Time for a makeover: how the beauty industry can emerge fresh-faced in the “new normal”
Dr. Sebastian Schoemann
Digital Transformation | Senior Partner at Bain & Company
The original look-good, feel-good business was hit hard by COVID-19. With old routines no longer fit for purpose, the beauty industry is now seeking new ways to connect with consumers and adapt to post-pandemic realities
Just as major life events can prompt us to overhaul our appearance, habits or lifestyle, COVID-19 has caused a crisis of confidence across industries. And, despite years of consistent growth, the beauty business is no exception. With consumer behavior rapidly changing, beauty brands are having to find their way in a new reality. We explore which actions have been successful and how companies can emerge fresh-faced from the crisis.
New behaviors, new beauty regimes
This time last year, the global beauty industry was worth $532 billion. As history has proven so far, it is a resilient business; after a slight blip during the financial crisis it soon bounced back. However, COVID-19 is in a whole new league. It is impacting every aspect of business and consumers’ lives, changing how we buy, what we buy, why we buy and where we buy.
At the peak of the pandemic in March, more than 70% of retail stores closed, with the remainder operating at reduced hours and capacity. Despite stores having reopened in many regions, consumers are still cautious: according to the Kearney Retail Pulse Check, only half of respondents have visited a physical outlet for non-essential purchases since the pandemic. As for the idea of browsing for beauty products, wearing a mask seems far reached for many shoppers.
These store closures caused a surge in online business worldwide, also accelerating beauty internet sales, which saw strong double-digit growth. At the same time, demand for beauty services online such as virtual consultations, tutorials and recommendations have assumed more importance. In February, Chinese consumers spent an average of 120 minutes per day watching beauty tutorials and livestreams for example, compared to 45 minutes in the same period in 2019.
And of course, with more of us staying at home to avoid infection, domestic self-care and pampering have taken off. But we are also favoring different products to strengthen our health and wellbeing with sales of skincare and haircare products on the rise, while those for fragrance and makeup declining. At the same time many of us look to make more value-driven choices, whether it is with an emphasis on sustainability, social justice or local shopping.
Beauty takes a hit
Like many other industries, the beauty industry had to act quickly to adapt to the crisis.
In the early days, many large businesses like LVMH and Estée Lauder Companies got involved in emergency responses, converting their factories to produce hand disinfectants that were distributed to hospitals at no cost. However, even allowing for the positive brand perception gained from these actions, a first look at 2020 performance reveals that lockdown had a major impact on the industry as a whole. The Western European market in particular showed significant decline – by as much as 60% – between April and June compared to the previous year.
As in other industries, online became a critical channel. In China, for example, beauty sales from platforms such as Taobao, Douyin and WeChat have more than doubled since COVID-19. However, performance during lockdown was heavily tied to having had an existing e-commerce presence. Although some brands more than doubled their online sales, as a whole only around 5-20% of the industry was online before the pandemic. This, coupled with the effects of fewer in-person consumers and cancelled events, saw total sales for the industry decline by around 30% in the months after lockdown.
Time for a makeover
Even before the coronavirus struck, beauty brands were under pressure to innovate and appeal to new consumer habits – but now, it is even more critical. To adapt to the new world of beauty and take advantage of opportunities emerging from the crisis, beauty brands should follow four key steps to give themselves a post-COVID makeover:
1. Become online, don’t forget about offline
Rather than focusing on one channel, connect both worlds your consumers are living in. When your brand is present in retail, turn attention into sales by offering online products through offline touchpoints with staff support, along with subscription services, or personalized products. Even if focusing on your online presence, take opportunity to create your brand’s individual offline footprint. Consider testing concept or pop-up stores to showcase products, build your brand story and attract new customers. Complementary services such as style consultation or live step-by-step tutorials, advocacy campaigns or brand ambassadors can turn consumers into loyal consumers, and deliver more value to your business over time.
2. Explore what’s new
It is time to test new ideas, expand your brand footprint and increase engagement. New and developing technologies are one of the most obvious ways to do this. Here are some examples:
· Procter & Gamble’s venture studio invented the Opté Precision Skincare system. A handheld scanner analyzes the skin for age spots and pigmentation effects, then applies a correcting serum precisely where it’s needed;
· Launched by La Roche-Posay, My Skin Track UV combines wearable patches and a companion app that measure and monitor individual UV exposure, taking skin type, sunscreen use, and the UV index for the particular location into consideration, and provides personalized advice and product information;
· HiMirror is a smart mirror enabled by Amazon’s Alexa voice service, which analyzes the user’s skin condition and the effectiveness of the products they’re using, and offers tips and product recommendations based on anonymized data;
· Function of Beauty offers customized hair and body care products using big data to analyze consumers’ specific needs and preferences. Products can be bought on a one-off basis, or by regular subscription.
3. Pivot products to become new heroes
By keeping your finger on the pulse of new consumer needs, it’s possible to make more of existing brand assets, for example by pivoting products to fit new consumer needs in adjacent categories. Trends already emerging include:
Health and wellness. With awareness of the importance of healthcare rising, shoppers now want more products that promise fitness, hygiene, and protection from infection;
Staying in is the new going out. More of us are at home more of the time, which means products and services that can be enjoyed in our domestic sanctuaries are key;
Be your best self. Consumers now seek more assurance than ever before, and are flocking to brands and retailers associated with authenticity and expertise, along with those that offer the personal touch;
Consumption finds purpose. Constant communication about the scale and impact of the pandemic could finally have landed the sustainability message – consumers are now more conscious about their consumption and its social impact.
4. Get obsessive about data
Last but not least, data remains a critical asset to stay consumer-centric and place consumer at the core of every brand decision. Build deep consumer relationships and by collecting data at every consumer touchpoint, and linking up cross-channel insights, digital profiling will enable your company to identify relevant messages and solutions by staying close to consumers and lay the foundation to better adapt to their ever-changing needs.
Ready for your close-up?
Much as no single beauty regime suits every individual, there are multiple options for brands as they adapt to new consumer realities and prepare for a fresh start. Finding the right approach for your business means understanding which tactics and actions fit your strategy. Don’t try everything: first, identify the product categories, markets or consumer groups most relevant to your business. It is critical to start with a good understanding of current and future industry trends. Next, prioritize opportunities, identifying short- and long-term wins. Finally, get into design and execution, keeping any necessary organizational changes and new capabilities in mind, and experimenting with new solutions to test them against the new reality.
The beauty business might have been rocked by COVID-19, but by taking the opportunity to have their own makeover, brands could not only recover from the crisis, but emerge from it looking better than ever. However, that means getting the execution right. To learn how we can help you get there, feel free to contact us and start the conversation.
Dr. Sebastian Schoemann, Partner, Munich
sebastian.schoemann@kearney.com
Sabine Spittler, Principal, Berlin
Johanna Tybus, Manager, Berlin
Annalena Dierks, Senior Consultant, Berlin
Ewa Kaczynska, Senior Consultant, Zurich
Estella Reich, Senior Consultant, Munich
Laura Becker, Senior Business Analyst, Munich
Strategy and Analytics | Founder at bayesianₓ | Ex-Kearney
4yCarlos Bosch