The growing social threats facing retailers today

When L’Oréal’s (positive) US results came out April 18th, they contradicted statements made by Ulta’s CEO just 2 weeks earlier: “U.S. retailer Ulta Beauty earlier this month rattled the market with comments about a faster-than-expected slowdown in the US that hit shares across the sector.”

So, who’s right?

Our analyses side with L’Oreal, and our hypothesis is that if TikTok’s explosive impact on the beauty category has been a boon for socially savvy brands, it poses a growing threat for “traditional” retailers that don’t put in place the right counter-measures. Let’s take a look at some of the factors impacting retailer success:

1. Retailers face growing risks of dis-intermediation from multiple category stakeholders, starting with brands championing TikTok

#TikTokMadeMeBuyIt is not just a hashtag: it’s a real-life phenomenon fuelled by:

• Time on the platform: consumers 18-54 spend well over a third of their social media time on TikTok

  

• Its meritocratic algorithm: the very best, most deeply engaging posts get most of the oxygen, whereas on Instagram, a lot of the attention goes to less engaging posts just because they come from large accounts (oligarchic algorithm)

• The very posts on TikTok also boast rich comments sections, which play a convincing role in the branded exposure, adding authenticity/relatability to the branded exposure

• An endless stream of unfiltered, “independent” UGC (many of which go viral): surveys show these posts are key to overcome barriers to purchase 

No surprise then that brands and retailers under-represented on TikTok tend to underperform:

At the same time, DTC brands powered by best-in-class TikTok are doubling their gains by re-applying their skills on Instagram, translating into spectacular gains on search, site traffic, sales:

2. The retailer dis-intermediation is accelerated by creators not disclosing brand ties, and re-directing hordes of engaged viewers to their storefronts. A recent EU Commission “sweep” concluded what’s been visible to anyone looking carefully: a majority of influencer-led engagement comes from improperly labelled posts.

The appearance of authenticity allows these (undeclared) endorsements to perform much better, and rack up (est.) billions in engagement.

It was only a matter of time until most creators would set up their own storefronts,* siphoning buyers from traditional social-to-IRL store journeys.  

3. Multiple sampling-related dynamics are reducing traditional retailer clout:

   • The proliferation of “beauty boxes,” advent calendars and other sampling tactics compete for attention, usage and share of wallet

   • The multiplication of savvy influencers-turned-sample resellers compounds the growth of sampling — it is one of the key growth drivers of the fragrance category ⬇️

   • All of these samples and minis received by mail disable one of brick and mortar retailers’ competitive edges: the possibility to test, smell, try products before buying.

Implications of these dynamics for “traditional” retailers include 

1. Doubling down on TikTok owned mastery (more so than quantity) to achieve once again their pre-TikTok share of attention in beauty

   • Update content codes on both TT and IG (tone of voice, storytelling, use of components, i.e. sounds, effects, texts)

2. Measuring performance not with quantity metrics (followers, posting frequency, views) but quality metrics, key to nurture communities (compare sol de janeiro and rhode to Ulta and Sephora results ⬆️)

3. Lowering reliance on the now dated “squad” approach and influencer-centric content strategy, esp. on TT and IG.

   

   Brands and retailers that rely too heavily on influencers can alienate consumers looking for unfiltered, trustworthy points of view

4. Giving consumers more reasons to visit stores — this should become a source of content, and replace some of the many recommendations for products that can be bought anywhere, including competitors!

   

   Too much formulaic influencer content outside the stores, recommending products viewers can buy anywhere

5. Last, in no particular order, the combined rises in social search, sampling and affiliate clout should invite additional re-thinking of priorities.

Most of the above also provides re-applicable food for re-thought for brands on what to improve, experiment on and invest in.

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Footnotes

*TikTok Shop likely to steal a lot of traffic from all retailers. Beauty is its top category right now.

**SemRush’s numbers don’t exactly match Similar Web’s, but what matters most is the spectacular evolution in the gap, which is consistent across the board

About the author: 20+ years experience in insights & marketing mix at P&G, marketing & media consultancy at McKinsey, head of Europe at L2, co-founder at eBench and Rethink x Social. Have worked with over 250 clients teams across 100+ companies in a dozen categories.

About Rethink x Social: we’re a boutique marketing consultancy, backed by our proprietary tool that tracks and analyses hundreds of thousands of accounts, surfacing insights on trends, best practices, category leaders, and content excellence. We help clients on everything from investment priorities, to social strategies. Our most recent R&D emphasis has been on video content codes, tackling tone of voice, storytelling/editing/pacing principles, the roles of subtext, sounds, protagonists, content big ideas.