Marc Jacobs once said, “Makeup is the finishing touch, the final accessory.” 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 U.S. But, the rise of the global skincare market, coupled with the societal and economic shifts resulting from COVID-19, could dramatically change the future of the cosmetics industry. 

The “Lipstick Effect” On Consumer Beauty Spending During Economic Downturns

During every economic recession from 1973 to 2001, spikes in unemployment in the U.S. were parallel with upticks in consumer cosmetics — with spending increases specifically linked to lipstick products leading to beauty mogul Estée Lauder coining the phrase “lipstick effect.” As the phrase suggests, when consumers face financial stress, they seek satisfaction from small indulgences. Looking good to feel better is the rationale for consumers’ prioritization of non-essential beauty product purchases when facing economic distress. During the Great Recession, a broader spectrum of beauty products experienced spikes in sales, causing the lipstick effect to represent a wider array of SKUs. 

The Lipstick Effect Gets A Makeover During COVID-19 

Although COVID-19 is a health crisis, its effects have already resulted in recession-like turmoil. Social distancing and spending more time at home appears to be inspiring consumers to embrace a new level of comfortableness — void of makeup in daily life. The surge in consumers working from home, reviewing the essentialness of each purchase and decreasing participation in social events may have prompted lip cosmetics sales to plummet 62.4% during the week of April 4, compared to the same time last year. But that’s not the whole story. Face and eye cosmetics sales declined while sales of personal care products surged. With access to nail and hair salons either unavailable or limited, personal care product sales indicate an increased need for at-home nail and hair care products. Hair care product sales spiked 82%, and nail care product sales increased by 9% as self-care blossomed in March, according to retail data platform NDP. 

Gen Z Could Be Powering Skincare’s Rise To Outshine Cosmetics In The Beauty Industry

The global beauty industry is facing a major transition. Even before COVID-19 became the catalyst for in-store cosmetics purchases to slip, shifting consumer values encouraged the embrace of skincare instead of cover up. From 2012 to 2019, the size of the global skincare market grew by 41.8%, and it is projected to continue its upward growth pattern, forecasted to hit a valuation of $189 billion by 2025. Much of the skincare industry’s growth can be attributed to Gen Z, as this generation has not embraced cosmetic products in a similar fashion to their generational predecessors. 

According to a survey by leading investment bank Piper Jaffray, in 2019, American teenagers showed an overall declining interest in cosmetics. The survey also highlighted a decline in the number of teenagers who wear makeup daily. Piper Jaffray Senior Research Analyst Erinn Murphy said, “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.” With GenZ spending power projected to exceed $140 billion, beauty brands, retailers and manufacturers will not likely ignore Gen Z’s values, but instead they will respond to GenZ’s desires and behaviors by increasing their promotion and production of skincare products. 

Social Media & Innovative Online Campaigns Reshaped The Beauty Industry

The global beauty industry has significantly benefited from advancements in digital marketing. Many beauty brand marketers deploy innovative online campaigns and heavily employ social media marketing tactics to reach consumers and engage current customers. The boom in digital content has empowered beauty brands to step away from the makeup counter and showcase their products in new ways. Social media helps beauty brands establish stronger connections with new and current audiences by posting engaging content that brings brand personas to life. 

As new niche and indie beauty brands enter the market, YouTube channels remain flooded with beauty tutorials and how-to content. User-generated content (UGC) and influencer marketing has helped brands like Glossier, Fenty Beauty, Kylie Cosmetics and ColourPop compete with legacy brands like L’Oreal and Estée Lauder. Social platform advancements such as Pinterest’s shoppable pins and Instagram’s in-app checkout elevated beauty brand marketing and evolved the shopping experience. 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. 

Cosmetics is not the only beauty sector experiencing boosts from social media. Social media opened up new avenues for purchasing and discussing skincare products, routines and trends. Instagram and YouTube content is helping skincare brands harness the power of visual experiences – a strategy which proved profitable for cosmetics. Skincare, which focuses on correction, remedy and preventive measures, previously sat in the shadow of its more glamorous counterpart, cosmetics. Not anymore.

Stephan Kanlian, head of a think tank at New York's Fashion Institute of Technology, noted 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. 

Beauty brand Summer Fridays, launched two years ago by two Instagram influencers, was based entirely on the sales of its single product: facemasks. Summer Fridays Co-Founder Marianna Hewitt said, “Everything we do as far as packaging, and boxes, and messaging, and photography should really be thought of on social, first and foremost.” The hashtag #facemask (pre COVID-19) produced more than 2.4 million images on Instagram. Consumers are finding brands that embrace their evolving values via social media, and they are displaying their use of products with UGC visual content. 

COVID-19 Accelerates Growth Of Online Beauty Sales & Ecommerce 

In-store sales reigned supreme for years, representing 81% market share in the beauty industry with consumer beauty spending largely influenced by special sales, unique products and rewards. In the past couple of years, discounted offers and loyalty programs drew consumers away from drugstores, pharmacies and department stores, transitioning more cosmetics buyers to purchase directly from brand websites. 

Most recently, with in-store shopping virtually impossible, COVID-19 appears to be accelerating a rise in beauty ecommerce. Online sales of self-care products were strong in Q1 2020, up 24% from 2019, according to market research firm NDP Group, with double-digit increases for makeup, skincare, fragrance and hair products. L’Oreal, the leading global beauty company, reported an increase of 52% in ecommerce sales in its first quarter financial results. L’Oreal attributes the rise in its ecommerce sales to a combination of conditions surrounding COVID-19 and the brand’s digital media and content expertise. Employing a people-based marketing strategy prior to COVID-19 helped L’Oreal sustain its ecommerce business. At the end of 2018, L’Oreal committed to leveraging its robust customer data to create more targeted marketing and rebrand itself as a beauty tech company. 

The beauty industry is on the cusp of a revolution. The societal shifts of COVID-19 amplified issues and weaknesses that were already prevalent in sales trends and shifting consumer values. A new reliance on data could become the hottest trend in beauty marketing.

Beauty brands struggling with brick-and-mortar sales woes should consider shifting their marketing strategies to leverage the power of their first-party data to better understand their customers and target audiences. To remain relevant and profitable moving forward, the most successful beauty brand marketers will utilize digital marketing strategies to acquire and retain customers, develop engaging content focusing on diversity, inclusion and social responsibility, and maintain transaction processes that prioritize convenience, optionality and affordability. 

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