Macroeconomic concerns are no match for beauty’s mass market.
Retailers, brand executives and analysts are anticipating a big year ahead for the channel.
In addition to makeup — which began to rebound last year — being fully back, mass market retailers have found new ways to differentiate, making themselves ready to capitalize on any trade-down amid an uncertain economic backdrop. Beauty manufacturers also are spotting growth across all the categories in which they play.
“The mass market is in a really interesting place,” said Wendy Liebmann, retail analyst and chief executive officer of WSL Strategic Retail, noting that while a recessionary environment will certainly affect consumer spend, brands and retailers stand to benefit — as long as they have the right strategies in place.
“Anybody who’s been buying prestige or premium price, those people will pay down and they will look for more affordable prices, but we can’t assume only that. There are so many ways to save money,” she continued, positing that a diversified portfolio across price points — and steering clear of too much promotion — is key to driving traffic and sales to stores.
“For retailers at a more affordable price point, they have to be conscious of creating options. That area is going to require some very nuanced and smart marketing: it’s a portfolio of value options that the beauty shopper can avail themselves of so retailers don’t lose the trip, and don’t lose the item in the basket,” Liebmann said.
For now, retailers appear to be doing just that. CVS Pharmacy, for example, dipped its toes into prestige beauty with its Skin Care Centers, while Ulta Beauty reorganized its store formats by price point and category, flowing from prestige price points down. “The necessity and urgency to be a little more differentiated is really coming into play, whether it’s the Targets and Walmarts of the world, the drug channel, or the dollar channel,” Liebmann said. “We’re really starting to see them push different points of view.”
Ulta’s rationale for the reformat was catering to post-pandemic, channel-agnostic shoppers. “Ulta Beauty guests are fluid in their shopping journey, which is why our unique business model bodes so well with today’s beauty consumer,” said Maria Salcedo, senior vice president of merchandising at Ulta Beauty. “This is a key priority within our overall merchandise strategy that reflects how our guests like to shop.”
Drugstores have also diversified their price points, with CVS Pharmacy testing the waters in prestige beauty with brands like Wander Beauty, Bloom and Volition Beauty. They’re not alone: Sephora and Ulta’s respective partnerships with Kohl’s and Target Corp. bring higher price points to those shoppers, while Walmart inaugurated its shop-in-shops with Space NK earlier this year.
“What we’ve done with our skin centers is try to bring the first step into masstige and prestige, but also surround that with the value options we know provide that wallet relief,” said Andrea Harrison, vice president of beauty and personal care at CVS.
Keeping a wide range of price points is just one tenet of that retailer’s strategy. Harrison is also capitalizing on the intersection of beauty and health, one pandemic-era mentality that has stuck with consumers.
“The relationship between health and beauty remains top-of-mind,” Harrison said. “It allows us to shape a holistic strategy that allows us to bring that intersection to the forefront of the customer, whether we’re talking about emotional and mental well-being or physical well-being.”
Meanwhile, the in-store experience at Ulta — centered more on playfulness and discovery — has also kept shoppers returning. On an earnings call for the third quarter of 2022, Dave Kimbell, Ulta’s chief executive officer, said, “as it relates to mass and prestige, we did see mass growing somewhat faster than prestige, but both sides were strong and healthy,” attributing new product from E.l.f., NYX Professional Makeup, The Ordinary, La Roche-Posay and CeraVe for the heightened consumer engagement.
“All of our analysis suggests we have not seen clear signs of trade-down, but I’d reinforce, if there is that, we are uniquely positioned to deliver and support our guests regardless of what choices they make from a price point,” Kimbell continued.
“For guests, it’s a beauty playground where they’ll feel welcomed and inspired by enhanced ways to explore every category, brand and product,” Salcedo added. “Guests love the options and flexibility mass brands offer. Beauty is such an expressive and experimental category, and mass brands allow guests to explore and discover new products with more frequency and at an accessible price.”
Salcedo also noted bond-building technology and scalp care as driving growth across hair care; dermatologist-recommended brands were also gaining steam.
This all comes at the same time as makeup being back in full force. “I’ve long been bullish on the overall mass beauty category. That includes during the pandemic, when it was a tough time for color cosmetics as people were restricted,” said Tarang Amin, CEO of E.l.f. Beauty. “I very much knew there was a lot of pent-up consumer demand of people wanting to get out there, wanting to express themselves. That’s very much what we’re seeing.”
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Amin added that “the category bounced back really well, both color cosmetics and skin care, which had actually been strong throughout. We’re particularly well positioned within that.” To his point, E.l.f. has seen 15 consecutive quarters of net sales growth, and is gaining share across skin care and makeup, which Amin credits to a three-pronged approach.
That formula starts with accessible pricing, is rounded out by prestige-caliber product innovation and ends with meeting shoppers in new ways, such as TikTok and BeReal, where E.l.f. was a pioneer.
“You have this bifurcation of consumers,” Amin said. “Luxury’s doing extremely well, they’ve got no worries. You’ve got this entire core middle class, and a good portion is living paycheck to paycheck. How do you give them access to that level of beauty? And consumers are super savvy these days, there are so many better tools. All they have to do is go on TikTok. We don’t even have to do it as a beauty company, consumers are doing it for us.”
Coty Inc.’s consumer business has also gained share consistently for the past 11 months, said Stefano Curti, chief brand officer of Coty Inc.’s consumer division. “Our overarching goal is to continue to drive this market share momentum. We will achieve this by consolidating the progress we have already made, moving our consumer brands into new categories such as skin care, and achieving Leaping Bunny certification across all of our major consumer beauty brands.”
