KEY POINTS

  • Health and personal care is one of the biggest untapped opportunities in e-commerce. Americans spend nearly $300 billion a year on health and personal care products, the second-largest retail category after groceries, but only 7% of that sales volume occurs online. Compare that to home furnishings, which sees 20% of sales online.
  • But online health and personal care sales volume is expected to grow at a much faster rate than traditional drug-store sales. We forecast that the online health and personal care market will grow at a compound annual growth rate, or CAGR, of 13% between 2015 and 2020 with mobile driving this uptick, while sales at brick-and-mortar drug stores are projected to grow at a CAGR of just 2%.
  • There are a number of subcategories within health and personal care, and these have not been disrupted evenly across the board by e-commerce. For now, beauty products are much more commonly bought online compared to daily essentials. We expect this to change as retailers tweak their business models.
  • There are significant reasons why health and personal care online sales have lagged behind other retail sectors. These include the high cost to retailers of absorbing shipping costs on small, inexpensive items, and the desire among consumers to sample health and beauty products before buying.
  • Subscription shopping models can help mitigate retailers' costs and provide an added layer of convenience to customers, and these services are helping the health and personal care category grow. 38% of US consumers who regularly purchase health and beauty products online say they're signed up for a subscription service, according to AT Kearney.
  • The race to win the online health and personal care category hasn't been won yet. While Amazon is the clear leader, a good number of consumers do their online health and personal care shopping on a variety of websites, including buying directly from brands that otherwise would not have a direct channel to reach consumers.

Introduction

Online's share of total health and personal care spending is rising fast, but the industry still lags behind most other retail categories in e-commerce disruption. However, that is changing, especially as retailers launch innovative programs aimed at bringing more health and personal care consumers online and encouraging them to make repeat purchases.

There are some basic [...]