23 data to include in the business plan of your beauty e-store

This article was written by our expert who is surveying the industry and constantly updating the business plan for a beauty e-store.

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Ever wondered what the ideal inventory turnover ratio should be to ensure your beauty e-store remains stocked without overcommitting capital?

Or how many unique visitors need to convert on a typical Saturday to meet your sales goals?

And do you know the optimal customer acquisition cost for an online beauty retailer?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your e-commerce business.

If you’re crafting a business plan, investors and financial institutions will scrutinize these figures to gauge your strategy and potential for success.

In this article, we’ll explore 23 essential data points every beauty e-store business plan needs to demonstrate you're prepared and poised for growth.

A successful beauty e-store should aim for a gross margin of 60-70% to ensure profitability

A lot of production companies' pricing strategies in the beauty industry are designed to achieve a gross margin of 60-70% to ensure profitability.

This margin allows e-stores to cover various costs such as marketing expenses and operational overheads, while still leaving room for profit. Additionally, it provides a buffer against market fluctuations and unexpected expenses, which are common in the fast-paced beauty sector.

However, the ideal gross margin can vary depending on factors like product type and target market.

For instance, luxury beauty products might aim for a higher margin due to their premium pricing and brand positioning, while mass-market products might operate on a slightly lower margin to remain competitive. Ultimately, understanding these nuances helps beauty e-stores tailor their strategies to maintain profitability while meeting customer expectations.

Marketing expenses should ideally be 10-15% of total revenue, especially in the first year to build brand awareness

Insiders often say that marketing expenses should ideally be 10-15% of total revenue, especially in the first year, to build brand awareness for a beauty e-store.

In the initial stages, a beauty e-store needs to invest significantly in marketing to establish a strong brand presence and attract a loyal customer base. This percentage allows the business to effectively utilize various marketing channels, such as social media campaigns and influencer partnerships, which are crucial in the beauty industry.

However, this percentage can vary depending on factors like the target audience and the competitive landscape.

For instance, if the beauty e-store is targeting a niche market, it might need to spend more to reach a smaller, more specific audience. Conversely, if the store already has a well-established reputation or a unique product offering, it might be able to allocate a smaller percentage of revenue to marketing while still achieving its goals.

The average cart abandonment rate for beauty e-commerce is 70%, so optimizing checkout processes is crucial

Most people overlook the fact that the average cart abandonment rate for beauty e-commerce is a staggering 70%, making it essential to optimize checkout processes.

In the beauty industry, customers often browse and add items to their cart without completing the purchase due to complex checkout procedures or unexpected costs. This high abandonment rate can be attributed to factors like shipping fees, lengthy forms, or a lack of preferred payment options.

Optimizing the checkout process can significantly reduce abandonment rates by addressing these issues.

However, the abandonment rate can vary depending on specific cases, such as the type of beauty product or the target demographic. For instance, luxury beauty products might have a lower abandonment rate due to brand loyalty, while budget-friendly items might see higher rates due to price sensitivity.

Beauty e-stores should aim for a customer acquisition cost (CAC) that is 30% or less of the customer lifetime value (CLV)

It's worth knowing that beauty e-stores should aim for a customer acquisition cost (CAC) that is 30% or less of the customer lifetime value (CLV) to ensure profitability and sustainable growth.

By keeping CAC at or below this threshold, businesses can ensure that they are not overspending on acquiring new customers, which is crucial for maintaining a healthy profit margin. This balance allows the company to reinvest in other areas such as product development, marketing, and customer service, ultimately enhancing the overall customer experience.

However, this ratio can vary depending on specific factors such as the type of products sold and the target market.

For instance, luxury beauty brands might have a higher CLV, allowing them to afford a slightly higher CAC while still maintaining profitability. On the other hand, e-stores targeting budget-conscious consumers may need to keep their CAC even lower to ensure they are not eroding their profit margins.

The average return rate for beauty products is 5-10%, so clear return policies and product descriptions are essential

Maybe you knew it already, but the average return rate for beauty products is between 5-10%, which is why having clear return policies and detailed product descriptions is crucial for a beauty e-store.

Beauty products often involve personal preferences and skin compatibility, which can lead to returns if the product doesn't meet customer expectations. Additionally, factors like color accuracy and fragrance can vary from person to person, making it essential for customers to have a clear understanding of what they're purchasing.

By providing comprehensive product descriptions and clear return policies, e-stores can help manage customer expectations and reduce the likelihood of returns.

However, return rates can vary depending on the type of product; for instance, skincare items might have a lower return rate compared to makeup, where shade matching is more critical. Ultimately, ensuring that customers have all the information they need before making a purchase can lead to higher customer satisfaction and fewer returns.

