Amazon dominates dietary supplement market in wake of Covid

Rachel Adams | Nov 08, 2022

Amazon's growth in the dietary supplements space skyrocketed during the Covid-19 pandemic. Now, it's leading the dietary supplements industry with more than $10 billion in annual sales.

That's according to data from SPINS/ClearCut Analytics showing Amazon's vitamin, minerals and supplements (VMS) sales are tracking at more than $10 billion annually—a figure greater than that of any other retailer, including brick-and-mortar giants Walmart, CVS and Target, said Daniel Harari, general manager of e-commerce solutions for SPINS, and co-founder of ClearCut.

Compared to other supplements retailers, Amazon's lead is significant. The second-largest retailer clocks in at around $6 billion in annual VMS sales, Harari said, followed by a handful of retailers that bring in more than $1 billion in annual VMS sales.

The analyst declined to disclose the names of the retailers, including the retailer in the No. 2 spot behind Amazon.

Amazon's gains in the dietary supplements space reflect the notable gains seen across the industry in recent years and, especially, the massive gains in e-commerce.

"BECAUSE AMAZON HAS AN INFINITE SHELF SIZE, MEANING THERE'S NOT A PHYSICAL AMOUNT OF SPACE WHERE YOU CAN FIT BOTTLES, THERE'S OVER 10,000 BRANDS ON AMAZON JUST IN THIS CATEGORY, AND WE'RE SEEING MANY, MANY HUNDREDS OF THOUSANDS OF PRODUCTS"

-- Daniel Harari, general manager of e-commerce solutions for SPINS, and co-founder of ClearCut Analytics

Per data from Nutrition Business Journal (NBJ), the supplements market achieved sales across all channels of $59.9 billion in 2021. That's up from $48.7 billion in 2019.

In 2020, the market saw double-digit growth of 14.5%, compared to 5.6% growth in 2019. In 2021, growth remained strong, albeit more modest, at 7.5%, according to NBJ data.

"2020 and 2021 were banner years," Daniel Fabricant, Ph.D., CEO and president of the Natural Products Association (NPA), said. "Everyone was doing everything they could to stay healthy, some even going above and beyond that, right?"

The Covid-19 pandemic brought, for many consumers, increased concerns around health and wellness that drove greater interest in dietary supplements.

Add to that lockdowns, in-person shopping restrictions and fears of contracting or spreading Covid-19, which funneled more consumers to the internet to make supplement purchases and caused what Harari described as a "four- to five-year acceleration in a matter of months" of people transitioning from in-person to online shopping.

"Covid forced many, many more people to have to buy online," he said. "They didn't have an option."

The pandemic, the analyst added, "expanded the demographic of people that were purchasing online versus going in the store very rapidly due to macro events that were just out of people's control."

In the dietary supplements segment, that shift dramatically increased the market power of the e-commerce channel, which according to Harari, Amazon dominates with 70-80% of VMS sales.

The e-commerce channel reached $12.1 billion in 2021 sales, per NBJ—more than double 2019's sales of $4.9 billion.

Not surprisingly, e-commerce made the largest bump of all channels in the dietary supplements market during the height of the Covid-19 pandemic, jumping a staggering 87.3% in 2020. In 2021, the channel grew another whopping 30%, according to NBJ.

Now, e-commerce is expected to comprise an estimated 22.2% of the total dietary supplements market in 2022, per NBJ. In 2019, before the pandemic, e-commerce market share was just 10.2%.

"We were expecting [e-commerce] market share to increase, and Covid really accelerated that into 2020, and in 2021," Claire Morton-Reynolds, senior industry analyst for NBJ, said. "For any channel to gain over 10% market share over that course of time is really impressive … and a lot of that's driven by Amazon."

Harari said Amazon's VMS segment saw double-digit growth across all categories in 2020 and 2021, and triple-digit growth in certain categories. Across its supplements category as a whole, he reported mid- to high-double-digit growth during that time.

"Numbers like 30%, 40%, 60%, 70%—up to over 100% for some categories," he said. "And it was just consistently growing at that rate for 18 months."

By 2024, NBJ expects e-commerce, mass market, and natural and specialty channels will be roughly even, each comprising about 25% market share, "with e-commerce being slightly larger," Morton-Reynolds said. "Amazon is a huge driver of that."

Historically, the natural and specialty channel, followed by the mass market channel, have maintained the lion's shares of the supplements market.

While Amazon's supplements growth has slowed substantially to about 2% annually, per Harari, its power in the market is significant.

"Any growth that we see now is growth over a number that is potentially two or three times larger than it was in 2019," he said. "In absolute dollars, it's still a relatively substantial number."

With easier access to the market comes more opportunity for innovation, and products that lack ingredient integrity, scientific substantiation and quality.

"We think of the retailers as gatekeepers, and we've had concerns that Amazon doesn't hold those same standards," Morton-Reynolds said. "When we can assume that Amazon is 70% of e-commerce and, by 2024, e-commerce will be a quarter of all supplement sales, what are our concerns within the industry when the retailers and buyers aren't acting as those gatekeepers?"

Natural and specialty retailers represent the largest channel in the dietary supplements market, according to NBJ, and they have played a vital role as an information resource for dietary supplements consumers.

"In terms of engagement, [Amazon is] a very different platform than going to a mom-and-pop health store who has a pharmacist on staff, who has a dietitian on staff, a nutritionist," Fabricant said. "That creates a divide."

At the same time, less gatekeeping means more opportunity for more products to get to market, which means more potential for innovation.

"Because Amazon has an infinite shelf size, meaning there's not a physical amount of space where you can fit bottles, there's over 10,000 brands on Amazon just in this category, and we're seeing many, many hundreds of thousands of products," Harari said. "What this causes as a result is a lot more innovation because you have brands of all sizes, companies of all sizes trying new things on Amazon, knowing they can reach people immediately."

And, eventually, those trends migrate to brick-and-mortar stores.

"Amazon is this kind of incubator of brands and trends and attributes," Harari said. "The ones that succeed are making their way over to the natural channel and then over to more conventional retail chains like the Krogers and the Targets and the Walmarts of the world."

As Amazon grows, so does the reality that retailers and brands face: figuring how to navigate an increasingly dynamic market environment.

Harari advised natural channel retailers to leverage information on Amazon to make decisions about what to put on the physical shelf. That means understanding the trends on Amazon, as well as only carrying brands that have a "managed Amazon space."

"Don't carry brands that are heavily discounting [on Amazon] the same product that's on your shelf," he said. "Only carry brands that are going to help manage their own Amazon space so that if the product is being sold for $30 on your shelf, it's going to be sold for $30 on Amazon."

Amazon, too, has a part to play. Fabricant underlined the need for the e-commerce giant to be more engaged in industry.

"We really do need to see more involvement from Amazon on the federal [and] state level," he said. "I think we all know the internet can't be policed in the same way that an independent retailer can be, if you will. Not joining arms with the rest of the community … doesn't help anybody in the long term," including Amazon, he said.Amazon did not respond to multiple requests for comment for this article.

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