The Digital Beauty Revolution

How Amazon and TikTok Are Reshaping the $107B Industry

The U.S. beauty market is undergoing a seismic shift as e-commerce giants like Amazon and TikTok Shop chip away at the dominance of traditional brick-and-mortar retailers. With consumers increasingly turning to online platforms for their beauty needs—and becoming less loyal to established brands—the industry is poised for a digital-first transformation.

The Rise of E-Commerce in Beauty

The U.S. beauty market, encompassing skincare, cosmetics, haircare, and nail products, has grown for five consecutive years, reaching $107.5 billion in sales in 2023 . Online sales, however, are outpacing in-store growth. E-commerce beauty sales surged 11.1% year-over-year (YoY) to $45.7 billion , while physical stores eked out a modest 2.8% gain , per NielsenIQ’s State of Beauty Report . Today, 43% of beauty dollars are spent online, up from 41% in 2022, with projections suggesting digital could claim 50% of the market within five years .

“Beauty is transitioning to a digital-first industry,” says Anna Mayo, VP of NielsenIQ’s beauty vertical. “This isn’t just about where people shop—it’s reshaping how they shop, what they buy, and their loyalty to brands.”

Amazon’s Dominance and TikTok’s Social Commerce Surge

Amazon is leading the charge, capturing 2.1 points of beauty market share YoY (and 7.3 points since 2021 ). Its growth stems from three key trends:

1. Increased purchasing frequency (64.1% of growth),
2. Shifts from mass retailers like Target and Walmart (30.9%),
3. New customers (5%).

Amazon’s “replenishment” model—where shoppers buy staples like shampoo or deodorant—has driven cart sizes up, often at the expense of competitors. The platform now sees double-digit growth across nearly all beauty categories.

Meanwhile, TikTok Shop is the dark horse. Dubbed the “fastest-growing beauty retailer NielsenIQ has ever tracked,” TikTok Shop ranks as the 8th-largest U.S. beauty e-commerce platform . Its success hinges on impulse purchases : 68% of social commerce beauty buys are unplanned, fueled by viral trends and influencer-driven discovery.

“TikTok’s ‘fun factor’ and Amazon’s convenience are squeezing traditional retailers from both ends,” Mayo notes.

The Loyalty Crisis: Why Brands Are Losing Their Grip

As e-commerce grows, brand loyalty is crumbling . Over the past two years, loyalty to beauty brands has dropped 20% , NielsenIQ found. In-store shopping traditionally favored trusted names, but online platforms have democratized discovery. Consumers now search for ingredients (e.g., hyaluronic acid or retinol ) rather than brands, commoditizing products.

On Amazon, 90% of beauty searches are unbranded , with only categories like deodorant (76% brand-specific searches) and hair color (71%) retaining stronger loyalty. Experimental categories like cosmetics and nail products see the lowest loyalty (58%).

Private-label brands, however, remain a minor threat—accounting for just 5% of beauty sales . Even in categories like bath products, national brands still dominate 92% of sales . “There’s room for retailers to grow private labels,” Mayo says, “but brands still hold the emotional connection.”

Brick-and-Mortar’s Struggle to Adapt

Physical retailers face a perfect storm:

• Stagnant innovation : In-store experiences haven’t evolved to compete with digital’s convenience or TikTok’s entertainment value.
• Theft-driven friction : Stores locking up products to curb theft has backfired, pushing customers online.
• Erosion of exclusivity : When Amazon offers the same products as Sephora or Ulta at competitive prices, the incentive to visit malls dwindles.

To survive, Mayo argues, retailers must lean into their “secret sauce”: experiential shopping, curated discovery, and loyalty programs . “Beauty specialty stores need to double down on what digital can’t replicate—like in-person consultations or exclusive launches,” she says.

What’s Next for Beauty?

1. Amazon’s Expansion : Expect deeper integration of AI-driven recommendations and subscription models to lock in repeat buyers.
2. TikTok’s Evolution : As social commerce matures, platforms like YouTube and Snapchat may introduce shoppable features, intensifying competition.
3. Brand Innovation : Legacy players must invest in digital storytelling and ingredient transparency to win back loyalty.
4. Private Label Push : Retailers like Target and Walmart could leverage their scale to boost affordable, exclusive beauty lines.

The Bottom Line

The beauty industry’s future is digital, but it’s not a zero-sum game. While Amazon and TikTok are redefining convenience and discovery, brick-and-mortar stores still hold 57% of sales . Their survival hinges on blending the tactile joy of in-store shopping with the agility of digital—a makeover long overdue.

As Mayo puts it: “If TikTok makes shopping fun and Amazon makes it frictionless, where does that leave everyone else? The answer will decide who thrives in the next era of beauty.”