PORT WASHINGTON, NEW YORK, March 21, 2000 – Online beauty sales accounted for approximately 1% of the $25 billion-plus total U.S. beauty market in 1999, but could be poised to gain significant market share in the near term, according to a new e-Visory Report released by leading marketing information provider The NPD Group, Inc. and Media Metrix (NASDAQ: MMXI), the pioneer and leader in Internet and Digital Media measurement. While a relatively small percentage of Internet users reported previously purchasing beauty products online, nearly two-thirds of those polled said they would consider doing so in the future.

According to the report, fragrance, makeup and skin care products accounted for 2% of all products sold online. Fifteen percent of consumers with Web access have shopped on the Internet for fragrances, makeup, skin care, bath and body or hair products. Eight percent of these consumers have purchased a beauty product on the Internet.

Boding well for the future of the industry, NPD BeautyTrends^® reports that 62% percent of consumers surveyed for the e-Visory Report said they would consider purchasing beauty products online. Thirty-three percent said they were very or extremely likely to purchase beauty products online in the future. Among women only, this number rose to 37%.

Convenience, not price, is driving most of these consumers to the Internet for beauty products. Seventy-five percent of online beauty shoppers cited "shop any time" as a reason for choosing the Internet over traditional retail stores for beauty purchases. By contrast, only 31% indicated they shopped online for beauty products to find better prices. Online beauty shoppers value time over money, and beauty e-tailers are listening: many of the recently launched beauty e-commerce sites do not offer discounted prices, but they do offer coupons and other incentives for online shopping.

Brand name emerged as another important factor in online beauty purchasing decisions. Sixty-four percent of online beauty purchasers said they mostly buy products that they have tried before, evidence of how important replenishment has been to the success of beauty e-commerce sites. Only 5% of purchasers said they mostly buy products they have never tried. Another 31% said "it’s fairly equal" – they purchase both products they have tried before as well as products new to them. NPD BeautyTrends expects replenishment and brand equity to remain key drivers of online beauty sales.

Supporting these findings, a separate NPD brand analysis determined that brand names matter more than price to consumers in the fragrance, makeup and skin care categories. These shoppers understand the differences between brands, show loyalty to their favorite brands and will seek out and pay premium prices for their brands. On the other hand, while bath and body users know and respect the differences between brands and tend to have favorite brands, these shoppers try to find their top brands at lower prices.

"Brand equity will take on increased importance in the world of beauty e-commerce, especially as well-known department store brands previously without Web presence introduce proprietary Websites," said Karyn Schoenbart, NPD group president for Tracking Services. "Existing pure-play sites, many of which offer specialty or niche brands, will have their work cut out for them if they intend to compete with the well-established brands that are heading to the Web. Those that survive on the Net will be those carrying the key brands. These could be the big brands but also the ‘hot’ brands. E-tailers who have secure relationships with the most valuable brands will remain standing as competition heats up."

"We expect to see more consolidation among beauty e-tailers as existing sites scramble to carry the top brands and as better-known brands’ proprietary sites start to steal market share from the specialty brands marketed online. We’re also seeing blurred lines between mass and class in the online beauty market. Prestige beauty products traditionally sold only in department stores are featured next to mass beauty products on some e-commerce sites. This detracts from the perceived exclusivity of the prestige brands, one reason some of the top brands have not authorized sales on pure-play sites that carry several brands," said Timra Carlson, vice president, NPD BeautyTrends.

Although rankings of the top beauty e-commerce sites constantly shift, the most visited beauty e-commerce sites are those that have existed for a longer time and have a high level of advertising. Sites that focus on health and beauty are more visited than beauty-only sites, according to the e-Visory Report. Health-related sites typically carry mass merchandise beauty brands. Beauty-only sites tend to carry only prestige or exclusive brands.

For more information or to purchase the e-Visory Report, contact Mary Morrissey at
(516) 625-4898, or by e-mail at mary_morrissey@npd.com. An e-Visory Report on e-commerce in
consumer electronics is forthcoming.