Introduction

The global cosmetics market is expected to hit $390 billion by 2020, and based on current trends, eCommerce will play a significant role in overall industry growth. In the US, online purchases accounted for more than 10% of beauty sales in 2016. Europe’s online beauty sales are projected to grow by more than 8% on a compound annual basis over the next few years. But APAC is the most promising region, and is predicted to hold 40% of the total market share for the industry by 2020.

Moreover, forecasts indicate that the online share of total beauty sales will be considerably higher than the overall luxury market for a number of reasons: beauty products are inexpensive compared to other luxury items, making them appealing to a broader audience; their lower price reduces concern that products won’t ‘fit right’ – a risk that’s almost been eliminated with the growing number of virtual apps allowing prospective buyers to check whether a specific shade of lipstick or foundation suits their complexion; and beauty shoppers have a propensity for remaining faithful to their brands, leading to repeat purchases of products that don’t need to be re-tested.

But cosmetics retailers can’t afford to be complacent. Booming sales are no guarantee that customers will keep returning to the same online store, which makes providing a positive customer experience critical for nurturing and gaining loyal customers.  And the value of loyalty shouldn’t be underestimated – engaging a new customer costs five times more than maintaining an existing one, and returning customers spend three times more than one-time shoppers.

As online volume increases, merchants need to offer a seamless, frictionless experience across channels and cater to the needs of cross-border shoppers. A large part of this is understanding how to manage CNP fraud. This means limiting the use of high-friction validation measures (excessive payment security checks are behind 18% of cases of shopping cart abandonment), and ensuring fraud systems can deal with overseas and mobile orders.

Riskified has extensive experience protecting cosmetics merchants from CNP fraud. In this report, we share insights into cosmetics shopping patterns and fraud trends, as well as best practices for effectively handling transactions without compromising users’ shopping experiences.