A Makeover in the Beauty Industry: Ecommerce, AR, and Diversity

The beauty industry is experiencing a cultural and digital transformation.

Almost every industry has suffered a huge blow from the outbreak of COVID-19. Many traditional industries like retail and catering have struggled to survive the general decline in consumption. Likewise, the beauty industry – comprising skin care, cosmetics, fragrances, and personal care – did not escape the fallout.

According to a McKinsey report, it is estimated that global beauty industry revenues will fall up to 30% this year. Despite a decline being observed, the beauty industry is said to be comparatively more resilient than other struggling industries – perhaps because the nature and necessity of beauty products secures strong customer loyalty.

Although sales for color cosmetics like lipsticks and foundations have declined drastically with fewer people wearing makeup while working from home and wearing masks, consumption of other beauty products like skincare and personal care has remained stable.

According to Estée Lauder Companies’ 2020 Fiscal Reports, the skincare sector demonstrated strong resilience over the course of the pandemic so far, with a 1% increase in sales in the final quarter of the 2020 fiscal year (March to June), while sales for makeup saw a plunge of 62% compared to the same period last year.

The industry is also predicted to recover quickly. In China, February saw a 80% year-on-year decline in sales during the toughest phase of lockdowns. But in March, the YoY decline improved to 20%, as sales rapidly rebounded.

What this demonstrated is that once the pandemic is under control and if a vaccine becomes available later this year, the beauty industry, among all FMCG industries, might be the quickest to recover.

But the crisis has also been a lesson to cosmetics and skincare brands that resilience and flexibility can come from unexpected places, and ecommerce solutions are far from the only technologies being applied in this field.

Integrating emerging technologies into beauty

Digitization in the beauty industry came into its own during this critical time. Though hardly a new concept, as the majority of the beauty brands already had online sales channels in place pre-crisis, in-store sales still played a dominant role in revenue-generation, counting for 85% of beauty product purchases.

The reliance on in-store purchases can largely be attributed to the highly interactive nature of the purchasing journey: consumers tend to select products by trying on shades and testing scents, things that can only be done in-store.

However, COVID-19 quickly flipped the game and catalyzed the digital transformation in the industry. With most consumers unwilling to risk shopping at brick-and-mortar retailers, they turned readily to online shopping instead. A surge in online sales was immediately noticeable: Separo, one of the world’s largest beauty product retailers, recorded a spike of 30% in its U.S. ecommerce sales in March, compared to the same period in 2019.

Beauty brands are also adjusting their online stores to accommodate changes in buying behavior and boost sales. Well before the pandemic, beauty industry veterans had already become aware of emerging technologies, and began paving the way to dominating the online sales segment. Some of these companies placed their bets on Augmented Reality (AR) technology, which turned out to be a provident choice.

As early as 2018, beauty giant L’Oreal acquired Modiface, an AR technology company, and rolled out a virtual try-on feature accordingly. It allowed consumers to virtually try on cosmetic products using their webcams and presented them with a mock-up of how the product would look when used. It also partnered with Amazon and Facebook to make its AR functions available on both platforms via mobile apps.

Subsequently, in October 2019, Chinese ecommerce titan Alibaba Group partnered with Perfect Corp, one of the world’s leading AR companies, and adopted AR virtual try-on technology on its online shopping platforms Taobao and Tmall Alibaba to enhance consumers’ experiences and boost sales.

As a JP Morgan 2019 report indicates, China is the second-largest beauty player in the world. According to a report by Chinese market insights firm Daxue Consulting, the penetration rate of online cosmetics shopping in China exceeded 70% in 2018, which means ecommerce became the most popular channel for Chinese customers buying cosmetics.

Though Alibaba Group has yet to release any information on the results of the Perfect Corp partnership, the above market data suggests that it was a well-placed strategic move given the burgeoning expansion of China’s online cosmetics market.

Early adopters of AR technology have seemingly been rewarded during the pandemic. Beauty-product brands and retailers like Sephora and Amazon that have launched virtual try-on functions have seen a 20-30% growth in ecommerce sales compared to the pre-COVID-19 period.

AR has played a major role in online sales strategies and marketing in the ‘new normal,’ and its prevalence is likely to grow even when the pandemic is over. With notable brands like Chanel, Saint Laurent, Charlotte Tilbury, and Maybelline jumping on the bandwagon to offer VR fitting on their websites and mobile apps, tech partnerships are becoming a key strategy of choice for beauty brands.

“From virtually trying on make-up looks to evidence-based skin analysis, AR and other disruptive technologies are changing the way consumers discover, experience and connect with health and beauty brands,” said Kimberley Yap, Ministry XR’s Vice-President of Experience Design.

Ministry XR, a Kuala Lumpur-headquartered AR company, is now working with Nutox, one of the country’s leading skincare brands to develop AI skin analysis.

