Now would not seem to be a great time to introduce a retail business, much less one devoted to luxury items. And reviving an Internet site devoted to prestige beauty products sounds borderline masochistic, given that investors long ago hung consumer e-commerce companies out to dry.
So when Gloss.com, a purveyor of high-end cosmetics, skin care and perfume went live late last month after a hiatus of more than a year, it appeared, at first glance, to be a case of unfortunate timing. But a second look indicates that the site may have a fighting chance, thanks to its backing by some of the biggest names in the beauty industry, including Estee Lauder, Chanel and Clarins.
That those companies anointed Gloss as the sole Internet-only retailer to carry an array of their products means the site has an immediate advantage over rivals like Drugstore.com's Beauty.com and LVMH Moet Hennessy Louis Vuitton's Sephora.com. But analysts said Gloss still faced a multitude of challenges -- not the least of which was maintaining peace among a group of investors who are fierce competitors offline.
"This is the first example in this market where directly competitive manufacturers have joined forces to offer products that compete side by side at traditional stores like Macy's," said Evie Black Dykema, an analyst with the consulting firm Forrester Research. "They're certainly unlikely bedfellows, and the fact that it took so long to launch raises questions about the quality of the working relationship between them."
`A good time for starting dotcoms'
Gloss executives claim the working relationships among the various parties are fine, and note that the site's debut went off, as planned, in time for the holidays. Furthermore, said Peter Hirshberg, Gloss.com's chief executive, now is an ideal time to start a dotcom business. Not only has the site been able to attract employees at lower salaries than during the dotcom boom, he said, but the company is under no pressure from its corporate parents to grow quickly and offer shares to the public.
Gloss was purchased for an undisclosed sum in April 2000 by Estee Lauder, which then received investments from Chanel and Clarins, which agreed to market their skin care products, makeup and perfumes on the site. These brands account for most of the sales in the US$7 billion prestige beauty market, with one exception: L'Oreal's Lancome.
Until recently, these companies deemed online retailers unworthy of their products. As the ranks of online beauty sites swelled in 1999 -- by some estimates, there were more than 300 at the peak -- the high-end manufacturers said they could not trust their brands to start-ups that might vaporize at a moment's notice. Instead they used their own sites to sell online.
In some cases, the brands allotted limited product lines to department store Web sites, like Federated Department Stores' Macys.com. Meanwhile Internet-only companies like Eve.com, now defunct, and BeautyJungle.com, now part of fashionmall.com, were left with no prestige brands to sell as they struggled to attract customers and make a profit from cheaper, lower-margin goods.
Some analysts have suggested that the prestige brands had planned all along to wait for the competition to die off, then set up a site and reap Internet profits directly.
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