Trends in the Cosmetics Industry

A key factor driving the adoption of premium cosmetics is an increased awareness of premium ingredients and their potential benefits for skin. Consumers no longer evaluate a cosmetic product on just how it makes them look: they’re looking to heal, tighten and enhance their skin as well. Nowadays, concealers don’t just improve skin tone -- they work to brighten, soothe, and plump skin as well. For beauty brands, this has meant large scale investments to create cosmetic products that blur the lines between makeup and skincare. From vitamin C-enriched tinted serums to the integration of nanotechnology for improved hydration, toxin removal and enhanced skin metabolism, cosmetic products are being supercharged beyond the usual spheres of color and coverage.

NielsenIQ reported that as of 2022, a growing number of cosmetics and beauty shoppers in the US buy products meeting the strictest ‘clean’ definitions

European consumers are particularly responding to brands that claim natural ingredients (especially French consumers)

From concealers that analyze the weather, to products tailored to consumers’ specific microbiomes, personalization is helping to drive differentiation in the cosmetics industry and increase loyalty . Brands such as L'Oréal and an explosion of startups are investing in hyper-personalization solutions with the help of data science and Artificial Intelligence. By testing DNA and the skin’s bacterial composition, they’re set to offer custom-blended formulas for each customer’s unique genetic makeup. Cosmetic products with modified allergens are also being specifically designed to address a user’s underlying skin concerns.

Ethical product development and production has become more important, as simply focusing on recyclable or re-useable packaging is not green enough in this era. Gen Z consumers in particular want to ensure that a sustainability focus underscores every aspect of the manufacture of their favorite products.  In response, there has been a push toward sourcing ingredients that respect the ecosystem and consider their environmental impact, and increased efforts and research by cosmetics and beauty brands to offer and develop eco-friendly alternatives such as:

Water-free cosmetics: With sustainability and carbon reduction high on the agenda for the cosmetics industry, waterless products are becoming more and more common. It’s predicted that the global water-free cosmetics market will hit $31 billion by 2031.

Biotech Beauty: With the natural world providing many of the most popular ingredients in beauty products, manufacturers and consumers have become ever more conscious of their limited scalability. With biotechnology, scientists read the genetic makeup of flora and fauna that hold beneficial properties for skincare and work to replicate them in a lab.

3D Printing to reduce waste: Some startups are creating solutions that allow customers to directly print cosmetics in exact amounts they require, thereby minimizing waste. In cosmetics packaging, 3D printing also enables new creative and custom solutions.

Plastic-Free Packaging: Plastic-free packaging has seen an annual 18% growth in online search in the US, and plastic-free beauty products logged $25M in-store sales in 2022 -- a 13.4% increase from the previous year.

E-commerce channels have seen significant elevation during the pandemic, with 65% of US consumers having ordered beauty products online in 2021 versus 51% pre-pandemic, according to NielsenIQ. But today, consumers scout out cosmetics primarily on social media and Mintel research shows that social channels can be a seamless avenue for brands and consumers to connect via a single path to purchase.

A 2021 survey by Accenture found that 52% of millennials said they are more likely to get inspiration from other users or influencers when shopping through social commerce than when shopping through e-commerce, followed by 48% of Gen Z respondents. The social commerce industry is expected to expand three times faster than traditional e-commerce to reach $1.2 trillion by 2025. With the number of people using social media worldwide projected to increase to 5.85 billion by 2027, the social media opportunity for beauty brands to reach new consumers, create omnichannel shopping experiences and generate higher revenue is growing every year. This has led to explosive growth of socially-fueled indie brands that have risen to meet changing consumer demands and preferences.

Social media has established itself as an essential channel for brands looking to launch and grow cult followings with viral reach. According to the Fashion Network, TikTok is the social media platform with the strongest impact on growth for beauty brands, with #tiktokmademebuyit having racked up over three billion views, and 89% of TikTok users having purchased beauty products after seeing them on the app.   Beauty brands are using TikTok partnerships as an opportunity to align with, engage and build trust within their target audiences.

Beauty brands are increasingly adopting immersive technologies such as Artificial Intelligence (AI) and Augmented/Virtual Reality (AR/VR) to provide personalized experiences and increase customer engagement. Cultural happenings have also had a big impact on the use of AI and AR technology, as the pandemic has been a catalyst for brands adopting these digital experiences. Store closures due to COVID-19 meant that shoppers were unable to browse and purchase beauty items in physical stores, and AI tools that allowed people to ‘virtually try on’ cosmetics became more widely used.  50% of UK female consumers now say they would be interested in using an app to receive personalized makeup tips .  Gen Z is a large driving force in this development, with 68.3% of Gen Z in Europe keen to get personalized, AI-based recommendations.

Cosmetics consumers are looking for more information on the products they purchase than ever before. They’re concerned not just with the overall health benefits of the ingredients being utilized, but also the ethical nature in which those ingredients are sourced. As beauty consumers become more selective than ever, they’re interested in purchasing from brands who share their ingredient lists in an upfront and open manner. As a reflection, 81% of beauty product searches on Amazon are unbranded, as shoppers are looking for attributes rather than brand names. To compete in such a space, transparency is becoming the marketing watch-word.

There’s been lots of hype about the advent of the metaverse over the last couple of years, and the potential of virtual spaces to enhance consumer experiences and sell products is huge. Up to 60% of Millenials will consider making purchases in virtual worlds. Many beauty brands have entered the metaverse and have been experimenting with these platforms. Brands can use Web3 features such as non-fungible tokens (NFTs) to deliver exclusive experiences for their customers. Issuing an NFT can, for example, help a small company kickstart a community, and for a larger brand, an NFT could replace a membership card.

Nowadays, brands are reacting to society’s voice in their marketing campaigns, with issues surrounding transparency, diversity and inclusion becoming key factors shaping brands’ strategic and business decisions. 41% of UK consumers now value beauty brands committed to ethical working practices, with 36% also willing to pay more for brands that respect human rights. For Gen Z, “2D identity” is a thing of the past, and brands catering to this generation’s vision of radical inclusion are designing neurodivergent-conscious products and experiences, with the goal of increased accessibility.

The U.S. inflation rate reached 6% in 2023, with color cosmetics and nails facing average unit price increases of 19% year-over-year, according to NielsenIQ data. In addition, department stores and mass channels are both experiencing 20% increases in pricing in the beauty sector. These price increases are notable because 36% of beauty consumers are financially constrained, which could lead to cutbacks in purchases of color cosmetics as non-essential expenses. As of May 2022, NielsenIQ research indicated that many beauty consumers were already using the following money-saving strategies:⁠

• 51% stock up when a product is on sale
• 41% use coupons
• 38% seek out stores with lower prices
• 27% only buy items on sale
• 25% buy less expensive alternatives
• 25% shop with retailers that offer loyalty points

This is not limited to the US. With looming economic pressures in Europe, 76% of UK female consumers shop around to find the best prices when buying makeup. Brands can boost loyalty by offering promotions, discounts, and gamified deals to attract a broader swath of shoppers. Additionally, loyalty programs that collect first-party consumer behavioral data to create insight-driven promotional strategies are growing increasingly important to brands as cookies fade out.