Inventory turnover should happen every 30-45 days to keep products fresh and avoid obsolescence

Believe it or not, maintaining an inventory turnover every 30-45 days is crucial for a beauty e-store to keep products fresh and avoid obsolescence.

Beauty products often have a limited shelf life, and frequent turnover ensures that customers receive items that are fresh and effective. Additionally, this turnover rate helps the store to quickly adapt to changing trends and customer preferences, which are particularly dynamic in the beauty industry.

However, the ideal turnover rate can vary depending on the type of product and its demand.

For instance, seasonal items or limited-edition collections might require a faster turnover to capitalize on their popularity. On the other hand, staple products with consistent demand might not need as rapid a turnover, allowing for a slightly longer cycle without risking obsolescence.

Subscription models can increase customer retention by 20-30% and provide steady cash flow

Experts say that subscription models can significantly boost customer retention and ensure a steady cash flow for beauty e-stores.

By offering a subscription service, beauty e-stores can create a sense of ongoing commitment from their customers, encouraging them to stay loyal to the brand. This model also allows customers to receive their favorite products regularly and conveniently, which enhances their overall shopping experience.

Moreover, the predictability of subscription revenue helps businesses maintain a consistent cash flow, which is crucial for planning and growth.

However, the effectiveness of subscription models can vary depending on factors such as the product type and the target audience. For instance, a subscription model might work better for consumable beauty products like skincare or makeup, where customers need regular replenishment, compared to one-time purchase items like beauty tools.

Offering free shipping can increase conversion rates by up to 50%, but should be strategically managed to avoid eroding margins

Few production companies' strategies are as impactful as offering free shipping in the beauty e-store industry.

When customers see that they can get their favorite beauty products delivered without extra cost, it often leads to a significant increase in conversion rates. This is because the perceived value of the purchase rises, making it more enticing for customers to complete their transactions.

However, while free shipping can boost sales, it must be strategically managed to prevent cutting into profit margins.

For instance, offering free shipping on high-margin products or setting a minimum purchase threshold can help maintain profitability. Additionally, the impact of free shipping can vary based on factors like customer demographics and the competitive landscape, so it's crucial to tailor the approach to specific market conditions.

Beauty e-stores should aim for a repeat purchase rate of at least 20% within the first six months

Please, include that in your business plan.

Aiming for a repeat purchase rate of at least 20% within the first six months is crucial for beauty e-stores because it indicates customer satisfaction and loyalty, which are essential for long-term success.

When customers return to make additional purchases, it not only boosts revenue but also reduces the cost of acquiring new customers, which can be quite high in the competitive beauty industry. Moreover, repeat customers are more likely to become brand advocates, spreading positive word-of-mouth and attracting new buyers.

However, this target can vary depending on factors such as the type of products sold and the store's target demographic.

For instance, stores selling consumable beauty products like skincare or makeup might naturally see higher repeat purchase rates compared to those selling luxury or one-time purchase items. Additionally, stores targeting younger audiences might need to adjust their strategies, as these consumers often have different purchasing behaviors and brand loyalties.

Personalized product recommendations can boost average order value by 10-15%

A precious insight for you, personalized product recommendations can significantly boost the average order value in a beauty e-store by 10-15%.

When customers receive tailored suggestions based on their past purchases or browsing behavior, they are more likely to discover products that genuinely interest them. This not only enhances their shopping experience but also encourages them to add more items to their cart, thereby increasing the average order value.

Moreover, personalized recommendations can introduce customers to complementary products they might not have considered, such as pairing a foundation with a primer or a lipstick with a matching liner.

However, the effectiveness of these recommendations can vary depending on factors like the accuracy of the data used and the customer's shopping habits. For instance, a customer who frequently buys skincare products might respond better to recommendations for new serums or moisturizers, while someone interested in makeup might be more inclined to purchase additional cosmetic items.

A successful beauty e-store should have a mobile conversion rate of at least 2%, given the high mobile traffic in this industry

This is insider knowledge here, a successful beauty e-store should aim for a mobile conversion rate of at least 2% because the beauty industry sees a significant amount of traffic from mobile users.

Given the high mobile traffic, a conversion rate below 2% might indicate that the site is not effectively engaging its audience or that there are barriers to purchase on mobile devices. This could be due to factors like poor mobile optimization, complicated checkout processes, or lack of mobile-friendly payment options.

However, it's important to note that this benchmark can vary depending on the specific target audience and product offerings of the e-store.

