Euromonitor International research shows that non-store channel in the Baltic States is relatively significant, as it outperforms Western Europe’s average in terms of Beauty and Personal Care production distribution. Non-store Beauty and Personal Care sales accounted for 18%, 25% and 15% of total market value in Lithuania, Latvia and Estonia in 2010 respectively; while Western Europe consumers purchased fewer than 8% of total Beauty and Personal Care products via non-store channels on the same year. The key contributors to non-store channel success in the Baltic States are direct sellers and internet retailers. However, internet retailing and direct selling are perceived as great rivals in Beauty and Personal Care industry with the latter one being the outstanding leader in this competition.
According to Euromonitor International research, internet sales of Beauty and Personal Care products accounted for 1%, 2% and 1% in 2010 in Lithuania, Latvia and Estonia, respectively. Meanwhile, direct sellers continued to hold significant shares accounting to 17%, 23% and 14% of total Beauty and Personal Care product sales (total market sales consisted of EUR158 million (Lithuania), EUR94 million (Latvia) and EUR93 million (Estonia) in 2010). While internet sales are expanding dynamically in the majority of FMCG (Fast Moving Consumer Goods) markets, Beauty and Personal Care is among the industries least affected by this new distribution trend, thanks to the popularity of purchasing cosmetics and toiletries from well-established and reputable direct sellers, specialized in Beauty and Personal Care market.
The main reason why internet retailing in Beauty and Personal Care market shows a relatively slow development and faces tough competition from direct sellers in the Baltic States is the basic consumers’ need to touch, smell and feel the products before purchasing them. In terms of direct selling, the consultants are able to provide sample testers or certain pages of the catalogues are often enriched by specific scents, so clients become aware of what they are buying. Unfortunately, internet retailing cannot provide this opportunity. As a result, consumers decide to purchase products online only when they have tried them before and were satisfied with results. Usually, fragrances can be taken as example of such purchases, as mark-ups of in-store retailers remain higher than internet retailers.
Euromonitor International forecasts that direct selling is not likely to lose its dominant position to internet retailing in the coming five years period. In fact, both channels are predicted to expand their shares, which will result in total non-store Beauty and Personal Care sales expansion. Non-store Beauty and Personal Care channel is predicted to account for EUR35 million in Lithuania, EUR31 million in Latvia and EUR16 million in Estonia by 2015. According to Euromonitor International estimations, in 2015 direct selling versus internet retailing will hold the shares of 17% and 2% in Lithuania, 25% and 3% in Latvia, and 14% and 2% in Estonia of total Beauty and Personal Care market sales. Sales via internet are not likely to reach direct selling level by 2015 mainly due to good price and quality ratio provided by direct sellers, constant new product development, as well as reputable company names achieved by direct selling leaders.