Even though in-store purchases are likely to continually be the dominant source of revenue, augmented reality nevertheless presents an alternative to traditional sales strategies. All the enthusiastic attempts to integrate AR into retail by major beauty brands with cash to burn suggest that they, too, see this as a strategy to employ vigorously in the industry going forward.

A cultural renovation in beauty: naturalism and individualism

Changes in the cosmetics space are not limited to technology advancements: a visible cultural revolution is happening alongside this shift. Naturalism and simplicity are gradually becoming the dominant aesthetic, fueled by people starting to care more about authenticity. In this vein, makeup users are increasingly opting for more natural effects instead of dramatic full-face looks.

This preference for authenticity has grown as people spend more time at home amid lockdowns and quarantine orders, and the prevalence of Zoom meetings has made people more comfortable with showing their bare faces.

Skincare and wellness products are no doubt the winners in this major cultural shift, as consumers start to prioritize a long-term and proactive approach to beauty that emphasizes chemical- and fragrance-free products over traditional makeup.

Coupled with the rise of naturalism is the surging demand for ‘clean’ beauty, which is a growing advocacy around sustainable, natural, healthy, and animal-friendly products. Perhaps surprisingly, given that mainstream brands have the market power to easily squash new entrants to the market, indie brands are taking the lead in this movement.

The beauty industry has seen a plethora of indie brands emerging in recent years, many of which have made it their mission to promote responsible, ethical and environmentally friendly products. According to a Harper’s BAZAAR poll, over 60% of the 1000 women surveyed would be willing to spend on new brands if they were offering natural products.

“Clean beauty will evolve to mean ‘safe beauty.’ As a result, science-led beauty brands and products will see increased demand,” said Clare Varga, Head of Beauty at WGSN, one of the world’s largest trend forecasting companies.

In order to boost consumers’ confidence, some indie brands also offer more transparency by building up ingredient profiles, so that consumers know what they are putting on their faces.

Another characteristic of indie brands that is perhaps even more appealing to consumers is the diversity in product range that they offer. Homogeneity in the industry has long been criticized, and the traditional one-size-fits-all approach to developing beauty products is being dispensed with as consumers with different skin types and pigments have become more vocal about their demands.

“It was this ‘champagne problems’ struggle where I loved the product and I wanted to be able to wear it and I never could,” said Zoe Brenneke, Founder of Arrive, a clean beauty brand established in 2019.

Indie brands with diverse product lines are showcasing an enormous market opportunity that went ignored by major brands for decades. Now that consumers are aware that more sustainable and more diverse brands exist, they are diverging from the established path to find products that fit both their values and their skin types.

Having correctly identified customers’ desire for personalization, indie brands’ marketing campaigns tend to emphasize individuality – sensitive skin types, ethical values and lifestyles – a missing element from the campaigns of mainstream beauty products. For individuals who feel they have long been neglected by mainstream products, indie brands offer a well-packaged answer.

Social media platforms have been instrumental to the growth of these small brands, becoming major sources of growth. Brands like ILIA, Klur, and Summer Fridays are slowly but steadily building up their customer bases and winning loyalty.

A technological response to the cultural shift

Though indie brands are benefiting from the rise of naturalism and individualism, their survival in this crowded industry is not without its challenges. With limited product ranges and significantly fewer financial resources, it is often difficult to compete with big-name brands despite consumers’ ideological shifts. They are also spread across various social platforms without unity and collective power – an issue that some entrepreneurs are trying to resolve.

Yutybazar, a Black-owned, AI-driven beauty ecommerce site, has built a platform for unifying indie brands to promote product diversity. The U.S.-based startup collaborates with clean beauty brands such as Freya & Bailey, Sade Baron, Flaunt Body, and Afro Skin & Hair Co, all of which were created by underrepresented individuals whose mission is to empower their communities while providing natural alternatives to consumers.

The site offers a 20-point survey – a product of hours of research and product testing by Yutybazar’s team. It covers questions such as hair type and skin tone, geographical location, water intake, sun exposure, and amount of sleep at night. In comparison to similar assessments provided by other brands, Yutybazar’s quiz is much more detailed, and ergo claims to provide more accurate and tailored product recommendations to its consumers.

Yutybazar’s approach to marrying AI algorithms and ecommerce sites could be the creative solution needed to enable more niche brands to reach a wider audience and enhance diversity as well as inclusivity in the industry.

This industry was undergoing metamorphosis even before COVID-19, but the pandemic has catalyzed the changes, from the integration of AR and AI technology to the shifting cultural focus of product development.

In spite of this glitch in the industry’s trajectory, innovative applications of technology coupled with a shift in consumer demand may act almost as a ‘reset’ button for the better, making the world of beauty more personalized, more diverse, and more inclusive.


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