Beauty and the Coronavirus: eCommerce, ‘Affordable Luxury,’ & the Future

Beauty and the Coronavirus: eCommerce, ‘Affordable Luxury,’ & the Future

The global beauty industry generates $500 billion in sales a year and accounts for millions of jobs, directly and indirectly, according to McKinsey. For this largely brick-and-mortar industry, coronavirus certainly impacted sales, but the industry (and its customers) proved dynamic with its shift to ecommerce and booming skincare and “affordable luxury” products. For now and moving forward, expect a permanent shift to ecommerce or hybrid shopping models. Offer promotions and content to inspire shopping online. And, when in doubt, “Pour yourself a drink, put on some lipstick, and pull yourself together.”

Sales Are Still Expected to Grow in 2020

​Health and beauty sales will grow 6.9% to $556.30 billion (eMarketer)

China’s beauty industry rebound is a good indicator of what to expect in the U.S. in China, the industry’s February sales fell up to 80 percent compared with 2019. In March, the year-on-year decline was 20 percent-a rapid rebound under the circumstances, according to McKinsey.

A Return to Au Naturel? Makeup Sales Dropped, Skincare Grew

Sephora skincare outpaced makeup sales during the COVID-19 pandemic, according to Sephora CEO Jean-André Rougeot. “Our skin-care business grew versus a year ago during the COVID-19 crisis,” he said (WWD)

Some of the growth in skincare sales may be attributed to a kind of “panic buying” or hoarding mentality – like toilet paper. Junior Pence, CMO and creative director at PeaceOut Skincare, reported customers have shifted to buying in bulk: larger orders with more products and buying the “jumbo” sizes instead of regular. “It was what we’ve been calling the “toilet paper effect,” where people started hoarding skincare.” (eMarketer)

  • 64.5% of US internet users are more likely to digitally purchase cosmetics and personal care during the coronavirus pandemic (Redpoints via eMarketer)

  • Cosmetics and personal care products were the category US internet users were most likely to buy online during the pandemic, coming in above food and beverage and household products. (Redpoints via eMarketer)

  • In Europe, there was a boom in pampering and self-care beauty categories, including candles, aromatherapy, and detox products; sales of skin-, nail-, and hair-care products were up 300 percent, year on year (Zalando via McKinsey)

Affordable Luxury: The Importance of ‘Treating Yourself’

As lock down dragged on, consumers found new ways to brighten their mood and “treat” themselves to everyday luxuries, such as high-quality soaps, haircare, and even perfume. Consumers across the globe are showing by their actions that they still and comfort in the simple pleasures of a “self-care Sunday” or a swipe of lipstick before a Zoom meeting. New small business owners who have started their own cosmetics eCommerce business have gained a lot from this. What tends to make it more alluring for the customers could be the utilization of a white label payment gateway which lets people from across the globe buy their products! With this massive spike in self care, there has been an influx of new businesses who want to capitalize on this for their benefit. That means, more and more e-commerce websites are popping up to fill this area. It may be more important than ever to have an online presence strategy or develop a website for your business if you want to survive in today’s digital world. You don’t always have to spend thousands of dollars on hiring experts to build a website. Several resources are available online, such as this YouTube channel here, that can serve as a guide to create your own professional website and help you keep up with the trend of selling your products online.

With the tremendous increase in the sales of cosmetics online, Leonard Lauder famously noticed and coined the “lipstick index” phenomenon during the 2001 recession. Consumers tend to spend on small products that add a bit of glamour to increase confidence or offer a reminder of better times. The principle is that people see lipstick as an affordable luxury, and sales, therefore, tend to stay strong, even in times of duress (McKinsey). Because of this there needs to be a good level of management as well as secure payment processing software with a high risk merchant account just in case of a breach, as many businesses will come up out of the blue to sell products meaning that customer protection is essential.

Sephora saw sales of fragrance grow up to double digits over the last six months. According to WWD, growth is coming from brands such as Chanel, Dior, YSL, and JoMalone, which Sephora CEO Jean-André Rougeot attributed to the demise of the department stores. “Department stores are struggling mightily,” he said.

  • Sales of luxury hand soap in France were up 800 percent the week of March 16, 2020, as the country went into lockdown (NPD via McKinsey)

  • DIY hair coloring, nail care, and care in other beauty categories are finding new customers. In the United States, Nielsen reported rises in the sales of hair dye and hair clippers by 23 and 166 percent, respectively, in the first week of April 2020 versus a year ago (McKinsey)

Promotions are Key

According to research, promotions are proving successful in bringing in new customers and clearing inventory. Several prestige brands are offering discounts online of up to 40percent, competing with specialty beauty-product and department stores to capture promotion-oriented consumers, and promotions also help move unsold seasonal inventory, according to McKinsey.

Remember, people are still trying new brands: More than 77 percent of Americans trying new shopping behaviors during the crisis (up from 76% in late July), including new methods, brands, and places, with the intention of sticking with them in the long-term (McKinsey).

Expect a Permanent Shift to eCommerce

Prior to the pandemic, beauty was still one of the verticals that relied heavily on in-store shopping experiences. Even online-savvy American millennials and Gen Zers (those born between 1980 and 1996) made close to 60 percent of their purchases in stores, according to McKinsey. But brands and retailers that rose to the ecommerce challenge benefited mightily. Incorporating content to aid customers in the experience – think online quizzes or recommendations – help close the gap. Now is the time to reassure consumers that shopping online is a worthy substitute for in-store shopping.

Brands that rallied their eCommerce efforts should expect this to stick around in the near- and long-term and give a hybrid experience as stores slowly reopen. My eCommerce stores do not give importance to Google My Business optimization for their online business websites. However, GMB shouldn’t be ignored for the lack of store address, because it can benefit your local SEO and product searches highly. Direct-to-consumer e-commerce, such as brands’ websites, shoppable social-media platforms, and marketplaces will become more important, and customers will expect a cohesive multi-channel experience. Beauty-industry players will need to prioritize digital channels to capture and convert the attention of existing and new customers and reassure customers about hygiene efforts (McKinsey).

  • Some beauty-product brands and retailers are reporting e-commerce sales twice as high as their pre-COVID-19 levels, according to McKinsey. Sephora’s US online sales are reportedly up 30 percent versus 2019 (McKinsey).

  • New research by Mastercard shows U.S. ecommerce sales were up 92.7% in May 2020, with more than $53 billion spent via ecommerce channels between April and May-the height of the pandemic. For scale, that’s more spent online than that last12 Cyber Mondays combined (DigitalCommerce360).

  • A cohesive customer experience matters, or so consumers say. Last year, 72% of internet users worldwide said a disconnected experience would make them change service providers or brands (MuleSoft and Opinium Research via eMarketer).

The Takeaways

  1. Emphasize skincare
  2. Promote “affordable luxuries” like lipstick before Zoom or a new high-end soap or perfume.
  3. Offer promotions and discounts to grab customers: loyalty is swaying.
  4. Incorporate content to inspire and make shopping online easier and more alluring.
  5. Expect ecommerce to stick around, so blow out those digital budgets and efforts now.
  6. Scale – always scale.

COVID’s Impact on BEAUTY: 5 Tips for MARKETERS

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Charlotte Otremba is Sr. Manager of Communications and Marketing at Bidtellect.

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