The beauty industry was in a state of flux due to a multitude of factors such as a shift in the retail landscape to online, technology innovations like AI-ML, IoT, AR / VR, brands born digital first, ethical and sustainable ingredients, APAC as a growth engine for beauty industry, etc. These changes were accelerated due to the advent of the pandemic, where it became harder for consumers to shop in-person and digital interactions started becoming a key driver for growth. New digital tools have helped mitigate the lack of in-person interaction at stores to some extent.
In this paper, we take a detailed look at some of the key trends that beauty companies need to account for from an innovation, marketing, sales and distribution perspective going forward.
Shift to Direct to Consumer (DTC)
Traditionally, big beauty brands relied heavily on wholesale department stores for selling their products. The distribution between wholesale and DTC was traditionally 80:20, but with consumers hesitating to go to stores during the pandemic, the wholesale business plummeted with some beauty brands losing 80% of their wholesale sales. On the other hand, online DTC sales skyrocketed, with practically every day resembling Black Friday sales. This changing trend pushed the beauty industry’s fundamental shift toward online channels. This includes changes to all aspects of the consumer journey like:
Coming of Age for Beauty Tech
Cosmetic companies, both big and small, doubled down on integrating technology with beauty products. The key aspects of this shift include:
Move to Hyper Personalization
Beauty Companies are increasingly focused on consumer intimacy to create a personalized, engaging, and immersive consumer experience to foster consumer loyalty. Initiatives in this space include:
There is a growing trend of using natural, sustainable, and local products that are ethical. Also, beauty is focusing on becoming more inclusive to include general neutral products, products for Gen-X and baby boomers, children’s beauty care etc. The key aspects of this trend include:
Over the last few years, social commerce has played a bigger role in the beauty industry. Some trends in this space include:
To sum up, the operating model for the beauty industry is fundamentally changing. This encompasses all aspects of the value chain including sales & marketing, product innovation, manufacturing, and supply chain. All these functions are getting impacted due to digital transformation changes. Beauty companies have to innovate and invest in the right tools and operating model to survive and thrive in the new digital world.
Consumer Goods & Life sciences, Wipro Ltd
Vinay Kavde is a consulting practitioner who works with Retail, CPG, Distribution, and Manufacturing clients in the areas of B2B / B2C e-commerce, omni-channel, supply chain, etc.