The Beauty Industry Faces Its Biggest Challenge, Ever

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\"RRThe beauty industry is facing the biggest and most complicated period in its history. Some might say, “The beauty industry is broken.” Others may ask, “Are the days of ten-time markups on luxury makeup and skincare products numbered?” Luxury, while barely holding its own now, better be thinking about the day after tomorrow.

Here’s the rub: Do the transparencies enabled by social media and competing websites have premium products on the ropes?” Department stores that carry these luxury brands are fighting to find a good solution to disintermediation thanks to the internet. Even the big beauty companies that have been buying up promising startups are broadening their search for innovative, affordable concepts that will capture customers’ attention and imagination. Price points are pinching luxury brands and lots more acquisition targets with lower priced products are appearing on their menus. more often.

The growing mass market, enabled by digital opportunities, is in many cases infringing on the premium segment. A significantly more educated consumer is realizing that improved mass-market products are in many cases as good as prestige cosmetics. Mass, with their lower prices (in some cases much lower) will facilitate the exponential growth of this already dominant market segment. The numbers reveal all: The mass market today accounts for some seventy percent of all beauty sales.

Beauty companies — in particular Shiseido, L’Oreal and Estee Lauder — are acquiring and partnering with tech companies to gain expertise in artificial intelligence, augmented reality and other technologies. The dramatic shift to digital, particularly by the younger generation, has accelerated the race to replicate the online experience of trying on cosmetics in a store.

In this new experimental and aspirational world, premium brands are going to have to be ready to spin on a dime. New products, new distribution methods and new marketing concepts are three important legs on a brand’s stool. Traditional luxury companies will require a big dose of creativity to stay relevant.

New Directions

The good news for the beauty industry in general is that in the mass market, worldwide demand will continue to grow, especially in Asia and Latin America. New products will be fueled by the availability of new technologies as well as a demand for natural products made in a sustainable way. In some cases, the growth will be dramatic. Skincare will lead the way. The major competition in the category will be how to serve the exploding global customer base, i.e., China, the rest of Asia, Brazil, and the rest of Latin America.

Follow the Money

In China, a growing middle class will provide a significant market for beauty. In the case of the United States and some other countries, a much more complicated ethnic blending evolution will have to continue to take place. The blending of ethnicities will add a new dimension to product development, while companies will concurrently have to serve traditional demographic market segments. The availability of apps that can color match skin tones will make online purchasing dramatically easier.


Overall distribution methods are also changing. We are witnessing declines in department store beauty sales and both brands and stores are trying to figure out how to reverse this trend. Drugstore chains are making a huge push with some success, taking advantage of the opportunity to add more products and catch the movement toward mass beauty. Supermarket and hypermarkets are introducing or broadening their beauty categories. Then add in online sales channels that charge membership fees and source their own products from all over the world. Major brands in Switzerland, Japan, Korea, France, the United States and Italy all utilize the same 10-20 factories.

Investment Spending

While the mass market is set for growth, the self-care industry is exploding and increasing its influences on the beauty industry. Women are beginning to look at beauty products and cosmetic procedures in a new way. They see purchases as an investment rather than an indulgence.

Brands must listen and understand the message this self-care industry is sending. Women today want to reach a level of fulfillment. This means bettering their lives, utilizing a wide range of new products and services that help them reach their wellness goals. They are excited by new products and devices. Today dermatologists are just beginning to use skincare injectables instead of using skincare products on the skin surface. Plastic surgery has peaked and fewer procedures are being performed. Instead, they are being replaced by a variety of new non-invasive products and techniques that provide a more natural look and are far less expensive. Women and men want to age more naturally.

The number of products that could be sold in this area is virtually unlimited including beauty skincare products, injectables, makeup and hair products. Add to that, dermatological products, self-care conferences, videos, devices for use at home and specialized fragrances. There are wonderful opportunities for both established and startup companies in beauty and healthcare to stake their ground in the growing self-care market.

Facing Up to Savvy Consumers

New customers are ready to try products that are marketed transparently and creatively. Better yet, these products need to be sustainable and embrace some philanthropic cause. The movement for authenticity and the power of the truth has become mainstream. Whether it’s prestige or mass, consumers want a dose of honesty with their aspirations for looking good and feeling well. Beauty today is more complicated than it’s ever been. With change comes opportunity for the aware and disaster for the sleepwalkers. So, stay awake and listen to what your customers want. If you don’t, you won’t have any.



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