The beauty and personal care industry is one that thrives on the in-person shopping experience. With a full 79% of overall spending at least partially done in-store,1 we prefer to discover new brands and products through sight, touch, and smell.
We as consumers are influenced by the branding and ethos of a beauty care store like Ulta or Sephora, and malls are a place to shop for that unknown product we won’t be able to live without. Brand loyalty is still built with the help of out-of-store experiences, but in-store retail has been a crux to the industry’s $500 billion in annual revenue.
So how will an industry survive in a new world — one where our shift to online purchasing is likely to remain high even after a return to normal? One where a younger, more digitally connected consumer base makes up the majority of our economy? One where habits around makeup and skincare have been fundamentally altered by a global pandemic?
Few would be surprised to hear that 2020 saw a huge shift from in-store only purchases to those made online. What is astonishing is just how quickly and how dramatic the shift was. In the decade before the pandemic, the share of online-only purchases went from 6% to 16% — an annual growth rate of just over 15%, or about 1.2% a month.2
A global pandemic later, that rate nearly tripled — growing 44% in twelve months. The $263 billion increase in eCommerce sales from 2019 to 2020 was more than that previous 4 years’ worth of growth combined. Today, more than 21% — 1 out of 5 five purchases made — is done entirely online.2
Our industry saw many winners and losers. Skincare was up, but color cosmetics were down. Professional and salon services suffered, while do-it-at-home brands flourished. Grocery stores and big-box retailers were considered more essential than malls and boutique stores which foundered under the weight of global lockdowns. These measures remained for so long they began to change our behavior in how we buy beauty and personal care items.
Analysts predict that a return to normal will repair much of the damage the pandemic created, and they’re likely right. However, no matter what we do, we will never live in a pre-pandemic world again. Some of the shifts in our purchasing habits will stick with us even after it’s no longer a necessity — the conveniences of online shopping were simply brought to life.
When the pandemic started and lockdowns were being established, retail stores were among the most affected businesses. According to a McKinsey report, 30% were closed after the initial outbreaks1 — and with those closures went in-store testers and professional makeup consultants.
Fortunately, beauty care had already made impressive advancements in augmented reality, which helped stabilize sales numbers. AR made for a convenient ally in attracting the large swath of consumers who suddenly found themselves without their traditional sources for beauty care products. Esteé Lauder, Ulta, Sephora — even Amazon had AR tools at the ready.
Wherever they are, customers can try on hundreds of lip shades, tinted moisturizers, blushes, and more. Users can dye their hair as many times as they like without the messy cleanup. Some apps will even simulate new hairstyles and wardrobe choices for a total makeover. Intrinsicly connected to a store’s eCommerce engine, customers can easily take the next step to buy everything that completes their look.
Furthermore, every data point is added to a stockpile of customer feedback — research that will lead to better products and new product categories. This information is also being used in the convergence of the physical and virtual worlds, as in products like HiMirror, which analyzes and tracks the effectiveness of the skincare products a person uses.
There’s the adage that everything old is new again, so it’s no wonder that sachet packets have become retro. What was once a mainstay marketing tactic is now an impactful way to onboard new customers.
Using trial sizes can help brands and retailers in a multitude of ways. New direct-to-consumer companies can introduce themselves without the need for commitments to full-size pricing. Established CPGs can showcase their deep bench of product offerings and how each works in harmony with the other. Retailers and subscription box services can promote an amalgamation of brands that appeal to specific audiences or personal care needs.
The try-it-before-you-really-buy-it approach works particularly well in the age of eCommerce because it helps to take the anxiety out of not being able to see or smell the actual product. Customers can test the waters and experiment with new brands, eventually converting into loyal customers.
And loyalty is key — since the pandemic began, analysts are finding that 36% of consumers are trying new product brands and among those consumers, 73% plan to continue incorporating new brands into their routines. A full 80% of customers who started using a new private label product during the pandemic plan to continuing doing so once it is over.4
When brands do convert new customers, many are moving to remove shopping from the shopping experience. Through subscribe-and-save options, customers can agree to have refills and replacements shipped automatically, in predetermined intervals, for a discounted rate. It’s like bulk purchases made on layaway.
Brands love it because it helps foment product demand and sales projections. Customers initially loved it because of the discounted prices, but during the pandemic, the benefits of not having to worry about stocking everyday essentials became abundantly clear.
When the pandemic forced closures of stores and upended the market, constants in product supply were no longer constant. Toilet paper was a hot commodity, malls disappeared as hubs of commerce, and it wasn’t unusual to find toothpaste short in supply at the grocery store.
Consumers can now subscribe to almost any product — shampoo, shaving cream, perfume, skin serum, even foundation or nail polish. Again, DTC brands had a leg up, already having well-oiled eCommerce apps that helped facilitate subscriptions. Having been versed in the quick processing of small orders, which helps in making these types of automated shipments financially solvent.
With our surge of online shopping, the influencers who champion brands and provide quality reviews found themselves in the spotlight. With stores closed, the conversation around personal and beauty care was happening online.
The largest block of spending power now belongs to millennials, who are the most connected generation we’ve ever seen. Beyond already doing a larger share of online purchases compared with other generations, some 90% of millennials — about 72 million people — are on social media. A full 32 million more millennials subscribe to social media than to cable or satellite TV.5,6
This puts these brand ambassadors into clear focus, acting as a peer-to-peer network for recommending new brands and taking the guesswork out of product exploration. Whatever your personal needs are, there’s an influencer who focuses on that type of demographic or consumer niche.
Influencers also provide a human aspect to a brand in a way that not all celebrity endorsements can. Influencers for better or worse are seen as equals to consumers (and not out-of-touch celebrities). When social issues rose to the top of people’s minds, influencers who were proficient in a cause or issue were able to talk plainly about their views and opinions (and often highlighted brands that subscribed to their ethical code).
Though we’re still searching for a lot of answers in regards to how the pandemic will affect us over the next decade, it’s clear that 2019 is ancient history. The definition we used to have for a consumer — where they shopped and how they researched new products has been changed forever.
When the effects of the pandemic settle, it’s possible we’ll see some market trends return to normal. However, it’s more likely that this revolution in retail behavior will see permanent shifts and we will look back at retail in beauty through ‘before COVID’ and ‘after COVID’ glasses.