2022 was a big year for the beauty industry, with a flurry of celebrity releases and cutting-edge shopping strategies. The capacity of brands to control expenses, reduce operational risk, and maintain consistency will determine their success in the upcoming year. Organic sales to companies like Mac Cosmetics and Bobbi Brown declined by 5% for the three months ending on September 30, while net sales dropped by 11% to $3.93 billion. Over a third of the company's sales come from China, which makes it particularly reliant on that country. L'Oréal also claimed that sales in its luxury segment were impacted by China, despite reporting a 9% growth in net sales to €9.58 billion for the same quarter. With only about 20% of revenues coming from the region, it is less dependent on China.
According to Schneidman, "all indications point to a challenging holiday season and a challenging global economic picture for the next 12 to 24 months." He predicts that cost and operation will define 2023, despite the fact that beauty firms have been largely focussed on growth over the past ten years. As prices rise and consumers' spending power may decline, we'll see who can tighten up their operations and finances.
Product Innovation
Brands are concentrated on being necessary to consumers while accruing revenue and streamlining their businesses. Product innovation is one approach to do this. Younger consumers have a new penchant for "skinimalism," choosing straightforward regimens and less wasteful packaging, in contrast to previous years when consumers would flaunt an enormous #shelfie of beauty items.
Fewer but more inventive launches are the brands' response. Instead of continually releasing new SKUs to create novelty and excitement, focus instead on developing what is already available. The hybrid makeup-skincare-fragrance product Plein Air complexion balm was introduced by Hermès in September. In order to simultaneously improve skin and enhance cosmetics, Mac Cosmetics announced a performance-based skincare collection. With nourishing components like peptides and vitamin E, which are often found in serums and creams, Laura Mercier is introducing a new foundation and powder.
Consumers are increasingly seeing wellness through a much broader and more complex prism, one that takes into account not only physical activity and diet but also general physical and mental health as well as appearance. Alvarez & Marsal's Schneidman claims that people are spending more money on goods and services that support greater health. "Hyaluronic acid and other ingredients are increasingly used in cosmetics. Even tinted moisturisers serve a purpose by giving you skin that is even and matches your skin tone while also moisturising your face.
Emilie Hood, senior beauty research analyst at Euromonitor International, predicts that product innovation in formulations will remain a major trend across all international markets. Consumers will favour multi-use items over elaborate routines and heavy cosmetic looks, she says, which will result in lower volume sales than before the epidemic but higher unit costs.
Additional Retail Outlets
In order to target and sell to consumers, prestige brands have historically operated in a high-end retail setting, such as upscale department shops. But businesses are putting convenience and accessibility first, relying on unconventional partnerships and outlets, in an effort to connect with today's consumer, who researches and shops across numerous touchpoints both online and offline.
To Allure's physical and online beauty stores in July, Ulta Beauty, the biggest beauty retailer in the US, introduced brands like Fenty Beauty, Olaplex, Tula, and Peter Thomas Roth. Ulta has also introduced shops-in-shops at more than 100 Target locations countrywide and online, with the aim of expanding this number to 800 in the US in the ensuing years. With a rollout across each of Kohl's 1,100 locations, the French international retailer Sephora stepped up its US footprint in August. In addition, cult brands Aesop and Byredo are now offered in airports through Gate Zero, a brand-new concept store by streetwear publisher Highsnobiety and travel industry behemoth Gebr Heinemann.
The field is also being joined by new participants. Following the purchase of cosmetics shop Violet Grey, luxury e-commerce platform Farfetch and its retail outlet Browns entered the beauty industry in April. the opened up a wider market for both new upstarts like Haeckels and well-known brands like La Mer and Charlotte Tilbury. After shutting down its stores in the UK in 2005, Sephora declared in November that it will re-enter the market.
According to Schneidman, "As companies tighten their cost structures and realise they need to increase sales, [they] will be going to other markets to create incremental sales growth rather than trying to continue to win in their own backyard." The appropriate alliances can "bring traffic into your store that you otherwise wouldn't have" in "a very respectable way," he continues.
Using Celebrity Appeal
With premium skincare on the rise, big names have been aggressively capitalising. Celebrities like Ciara, Pharrell, and Jared Leto, as well as influencers like Charlotte Palermo and Tina Craig, as well as a newer generation of creators like Emma Chamberlain and Hyram, are all putting out businesses in the current global beauty market. According to Schneidman, famous people are constantly looking for new cash streams. "It's an old story," someone once said.
Because they already have a strong following, celebrity-driven brands make a lot more noise than conventional ones, according to Schneidman. It makes sense, in his opinion, to take advantage of the opportunity "to increase incremental penetration, footprint, and distribution for a short to medium term," as most superstars have a limited window of relevancy before fans turn their attention to another celebrity.
Some critics wonder if celebrity brands are driving rival companies out of a market that is becoming more and more cutthroat. Whether or not a well-known person created the business, Schneidman thinks that execution and reputation will be essential to survival. "It can take a lot longer to generate that awareness if your brand is founded on a product, mission, or value proposition around diversity and equality," he continues. However, once you do, that allegiance may endure forever.
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