The traditional funnel is breaking. Discovery happens in video. Consideration stretches across platforms. Returns eat margin. Inventory write-offs silently erode profit. Customer acquisition costs rise. Growth without discipline leaks cash.
The brands that win in 2026 and beyond operate with a new playbook: beauty ecommerce unit economics first, scale second.
Disclaimer: This article combines insights from industry research and public financial disclosures from sources like BCG, McKinsey, NIQ, Oberlo (global e-commerce growth outlook), THG), and Ulta Beauty (loyalty member scale and revenue contribution).
This article breaks down what that means and how to operationalize it.
Beauty used to follow a simpler path:
Awareness → Consideration → Purchase → Repeat.
Today, the journey is fragmented and nonlinear:
Top-line growth hides three silent margin drains:
At the same time, loyalty economics show that repeat purchase — not acquisition — drives structural advantage. Ulta generates >95% of sales from 44.6m loyalty members.
Growth is no longer about pushing more traffic.
It is about designing systems that:
Let’s break this down.
Video in beauty is not just awareness. It drives measurable decisions.
Data shows:
If video influences product selection upstream but doesn’t receive the last click, budgets shift away from it, despite its causal impact. This creates a measurement trap: You cut the very channel that reduces uncertainty and drives higher-intent sessions.
Yet many brands still allocate budgets based on last-click ROAS. That creates a structural distortion. Influence happens upstream, while investment decisions are made downstream.
Video reduces uncertainty before checkout. It answers the questions that drive hesitation in beauty:
The state of beauty today is not a lack of performance channels. It is a measurement gap. Brands that fail to capture incremental influence risk underfunding the very formats shaping purchase decisions.
If you allocate a budget based on different and more complex attribution models, you are the winner here!
The health and beauty return rate averages around 6%. Each return costs approximately $29 (£27).
That figure compounds across reverse logistics, customer service, payment fees, and in some cases lost inventory value. Returns are not neutral transactions. They directly impact contribution margin.
Most beauty returns stem from expectation gaps rather than defects. The primary drivers remain consistent:
Each reflects a breakdown in alignment between promise and experience.
As acquisition costs rise, the economic tolerance for preventable returns shrinks. A one-percentage-point reduction in return rate can materially improve margin at scale. For a £10m business, moving from 6% to 4.5% returns can recover £150,000–£200,000 in profit before growth.
The state of beauty commerce is shifting: return management is no longer operational housekeeping. It is central to beauty ecommerce unit economics.
Returns are visible. Inventory write-downs are slower and often larger.
THG reported:
Beauty assortments amplify inventory risk due to:
When sell-through decelerates but purchasing decisions assume peak velocity, markdowns follow. When markdowns fail, accounting adjustments absorb the difference.
Revenue can grow while profitability quietly declines.
The state of beauty growth today demands tighter synchronization between marketing velocity and inventory discipline. Campaign acceleration without aging control converts demand generation into margin compression.
NIQ reports TikTok Shop holds 9.8% share in the UK.
That is meaningful distribution and meaningful operational pressure. Social commerce compresses the entire cycle:
Discovery → Purchase → Delivery → Review → Return
Into days.
Without coordination between content teams, merchandising, supply chain, and customer support, volatility increases. Viral demand without depth planning results in stockouts. Refund rates spike. Customer trust erodes.
Ulta reports:
This level of penetration shifts economics fundamentally.
High loyalty density:
In an environment where global e-commerce growth is expected to decelerate toward 2028–2029, loyalty becomes more than a retention channel. It becomes the foundation of predictable revenue.
The state of beauty e-commerce today shows a widening gap between brands dependent on continuous acquisition and those building repeat-driven ecosystems.
The new model depends on:
Influence × Conversion × Returns Control × Inventory Discipline × Loyalty LTV.
Top-line growth remains visible. But profitable growth now depends on how well brands manage:
But growth is becoming less forgiving. Margin leaks that once hid behind rapid expansion are now fully exposed. The brands that win will align discovery, operations, and retention around one principle: profitable scale.
Discovery must reduce returns. Content must match inventory depth. Acquisition must feed loyalty. Velocity must respect aging risk.
Unit economics is the competitive battlefield now.
