The companies are vying for a piece of the "prestige" cosmetics industry, an estimated $6 billion-a-year business that markets such brands as Calvin Klein, Philosophy, Benefit, Lorac, and Elizabeth Arden. The allure of this business, analysts and executives agree, are the high margins and high demand.
But will women swap the personal attention and expertise they get in department stores for the cold click of a mouse? Many industry analysts agree that much in the experience is lost from the beauty counter to the computer.
"The intangibles of cosmetics can't be captured over the Internet," said Andrew Bartels, an analyst with Giga Research, a Cambridge, Massachusetts-based Internet research firm. "You can't smell over the Internet; colors aren't terribly good over the Internet."
To be sure, the cosmetics industry relies heavily on the "touch-and-feel" aspects of the product. When shopping for beauty products, customers often try on the products to get a feel for the colors and textures of each brand. While doing so, sales representatives and beauticians can often sell the customer more than was planned.
"It's going to be hard for many of these companies to inspire the impulse purchase," said Andrea Williams, an e-commerce analyst at E*Offering.
But many of the online beauty retailers are convinced otherwise.
Gloss.com cofounder Sarah Kugelman says her site seeks to create an "experience" for each brand--much like the independent makeup counters in department stores--but with a better level of service online.
"[In department stores], customer service is a thing of the past," said Kugelman, whose company launched a preview version of Gloss.com on October 5. "The women are on commission, and there's often a sense of intimidation at the beauty counter."
Gloss.com rival Beauty.com, which is slated to open at the beginning of November, plans to revolutionize the experience of buying cosmetics by introducing such customer service perks as access to beauty experts. For example, the company has signed on beautician-to-the-stars Kevyn Aucoin--who's famous for his work with Gwenyth Paltrow--to give recommendations on the hottest styles and trends online.
"Women will buy things because Kevyn says," asserts Paul Woods, senior vice president of business development for Beauty.com, a privately funded upstart in New York that is expected to be a powerhouse in the industry.
Through technology such as Gloss.com's "virtual makeover," customers can try on products virtually by choosing a model's image closest to her own. Shoppers can even pick out an entire look--such as makeup for day or night--on one of the existing models and go straight to the shopping page. If the customer doesn't like the products once they're delivered, she can return them without charge--a benefit offered by most of the cosmetics sites.
Live chat and 1-800 customer service phone lines--which are a part of Gloss.com's and Beauty.com's offerings--also help customers in the process of choosing products, without imposing on them.
But some believe women won't turn to the Web for shopping assistance. Instead, they will order monthly replenishments online and skip the trek down to the mall.
"Too often, five consumers wait for every one clerk; and who needs one-to-one advice when merely replacing a dried up tube of black mascara?" said Evie Dykema, an Internet retail analyst with Cambridge, Massachusetts-based Forrester Research.
Giga's Bartels agrees. "For commodity items such as lipstick and nail polish--where some people find a particular brand and keep using it and using it--the Internet will be great," he said. "But this kind of activity is not going to radically change the cosmetics business."
Forrester projects that the online health and beauty products industry, which includes cosmetics, will grow from $509 million in 1999 to $10.4 billion in 2004--or 5 percent of the total sales in the industry. About 24.8 percent of women online also shop online; and as more Web sites focus on content for female audiences, more women will shop via the Internet.
One of the advantages to the cosmetics business is that there is continuous demand. Eve.com, backed by Idealab and one of the first movers in the industry, sees high demand among women across the United States. "We're providing access to women in Portland or Tennessee to brands that they normally wouldn't have access to," said Mariam Naficy, one of the founders of Eve.com, which currently sells about 100 brands.
Beauty.com, which aims to take the "glamazon" approach to the industry (read: controlling the category by offering the most products, like Amazon.com), will launch with more than 300 brands in November. Because well-connected industry executives founded the upstart, many of the key partnerships it needs are already in place.
As Beauty.com's Woods summarizes: "In terms of Internet models, this one looks perfect. The items are small, they're in high demand, the shipping costs are lower, and they don't take up a lot of space in a warehouse. [Plus], the margins are stable-and they're high."