According to the company’s most recent earnings, consumer beauty revenues had a 5 percent lift to $526.6 million for the quarter. E-commerce for the 2022 fiscal year was up 29 percent, and the company also partnered with GoPuff, a delivery service akin to DoorDash or Postmates, for what Curti called “fast commerce.”
L’Oréal, too, is focused on meeting consumers in original ways. Its consumer product division grew 10 percent in the third quarter, and 15.7 percent like-for-like in the first nine months of the year, said Nathalie Gerschtein, L’Oréal’s president of its consumer products division in North America. That growth, she said, is due to “a combination of products and innovation that were really strong this year, but also strong core activations,” she said.
The company has tracked growth in e-commerce as well as in brick-and-mortar retail, and enhancing its data capabilities are part of Gerschtein’s goal. “The consumer-centricity powered by data has been a very strong focus for us and we’re continuing to elevate our digital edge,” she said.
Gerschtein expects makeup sales to soar over pre-pandemic levels and fostering that growth is her top priority for the year ahead. “Consumers, especially the young consumers, are so excited to interact with and experiment with makeup, getting bolder with their looks,” she said.
Last year’s innovation pipeline helped with that — Maybelline New York’s Lip Vinyl was the brand’s biggest launch in 10 years, Gerschtein said — but even blushes, concealers and contouring products were strong.
“The second priority is skin care. We’ve seen the ever-growing importance of ingredients and scientific results to show efficacy,” she added, noting that every category in which L’Oréal plays, from makeup, skin care and hair care to hair color and nail, were tracking growth. “More than anything else, we find that skin care shoppers want a product that will work for them — we’re anticipating a continuous focus on SPF and UV protection.
“There’s a greater emphasis on efficacy. People don’t want to spend money on something that doesn’t end up working for them,” Gerschtein continued. “You see a greater focus on reviews and tutorials. With our L’Oréal Paris Revitalift range, we show the testimonials of consumers, explain how the product works and really show the results. Consumers are also looking for multitasking products as they look to cut down on purchases.”
Skin care has become a sharpened focus for Amin as well. “What really excites me are products like our primers; I wonder if they are really makeup or skin care, when you look at the benefits of primers versus what they really do. It’s these things where you’re able to combine core benefits that consumers can’t get enough of,” he said. “Everyone is even more conscious of their skin.”
Unilever has also put its R&D muscle behind skin care. “For the first time in 17 years, Dove Body Wash will be going through a complete transformation of both what’s inside and outside of the bottle,” said Esi Eggleston Bracey, Unilever USA’s president and CEO of the company’s North America personal care division. “New Dove Body Wash features revolutionary, patented nanotechnology which allows for millions of micro droplets to absorb into the skin and actively regenerate the moisture barrier. It delivers 24 hours of renewed, healthy-looking skin.”
As reported by WWD, Dove’s cleansing business is the brand’s largest category, and Bracey added that it’s the top dermatologist-recommended brand for body washes. That credibility has only become more important for consumers.
“People are looking for high-efficacy products that also offer good value, causing the lines to blur between masstige and prestige,” added Cara Sabin, CEO of beauty and well-being at Unilever North America and Sundial Brands. “Some of this is in part to the surging presence of trusted experts like dermatologists and ‘skinthusiasts’ on TikTok and Instagram — people are incredibly knowledgeable about effective ingredients, skin care benefits and results-oriented routines.”
Like L’Oréal, Unilever has also seen e-commerce growth sustain itself post-pandemic. Bracey noted the channel grew 44 percent in 2021.
“We will continue investing in and developing our portfolio into high-growth segments,” Bracey said. “We will succeed in doing so by putting people first, focusing on the importance of science-based products, growing our impact in the world and retaining an entrepreneurial spirit.”
That approach extends to hair care. Bracey said SheaMoisture was Unilever’s top performing brand on Amazon, and its product pipeline reflects a heavy foray.
“The space is ripe for disruption as people look for more personalized scalp care solutions to address their needs,” Sabin said, pointing to SheaMoisture’s Scalp Care collection “which features two distinct ranges packed with essential antioxidants and active ingredients that not only clear the scalp but also work to strengthen textured hair.”
Those ranges focus on scalp moisture levels and dandruff, respectively.
“SheaMoisture continues to see success both at the shelf and in its community impact, particularly among Black-owned businesses and founders,” Bracey said.
To that end, purpose is still at the forefront of the brand’s strategy. On Amazon, The Shea List allows consumers to shop Black-owned businesses that the SheaMoisture Fund has invested in. Equally, Dove’s The Crown Act, which would outlaw discrimination on the basis of hair, has been enacted in 19 states.
“This commitment creates market opportunities. It’s important to remember that 40 percent of Americans are people of color. One out of two babies born are babies of color. We have and anticipate to see more needs for textured hair care and for melanin skin care which reflects a huge opportunity for products and category growth,” Bracey said.
Added Gerschtein, “In a consumer, especially in Gen Z, they are looking to shop from brands that align with their values: not only propose great products, but that really are purposeful.”
Maybelline New York’s Brave Together initiative, for example, supports “everyone experiencing anxiety and depression,” according to its website. L’Oréal Paris’ Women of Worth also recognizes nonprofit leaders and awards each of them $20,000 for their respective charities.
Even on the product front, Rimmel London’s Kind and Free makeup range was the brand’s largest launch in the 2022 fiscal year, Curti said.
E.l.f., for example, is vegan, cruelty free and Fair Trade certified. “Values are speaking much, much more strongly in purchase decisions,” Amin said. “That gives me the ultimate confidence that we can put our superpowers together in a way that’s actually meaningful for consumers. It goes well beyond any particular subcategory, or segment. It then builds longer-term value, because it’s something consumers really believe in.”