers: they source branded products from manufacturers, distributors, wholesalers and other sources. So brand relationships and reputation are crucial in the health and beauty sector – perhaps more so than in any other market. Brands are trying to appeal to high-value customers and to promote a feeling of quality and exclusivity. All that will be damaged if they don’t know or trust the people selling their products.
So if you imagine you can go to a brand and say, “Hey, I want to sell your products, please take my money,” you’ll be in for a rude awakening.
You can’t overestimate the importance of building relationships, and this is where “soft skills” such as marketing and negotiation come in. You need to be friendly, open and approachable – to convince manufacturers that you are a good seller who will treat their products well, and be an effective ambassador for their brand.
You can’t overestimate the importance of building good supplier relationships
I have a couple of clients who are excellent salesmen through and through. They approach manufacturers and visit their offices with polished presentations, to explain their history of selling on Amazon and their track record with other brand names. They use this as their initial relationship builder to convince brands that they are valuable sellers to work with. Because they are so effective at that, they get good prices which they pass onto the consumer. That helps them win the Buy Box and make more sales – all because of their expertise in working with suppliers.
Relationship-building skills can take you a long way. They help foster trust with prospective brands, make people want to work with you, and encourage them to offer better selling terms. If you do receive counterfeit complaints about a product, your supplier relationships can help you take it up the food chain and understand where the problem came from.
Because brand relationships are so important in health and beauty, professionals who are already working in those fields have a distinct advantage over other Amazon sellers, much more so than in other sectors. They have a background in the industry and may well have existing relationships with the brands themselves. Brands want to keep sales within their industry because they feel outsiders might not understand their products as well as they need to.
That’s why people who approach health and beauty brands just as “Amazon sellers” often get shut down. I’ve had a couple of good sellers suffer this way. They found a promising source of health and beauty products, but it wasn’t extensive enough and they started receiving infringement complaints. They saw tremendous opportunities in these products, but kept hitting hurdles. Eventually they started reaching out to people they knew in the healthcare profession, who helped them get those crucial inroads.
So all is not lost for the typical Amazon seller, but there is a long path to go in developing relationships and gaining that all-important trust.
A word on private labeling
Private labeling is growing in health and beauty, but it’s nowhere near the level of categories like Home & Garden. Health and beauty is tough to get into with your own products, because there are a lot of restrictions from regulators (like the FDA in the US and EMA in Europe) on products that people put on their bodies or in their bodies.
But if you can private label, the same benefits are there as in other categories – including the ability to get away from direct competition. Even though a lot of people look for brand names on health and beauty products, there are certain niches where consumers can be less demanding. Supplements, for example, might be chosen more for their ingredients and health benefits than the brand name.
4. Category and brand gating
Health & Personal Care and Beauty are both restricted or “gated” categories on Amazon, so you need to ask Amazon for permission to sell products that fall into these categories. Evidence may be required, such as copies of recent supplier invoices for the products that you intend to sell.
The good news is that, if you’re an established seller who is going directly to a brand or an approved distributor, this should be a formality. It’s a simple process, with a form to fill in. Amazon will run due diligence such as checking the company details from the invoices you submit. They want to reassure themselves that you the products you will be selling are genuine.
They could find themselves with a pile of stock they aren’t able to sell profitably.
Amazon brand gating is a newer development. Sellers must apply for approval before they can start selling products with a gated brand, typically needing three invoices and/or a letter from the brand owner. New sellers to the brand must also pay a non-refundable “approval fee” which can run to $1,500 or more. Again, established sellers shouldn’t have a problem here, but sellers new to the brand need to make sure they have access to the required documentation, and factor the approval fee into their calculations. Otherwise they could find themselves with a pile of stock they aren’t able to sell profitably.
What about retail arbitrage?
The sellers who are most likely to fall foul of category and brand gating are those sourcing from retail stores. Retail arbitrage – sourcing stock from ordinary retailers – can be incredibly difficult for restricted categories and brands. You might buy a genuine, pristine product from Target and in theory be able to make a good profit online, but the brands really don’t want people reselling their products in this way, and they will work hard to shut you down. Those who source from liquidation wholesalers can be in a similar situation.