For instance, a store targeting younger demographics might see higher conversion rates due to their comfort with mobile shopping, while a store with luxury beauty products might have a lower rate as customers take more time to make purchasing decisions. Ultimately, understanding the unique characteristics of your audience and continuously optimizing the mobile experience are key to achieving and maintaining a successful conversion rate.

SEO should account for 20-30% of traffic, with a focus on long-tail keywords specific to beauty trends and products

Most of the production companies' SEO strategies aim for 20-30% of their traffic to ensure a balanced and sustainable flow of visitors.

For a beauty e-store, focusing on long-tail keywords specific to beauty trends and products is crucial because these keywords often have lower competition and attract highly targeted audiences. This means that potential customers searching for these terms are more likely to be interested in specific products, leading to higher conversion rates.

However, the percentage of traffic from SEO can vary depending on factors like the store's brand recognition and the effectiveness of other marketing channels.

For instance, a well-known brand might rely less on SEO because it already has a strong customer base, while a new or niche store might need to invest more in SEO to build its audience. Additionally, the focus on long-tail keywords can shift based on seasonal trends or emerging beauty products, requiring constant adaptation to maintain effectiveness.

Influencer partnerships can drive 20-40% of new customer acquisition, especially when targeting niche beauty communities

Not a very surprising fact, influencer partnerships can significantly boost new customer acquisition for beauty e-stores, especially when they tap into niche beauty communities.

These communities are often highly engaged and trust the influencers they follow, making them more likely to try products recommended by these influencers. When an influencer with a dedicated following endorses a product, it can create a sense of authenticity and credibility that traditional advertising often lacks.

Moreover, influencers can tailor their content to resonate with their audience, ensuring that the product is presented in a way that aligns with the community's values and interests.

However, the effectiveness of these partnerships can vary depending on factors like the influencer's engagement rate and the relevance of the product to their audience. For instance, an influencer with a high engagement rate but a general audience might not drive as many new customers as a smaller influencer with a highly targeted niche following. Therefore, choosing the right influencer is crucial for maximizing the impact of these partnerships on customer acquisition.

Email marketing should achieve an open rate of 15-25% and a click-through rate of 2-5%

This valuable insight into email marketing metrics is crucial for a beauty e-store aiming to engage its audience effectively.

Open rates of 15-25% are considered healthy because they indicate that a significant portion of recipients are interested enough to open the emails. A click-through rate of 2-5% suggests that the content is compelling enough to drive action, which is essential for converting interest into sales.

These benchmarks can vary based on factors like the target audience and the quality of the email list.

For instance, a highly engaged audience that has opted in for updates on new beauty products might show higher open and click-through rates. Conversely, if the emails are not personalized or relevant, the rates could fall below these benchmarks, indicating a need for strategy adjustment.

A beauty e-store should maintain a current ratio (assets to liabilities) of 1.5:1 for financial stability

This insight highlights the importance of maintaining a current ratio of 1.5:1 for a beauty e-store to ensure financial stability.

By having a current ratio of 1.5:1, the store ensures it has enough assets to cover its liabilities, which is crucial for managing unexpected expenses or downturns in sales. This ratio acts as a buffer, providing the store with the flexibility to invest in new products or marketing strategies without risking financial health.

However, the ideal current ratio can vary depending on the specific circumstances of the e-store.

For instance, a store with high inventory turnover might operate efficiently with a lower ratio, as it quickly converts inventory into cash. Conversely, a store facing seasonal sales fluctuations might need a higher ratio to ensure it can meet its obligations during slower periods.

Offering a loyalty program can increase customer retention by 5-10% and encourage repeat purchases

This data does not come as a surprise.

Loyalty programs in a beauty e-store create a sense of exclusivity and belonging for customers, making them feel valued and appreciated. This emotional connection encourages them to return to the store, leading to a 5-10% increase in customer retention.

Moreover, these programs often offer incentives like discounts or free products, which motivate customers to make repeat purchases.

However, the effectiveness of a loyalty program can vary depending on factors such as the target audience and the specific rewards offered. For instance, a program that offers personalized rewards based on a customer's purchase history might be more successful in retaining customers than a generic one. Additionally, the ease of use and accessibility of the program can also impact its success, as customers are more likely to engage with a program that is straightforward and easy to navigate.

Live chat support can increase conversion rates by 10-15% by addressing customer queries in real-time

Yes, live chat support can indeed boost conversion rates by 10-15% for a beauty e-store by addressing customer queries in real-time.

When customers shop for beauty products online, they often have specific questions about product ingredients or skin compatibility. Having a live chat option allows them to get immediate answers, which can help them make a confident purchase decision.

This real-time interaction reduces the likelihood of customers abandoning their carts due to unanswered questions.

