In 2022, the beauty market, comprising skincare, fragrance, makeup, and haircare, raked in a staggering $430 billion in revenue. Despite global economic crises and uncertainties, beauty has showcased remarkable resilience, experiencing a continuous upswing in all categories.
The global context in the next few years
After a robust recovery from the COVID-19 pandemic’s peak, the beauty market is expected to soar even higher, reaching approximately $580 billion by 2027. This growth is projected at a steady rate of 6% annually, on par with or slightly surpassing other consumer segments like apparel, footwear, eyewear, pet care, and food and beverages.
Established brands and retailers must adapt to stay ahead in this fiercely competitive landscape. Consumers are eager to explore new brands, with 42% expressing excitement for fresh options. Additionally, shoppers now freely browse different price points, while online and offline stores significantly impact their buying decisions.
The driving force behind this transformation is the younger generation. They are redefining beauty standards and reshaping their perspectives on sustainability, the role of influencers, self- care’s significance, and much more.
The beauty industry and ecommerce
Between 2015 and 2022, e-commerce in the beauty industry experienced remarkable growth, nearly quadrupling its share, now surpassing 20%, with more potential for expansion. In comparison, apparel and footwear had a 2022 e-commerce share of approximately 30%, while toys and games reached around 65%.
In 2022, online sales accounted for about 25% of global beauty product sales (GLG Insights), solidifying the shift towards e-commerce spurred by the impact of the COVID-19 pandemic. As digital channels flourish, the focus on customer experience becomes crucial. Social media, mobile-friendly websites, and user reviews are pivotal to a brand’s success.
Facebook’s data reveals that 33% of facial skincare consumers in the US primarily buy products online, and 44% of US beauty consumers are influenced by social media posts. (Facebook data)
Social media’s significance in e-commerce is undeniable, with platforms like Instagram and Pinterest transforming into selling channels. However, using these platforms to communicate brand values, establish a unique social tone, and connect with customers personally is equally vital while ensuring a genuine commitment to sustainability without greenwashing.
Understanding consumer behavior at a local level is vital for a global brand. Identifying preferred online platforms and popular products in each market can be achieved through collaboration with marketing localization experts. Their insights will help tailor strategies to resonate with and effectively engage target audiences.
Structural and competitive dynamics are shifting
As the beauty industry experiences shifting growth trends, “where to play” will become as crucial as “how to win.” Traditional global strategies will become less effective, prompting brands to reassess their approaches and introduce more tailored and nuanced strategies.
Unlike before, geographic diversification will be paramount when brands primarily focus on China and the United States. While these two countries will continue to wield significant influence, exploring opportunities in various regions is essential. China’s beauty market is projected to reach $96 billion, and North America’s is expected to hit $114 billion by 2027.
Furthermore, a promising avenue for growth lies in the premium pricing segment. The real luxury and ultra-luxury beauty markets could grow from around $20 billion to approximately $40 billion by 2027.
5 game-changing trends in the beauty industry beyond 2023
Clean Beauty and Natural Ingredients
Consumers are increasingly educated about the ingredients in beauty products and seek brands that prioritize transparency and safe, practical components.
The organic and natural cosmetics market in the US was valued at nearly $10 billion in 2022 (GlobeNewswire) and is projected to exceed $14 billion by 2026. Canada also boasts one of the world’s largest natural and organic cosmetics markets.
This trend presents a significant revenue opportunity. The global clean beauty market, valued at $7.22 billion in 2022, is anticipated to grow at a healthy CAGR of 12.13%, reaching $14.36 billion by 2028, as reported by Daedal Research.
Despite the increasing demand for clean beauty, the market faces challenges such as the absence of a regulatory body or industry-wide standards and potential threats from counterfeit beauty products.
Sustainability and circular beauty
Environmental concerns have spurred a growing trend toward eco-friendly packaging in the cosmetics industry. Some brands are adopting recycled materials and easily recyclable packs to meet consumer demands for improved packaging sustainability. Others are launching concentrated products to reduce single-use packaging waste and exploring alternative materials to decrease reliance on oil-based plastics, as highlighted in GlobalData’s Beauty and Grooming Packaging Opportunities report.
Leading global brands have already embraced this sustainable approach, as evident in Viori shampoo bars and Chanel’s bio-based packaging.
As the world reopens in 2023, the travel beauty sector also embraces sustainability and circular beauty practices. Innovations like Youth To The People’s recyclable travel minis and Glow Recipe’s refillable glass bottles cater to eco-conscious travelers, offering a way to maintain their skincare routine while prioritizing the environment.
The demand for specialty active ingredients is surging
Consumers nowadays seek sustainable and natural ingredients with scientifically proven efficacy. In their pursuit of better products, they are becoming more inclined to explore specific elements and try lesser-known brands like Timeless, Maelove, and The Ordinary.
As a result, active ingredients such as hyaluronic acid, vitamin C, vitamin E, collagen, coenzyme q10 (coq10), and others are gaining prominence. The global active cosmetics market is experiencing rapid growth, with a projected CAGR of 12.64% from 2021 to 2027, as indicated in a recent report by Arizton Advisory and Intelligence. Among applications, skincare is the fastest-growing segment, followed by haircare.
In 2023, the value-for-money trend is expected to persist in the beauty industry. Economic uncertainties, supply chain challenges post-Covid, and the crisis in Ukraine influenced the industry in 2022. Consumers now seek mindful and eco-conscious brands offering simplified yet effective products that resonate with the current climate.
A study from February 2022 revealed that 91% of US beauty and personal care consumers prefer products with visible research results (GCI Magazine). Brands can enhance transparency by optimizing packaging, product pages, and the point of sale, instilling trust in consumers and ensuring they perceive the product as valuable.
Drunk Elephant’s ‘suspicious six’ messaging is a notable example of this approach. Additionally, French brand Saie Beauty addresses consumers’ desire for multifunctional products with their Liquid Lip Balm, blurring the lines between lip balm and lip gloss.
The influence of gen Z
Gen Zers thoroughly assess brands in their quest for value. Besides product effectiveness and transparency, they insist that brands genuinely stand for something. Sustainability, diversity, and inclusion are essential, but they also value brands with an authentic and relatable image, offering a story that goes beyond mere products and fosters a sense of community among consumers.
For Gen Z, beauty products and services are about feeling good and expressing their true selves, challenging societal norms related not only to physical beauty but also to gender and traditional product categories. They seek to break free from cultural ideals and embrace a more inclusive and authentic approach.
Next steps for regional markets
Brands should capitalize on their understanding of global trends while remaining attuned to region-specific preferences.
To connect with customers effectively, consider the resonance level. For instance, US consumers now show a 40% greater willingness to try new beauty products, with Euphoria-style and experimental makeup looks gaining popularity. (Power Reviews)
In Canada, the prestige beauty industry is rapidly recovering, with rising mascara, blush, and tinted moisturizer sales. Meanwhile, in Mexico, consumers prefer natural products with an ethical focus.
K-beauty continues to lead with its vegan and cruelty-free movement in South Korea, poised to influence the APAC region and the global industry.
As a global brand, striking a balance is essential to appeal to regional customers while maintaining consistent and compelling messaging across markets. Key strategies for the coming year include:
- Tailoring messaging to local trends and reevaluating digital strategy to align with regional marketing goals
- Using local social media accounts to engage customers in their languages
- Providing culturally relevant content.
The beauty and cosmetics industry is projected to experience significant growth, with the global makeup market expected to reach approximately $85 billion by 2024. Despite the challenges faced by the industry in 2023 and beyond, it is crucial to prioritize and invest in a digital-first regional strategy.