So when people ask me if they can source from retail outlets, I say, “Fine, but don’t expect to be doing it for very long and be prepared to field counterfeit complaints from the brand when you do.” It’s hard to understand because buying from a retail source can actually be safer than from a wholesaler, but you’re still very likely to run into trouble.
5. Storage and handling
Health and beauty products are not the most straightforward items to handle and store. They are often liquids, creams, gels and other non-solids. Some will start to spoil after a certain time on the shelf, others will go bad quickly at certain temperatures. Some can leak, or may have delicate packaging that is easy to damage or scuff. And not all health and beauty products can be handled the same way, even if they are the same shape and size.
How do you know if a product needs special attention? It’s very difficult. Many sellers wouldn’t know that a product has a problem with separation, for example, until someone makes a complaint. But as soon as you do find out, it’s vital to jump on it and make sure you don’t get the same issue again. Don’t brush it off and don’t assume it’s a one-off. Take time to look into the problem, understand what’s happening and fix it. If a product gets a little weird after it’s been sitting on a shelf for more than a month, but is still usable, let your customers know that when they get it. Manage expectations. Buyers are very quick to complain in this category, if anything about the product they receive doesn’t seem quite right.
Buyers are very quick to complain in this category, if anything about the product they receive doesn’t seem quite right.
You may have to be careful about how you store products, including both the environmental conditions like temperature and humidity, and the duration of storage. Even sellers who use Fulfillment by Amazon (FBA) have a lead time between receiving the products and sending them in, when sensitive products could be stored incorrectly. Using FBA does not remove your responsibility for product quality in any case – it’s down to you to determine that FBA is suitable and put any additional measures in place, such as extra packaging.
As well as paying attention to storage and handling, sellers might need to be a little more aggressive in getting the product out of the door quickly. Sales velocity is a big issue for the health and beauty sector, much more so than with books or DVDs. Expiration dates are one factor, but products can spoil even if they are within date. Also brands are always on the move improving their formulas, and it won’t be long before your product becomes outdated anyway. Nobody wants to get stuck holding large quantities of an older inferior product.
Everyone naturally wants to sell their products for a high price, but ultimately you should move them on as quickly as possible and that may mean adjusting your pricing level.
6. Shipping and fulfillment
The health and beauty segment is about much more than selling, packaging, and sending. It’s about understanding the nature of the product and dealing with it appropriately. Sellers often learn lessons the hard way, but sometimes that’s the only way to do it.
Most of the sellers I work with use Fulfillment by Amazon (FBA). It’s simple, effective and provides access to Amazon’s own world-class logistics services. You become eligible for Prime shipping, and your Buy Box ranking is boosted considerably. There’s not much more to it than simply sending your stock into Amazon. Once stored in their warehouse, your items are sent to customers without you needing to do anything, in the same way as products sold by Amazon themselves.
Sellers who don’t use FBA normally already have existing systems in place allowing them to ship directly to customers. They are most often brick and mortar stores, with their own shipping arrangements and warehousing space. However, more and more are moving towards FBA, for both the sales boost from being eligible for Prime, and to outsource the burden of fulfilling orders to the best online retailer in the industry.
FBA does bring some challenges, because products spend extra time in transit.
But FBA does bring some challenges, because products spend extra time in transit – they must be packaged and shipped into the FBA warehouse, then unpackaged and stored, before they can be sent to customers. Given the nature of products within the health and beauty category, such as powders and liquids, each additional handling step raises the risk of damaging the item or its packaging.
There is a natural fear among sellers about how products will be handled within the FBA warehouse. Whereas if you ship a product yourself, you have some control over how it will be treated. I often hear seller complaints along the lines of, “Those damn FBA warehouse people. They must be throwing my products around. They must not care at all.”
It’s true that all sorts of things which can happen in a warehouse. Products can be dropped, squashed or damaged in many ways. It’s often better to err on the side of caution and ensure a product is as securely packaged as possible. Measures range from taping down caps and “fragile” stickers, to specialized boxes with shaped foam inserts. It’s much more effective to determine the right level of protection your products need before shipping them into FBA, than to complain after the fact about poor handling.
Beware of commingling
Commingling is where identical products sent into FBA by different sellers are pooled together. When a customer orders that product, the item shipped to them may have been sent into FBA by a different seller than the one they ordered from.