However, the effectiveness of live chat support can vary depending on factors like the quality of the responses and the availability of chat agents. If the chat support is slow or unhelpful, it might not lead to the desired increase in conversion rates.

Beauty e-stores should allocate 3-5% of revenue for website maintenance and updates annually

Did you know that beauty e-stores should allocate 3-5% of their revenue for website maintenance and updates annually?

This allocation is crucial because a well-maintained website ensures a smooth user experience, which is essential for retaining customers. Regular updates also help in keeping the website secure from cyber threats, which is particularly important for e-commerce platforms handling sensitive customer data.

Moreover, the beauty industry is highly competitive, and a visually appealing website can make a significant difference in attracting and retaining customers.

However, the percentage of revenue allocated can vary depending on the size and complexity of the e-store. Smaller e-stores with limited product offerings might require less frequent updates, while larger stores with a wide range of products and features may need to invest more to keep everything running smoothly.

Seasonal product launches can boost sales by up to 20% by creating urgency and excitement

This data suggests that seasonal product launches can significantly boost sales by up to 20% because they create a sense of urgency and excitement among consumers.

In the context of a beauty e-store, these launches often coincide with popular shopping seasons like holidays or special events, which naturally attract more customers. The limited-time availability of these products can lead to a fear of missing out (FOMO), prompting quicker purchasing decisions.

However, the impact of these launches can vary depending on factors such as the target audience and the uniqueness of the product.

For instance, a product that aligns well with current beauty trends or has a strong influencer backing might see a more significant sales boost. On the other hand, if the product doesn't stand out or if the market is already saturated, the increase in sales might be less pronounced.

Effective use of user-generated content can increase trust and conversion rates by 5-10%

This data point highlights how leveraging user-generated content can significantly boost trust and conversion rates for a beauty e-store.

When potential customers see real people using and reviewing products, it creates a sense of authenticity and relatability. This authenticity can lead to increased trust, as shoppers are more likely to believe the experiences of fellow consumers over traditional advertising.

Moreover, user-generated content often provides diverse perspectives on how products work for different skin types and preferences.

However, the impact of user-generated content can vary depending on factors like the quality and relevance of the content. For instance, high-quality images and detailed reviews are more likely to influence purchasing decisions than vague or poorly presented content. By effectively curating and showcasing this content, beauty e-stores can harness its full potential to drive conversions.

A beauty e-store should aim for a net promoter score (NPS) of 50 or higher to ensure customer satisfaction and loyalty

Actually, a beauty e-store should aim for a net promoter score (NPS) of 50 or higher to ensure customer satisfaction and loyalty because it indicates a strong level of customer advocacy.

In the beauty industry, where personal recommendations and word-of-mouth are crucial, a high NPS reflects that customers are not only satisfied but also willing to recommend the store to others. This is essential for building a loyal customer base and attracting new customers through positive reviews and referrals.

However, the ideal NPS can vary depending on the specific market segment or target audience of the beauty e-store.

For instance, a niche luxury beauty brand might need a higher NPS to maintain its premium reputation, while a mass-market brand might find a slightly lower score acceptable if it has a broader customer base. Ultimately, understanding the expectations and preferences of your specific audience is key to determining the right NPS target for your beauty e-store.

Video tutorials and product demos can increase engagement and conversion rates by 15-20%

It's very common for video tutorials and product demos to boost engagement and conversion rates by 15-20% in a beauty e-store.

These videos provide visual and practical insights into how products work, which helps customers make informed decisions. When shoppers see a product in action, they can better understand its benefits and application techniques, making them more likely to purchase.

Additionally, video content can create a more personal connection with the audience, as it often features relatable influencers or experts.

However, the impact of these videos can vary depending on factors like the target audience and the type of product being showcased. For instance, a detailed tutorial on a complex skincare routine might be more effective for an audience interested in skincare, while a quick demo of a lipstick shade could appeal to those looking for fast and easy solutions.

Establishing a product return variance below 3% month-to-month is a sign of strong product quality and customer satisfaction.

A lot of beauty e-stores aim to keep their product return variance below 3% month-to-month because it indicates strong product quality and customer satisfaction.

When customers are happy with their purchases, they are less likely to return products, which means the store is meeting or exceeding their expectations. A low return rate suggests that the products are of high quality and that the descriptions and images on the website accurately represent what customers receive.

However, this benchmark can vary depending on the type of products sold and the target audience.

For instance, a store selling high-end beauty products might naturally have a lower return rate because customers expect premium quality and are willing to pay for it. On the other hand, a store with a younger demographic might experience higher return rates due to more experimental purchasing behavior, which could affect the variance. Understanding these nuances helps businesses tailor their strategies to maintain or improve customer satisfaction and product quality.