- Daily Zen
Cosmetics see a downturn in COVID-19 but skincare industry sees renewed interest.
Almost all industries are feeling the COVID-19 effect, and the beauty industry is no exception. With livelihoods in peril due to the lockdown and faced with recession and rising unemployment, people are budgeting and spending only on essentials.
Companies were hoping for the lipstick effect to kick in to save the industry. Lipstick effect is an economic phenomenon in which consumers spend money on smaller indulgences in times of recessions and economic downturns. But that seems a long way off.
The global beauty industry generates $500 billion in sales a year and accounts for millions of jobs, directly and indirectly. In 2019, the global beauty industry was valued at $532 billion, with cosmetic products – inclusive of eye, face, nail and related accessories – accounting for $6 billion of sales in the US.
But the first-quarter sales have been weak, and there have been widespread store closures all over the world. Another effect of the pandemic has been the work from home phenomenon, and the promotion of masks and social distancing has led to people not being too taken up with makeup.
A McKinsey report estimates that the global beauty-industry revenues could fall 20 to 30 per cent in 2020. And a second wave in the latter part of the year could lead to a 35 per cent decline.
Traditionally cosmetic purchases have been made in-store. In-store shopping accounted for up to 85 per cent of beauty-product purchases prior to the COVID-19 crisis. Even the younger generation of millennial and Gen Z, who are tech-savvy and prefer shopping online, made 60 per cent of their cosmetic purchases in stores.
Most people who are either working from home or are in a stay at home situations are not too taken up with keeping up with appearances. All A grade brands have seen a 55 to 75 per cent fall in fragrances and cosmetic purchasing. But not all sub-categories of beauty care are seeing a decline. Skincare and hair care products and bath-and-body products are seeing renewed interest.
Zalando, Europe’s largest fashion and lifestyle e-commerce marketplace, has reported an uptick in pampering and self-care beauty categories such as skin-, nail, and hair-care, and aromatherapy, candles and detox products; all are up 300 per cent, year on year. Amazon has reported a similar trend. Though it has seen a decline in makeup sales in the US, sales for nail-care products (218 per cent), hair coloring (172 per cent), and bath-and-body products (65 per cent) are way up.
This phenomenon of personal care products seeing better sales had been happening before Covid-19. There has been a shift in consumer preferences to skincare rather than cover-ups. Especially the younger generation is showing a shift away from cosmetics like makeup to a healthier outlook of preservation rather than indulging in expensive purchases of makeup. Skincare industry, which focuses on remedy and preventive measures, was ignored in preference of glamorous cosmetics products earlier, but not anymore.
Stephan Kanlian, head of a think tank at New York’s Fashion Institute of Technology, said in a news report that 2018 was the first year skincare sales outpaced cosmetics in the beauty industry, much of which was due to the growth of social media. “Today’s consumers are more sophisticated in their searches for beauty and skincare products, however. Shoppers want clean ingredients, eco-friendly packaging and relatability. Social media content empowers consumers to quickly find the products they identify with their values and needs,” he added.
The global skincare market grew 42 per cent from 2012 to 2019 and is expected to reach a valuation of $189 billion by 2025. Senior Research Analyst Erinn Murphy says, “The increased use of skincare is cannibalizing some makeup usage, and so it becomes a bit of a self-reinforcing cycle — when consumers start to feel better they feel less need for coverage, and so less makeup is needed.”
Several luxurious brands are offering discounts online of up to 40 per cent. Promotions help move unsold seasonal inventory. This route will be seen even when stores reopen to regain footfall and get rid of seasonal make up inventory build-up. Online sales have picked up as reported by Amazon and other brands selling online, but they have not offset the in-store purchase loss. Reopening of China has shown no resurgence in shopping for beauty products. Retailers and brands are turning to digital marketing and promotional sales online with tie-ups with social media platforms and influencers to make up for the losses and to clear up inventories.
Social media influencers are affecting brand sales by promoting indie and homegrown skincare brands. So many brands now rely on social media channels as an extension of their customer’s buying experiences, encouraging seamless transaction journeys from “like” to cart. Market research firm NDP reports that online sales of self-care products went up 24 per cent from 2019 in the first quarter of 2020.
L’Oreal, the leading global beauty company, reported an increase of 52 per cent in ecommerce sales in its first-quarter financial results. The company attributes its online sales performance to the Coid-19 situation and the brand’s digital media and content expertise. Most leading brands in the beauty industry will have to adopt digital marketing strategies to remain profitable. Focusing on content, tie-ups, diversity, inclusion and social responsibility along with ease of transactions, variety and affordability are the new ways to promote sales and stay relevant.