The greatest risk of commingling is counterfeiting. If a customer complains that they have been sent a fake item, and the product was commingled, you could be penalized for another seller’s mistakes. Even though Amazon track the source of inventory in their fulfillment systems, and should be able to identify the seller who sent the item in, there are cases where sellers have been penalized unfairly as a result of commingling.
Thankfully, many health and beauty items are not commingled because products which are expiration-dated, consumable or topical (such as skin creams, shampoos, or cosmetics) are not eligible for this program.
If you have items which are eligible, I recommend you take the option to use an Amazon barcode rather than the manufacturer barcode to avoid commingling. While it might be acceptable in a sector such as books or DVDs, it’s to be avoided as much as possible in health and beauty. Some of these products even come with large warnings saying, “if you’re not buying from an authorized seller this product is counterfeit”. The one thing you must avoid is having your reputation harmed by someone else.
7. Selling internationally
I see many sellers expanding to Amazon websites in other countries. They want to take products they are selling in the US, for example, and sell them elsewhere to increase sales and secure higher profit margins, if they possibly can.
Some products work better internationally than others. Those which are consumed or applied by human beings naturally come under a higher level of scrutiny than others, so sellers must understand the relevant regulations of every country they sell to.
In the EU, for example, not all products have parity with US laws. This is something which Amazon takes very seriously. A lot of businesses are selling internationally and sending high volumes of products to FBA warehouses abroad. It could be a few days before Amazon realizes you’ve sent something in which is not approved by the European Medicines Agency (EMA), for example. Those listings get shut down, and you’re left to decide whether to have the product shipped back or destroyed. It can be an extremely expensive mistake.
For example, there was a problem recently with some ingredients in sunscreen which were allowed under EU regulations but no longer permitted by the FDA. Regulations are always being reviewed and updated, and the list of banned substances is constantly changing. It’s perfectly possible for a product to have FDA approval which is then invalidated under a regulatory change. Knowing the ingredients inside your products and their current regulatory status helps, but it’s by no means straightforward.
Every now and again, Amazon cracks down on certain issues. Often these checks happen in waves.
Within the last year, I’ve noticed many more people saying things like, “Amazon just said I can’t sell my bestselling product anymore because it’s on the FDA list, even though I’ve been selling it for years.” My response to them? “Well, Amazon finally realized and now they’re making the effort, so there’s not much you can do.”
Every now and again, Amazon cracks down on certain issues. More often than not, these checks happen in waves – they may do nothing for years then suddenly there’s a host of sellers coming to me with problems around the same product. Don’t assume you’re safe just because they’ve allowed you to sell something without any problems in the past.
It’s a difficult issue and not something sellers can easily avoid. You could regularly review the list of banned substances on the regulators’ websites (FDA, EMA etc.), and compare them to the ingredients of your products, but that’s a little like looking for a needle in a haystack. Certainly it makes sense to check the regulations if you start selling in a new territory, but it can be a huge challenge to keep on top of all the changes.
Shipping internationally can present a number of different challenges compared with shipping domestically. However, if a seller has been trading on Amazon successfully and using FBA well, the chances are they have all the basics in place to make a success of it. They will be over-packaging, and considering how the product needs to be handled when it’s shipped.
However, it’s still a good idea to develop a close relationship with your shipping partner, and ask them if there are any specific requirements for a product, what their processes are, and if they need anything specifically from you.
Each carrier and country has their own regulations for the shipping of certain substances, and some health and beauty products can be classified as hazardous materials – particularly those which contain alcohol or solvents. Shipping by air is considerably more restrictive than shipping by sea freight.
The potential upside of selling health and beauty products is huge. This is a vibrant market, with plenty of scope for growth in the online world. However, it’s also a specialized market, and has several different challenges compared to most other categories.
In this post I’ve explained what some of those challenges are – including counterfeit claims, finding suppliers, storage, shipping and fulfillment – and given my advice on how to overcome them. There’s no guarantee of success in this market, but I hope I’ve helped you avoid some of the biggest pitfalls.
Find out more about SellerEngine’s tools for Amazon sellers at SellerEngine.com.
This post was written with Tom Cropper and Andy Geldman.