How COVID-19 is changing the world of beauty

The cosmetic market has always been a very resilient sector, but how will the sector adapt to the global COVID19 crisis? In this blog we are going to share the key aspects of the McKinsey and Company study that analyses how the pandemic has affected the beauty world.

The market currently generates $500 billion in sales and accounts for millions of jobs. Due to covid-19, the global beauty industry that comprises skin care to color cosmetics, hair care fragrances and personal care) has decreased its first-quarter sales and even has forced to close some stores.

The industry has been smart and has fastly started to launch products that adapt perfectly to the current market with hand sanitizers and other cleaning agents, also providing free beauty services for frontline response workers.

The short-term effects of Covid19

Consumers have always been loyal to the beauty market even in times of global crisis like the one we suffered in 2008: the cosmetic market had a small sales decrease but it bounced back quickly in 2010.

As for COVID-19, market data proves that this is the biggest recession for sales in the beauty sector since in China sales fell 80% in February of 2020 and then bounced back in March with only a 20% decrease. This quick rebound might be explained by the lipstick index which states that people consider lipstick as an affordable luxury which they can buy despite going through a tough economic phase.

How are selling points changing due to covid19?

Before COVID-19 the majority of consumers bought their cosmetic products at stores, even millennials preferred going to shops than buying online (60%). Due to the pandemic, stores were forced to close and therefore, approximately 30% of the beauty industry market was shut down. These new openings will take more than a year to reopen again and will even make stores not be able to open again. Here are several ways that covid19 has changed how cosmetic beauty is being sold:

Online sales have increased but haven’t compensated the decline in in-store sales:

e-commerce sales in the beauty sector have scaled up upto 20-30% in webshops like Sephora US or Amazon.

Beauty products at essential retailers are down: while other markets such as food haven’t been affected by covid since their usual mass-stores and retailers continue to be opened, in the cosmetic sector mass beauty stores and chains have been forced to close their doors to consumers. Therefore, consumers have also spent 50% less on beauty products than usual.

China shows that though they can reopen stores again, the in-store shopping return has been slow: the post-covid has demonstrated that despite revenge spending, sales have not fully recovered. The traffic remains down 9 to 43 percent compared with pre-COVID levels. Malls have also experienced a slow recovery since their reopenings: there is still a 30-70% decrease in sales in the first quarter of 2020.

Brands and retailers are using promotions in order to attract more consumers and be able to clear inventory. Several prestige brands are being forced to use upto 40% discount Promotions also help move unsold seasonal inventory. As beauty-product brick-and-mortar stores reopen, we expect to see more promotions aimed at reclaiming customer foot traffic.

How is covid affecting the sales of different cosmetic products?

Covid-19 has changed our daily routines: from having to go to our office to do our meetings to online calls and working remotely. This has indeed affected the cosmetic sector since people wear less makeup and fragrances. Therefore products such as foundations or lipsticks have decreased in sales. Nevertheless, due to the mandatory use of face masks, skin health has been affected in a negative way: people are experiencing more rashes, irritation due to the lack of fresh air and ventilation. As a consequence, there has been an increase in the demand of skin care products for daily routines and cosmetic treatments such as skin-care, hair-care, and bath and body products which appear to be benefiting from the self-care and pampering trends.

Other products from the beauty industry that have increased their sales due to the pandemic needs is soap. According to NPD, which tracks the consumer spending and point-of-sale data, it states that the sales of luxury hand soap in France has increased 800% in March 2020 when the country faced the first lockdown. The famous e-commerce Zalando, which is Europes’ largest fashion and lifestyle ecommerce store, reported a boom in self-care beauty categories with products such as: candles, detox products, sales of skin, aromatherapy nail and hair care products. The sales in this category boosted 300%.

Another trend that is growing among consumers due to covid19 is DIY (Do it yourself) beauty care. As covid19 is easily spread in public places, people are afraid of attending their usual beauty salon or hairdresser for their beauty treatments, therefore a big amount of consumers prefer to look up on the internet how to take care of their skin and hair themselves. DIY products have increased upto 166& their sales according to Nielsen report during April 2020. Consumers are relying on influencers’ tutorials on Instagram and youtube videos in order to learn how to do their hair and skin care routine. At this point, it is super important that brands develop a strategy with their key influencers to reach their target audience. In addition to the fear of infection, there are also the economic difficulties that consumers are facing due to the global crisis that is keeping them from spending money on luxuries such as skin care or hair treatments. “COVID-19 crisis, given the loss of jobs and savings. In McKinsey’s survey of UK consumers, 66 percent believe their finances will be affected for at least two months because of COVID-19, and 36 percent say they are cutting back on spending”.

Long term impact of covid

There will be three main trends that covid has accelerated but will for sure stay in the beauty market.

Digital continues to rise. Pre-COVID-19 trends will likely accelerate, with direct-to-consumer e-commerce, such as brands’ websites, shoppable social-media platforms, and marketplaces becoming more important. Beauty-industry players will need to prioritize digital channels to capture and convert the attention of existing and new customers. On the operations side, the use of artificial intelligence for testing, discovery, and customization will need to accelerate as concerns about safety and hygiene fundamentally disrupt product testing and in-person consultations.

The pace of innovation accelerates. Even before the pandemic, brands were under pressure to overhaul their product-innovation pipelines, inspired by the ability of digital-native direct-to-consumer brands to go from concept to cupboard in less than a month. Now, the need for speed is even greater. To achieve it, there may be a greater role for contract manufacturers, both to diversify (and thus reduce production risks) and to serve as thought partners in product innovation.

M&A rises as multiples fall. With the COVID-19 crisis causing significant damage to the balance sheets of brands, retailers, and suppliers, many companies will need to find new sources of capital.

While the beauty industry may be in a relatively stronger position than other consumer categories, 2020 will be one of the worst years it has ever endured. We believe, however, that the industry will remain attractive in the long run. The COVID-19 crisis is likely to accelerate trends that were already shaping the market, such as the rise of the global middle class and the use of e-commerce, rather than mark entirely new ground.