CEW recently hosted “State of the Beauty Industry Report 2018-2019,” featuring insights and data from Larissa Jensen, executive director, beauty industry analyst, The NPD Group; Flynn Matthews, head of insights + measurement, consumer packaged goods, Google; Karen Wolfe, vice president, client consulting, Nielsen; and Lauren Goodsitt, global beauty analyst, Mintel Group Ltd.
Look for our full report in the April 2019 issue of Global Cosmetic Industry, including top trending ingredients, the role of emotions in marketing and more; sign up for your free copy by subscribing at www.gcimagazine.com/magazine.
Previously: The State of Beauty, 2018
Prestige beauty achieved sales in the United States of $19 billion, according to NPD, a steady year-over-year gain of $1 billion, representing a 6% rise in North America. Latin America, by contrast, grew 10%.
Prestige travel retail was worth $25.6 billion in 2018, according to NPD data, representing 19.3% year-over-year growth. Impulse purchases represent a significant portion of the market opportunity in Spain, Italy and Germany.
Larissa Jensen, executive director, beauty industry analyst, NPD, explained that calendar shifts made December numbers look artificially low, with Cyber Monday hitting outside of the month, as well as the inclusion of the first week of January in overall results.
Weekly data for the period showed bright spots, as well as significant spikes from self-gifting. Jensen also explained that sales begin well before December, so results are spread across a wider timeline.
Larissa Jensen, executive director, beauty industry analyst, The NPD Group, noted that some brands declines, while others expanded by almost 150%. The big decliners among online brands were those that expanded into major retailers.
Prestige fragrance grew 5% in 2018, according to NPD data—7% online and 4% in brick-and-mortar. However, brands outside the top five brand rankings generated 14% growth in the period, signaling continuing strong interest in smaller, indie brands.
The U.S. prestige fragrance category in 2018 was topped by a masculine scent, Acqua Di Gio Absolu ($24.6 million), followed by Coco Mademoiselle Intense ($21.7 million) and Marc Jacobs Daisy Love ($18.4 million). Joy by Dior was the top prestige seller during the 2018 holiday, per NPD data.
- 19% of millennials want body care products scented with natural ingredients
- 50% of consumers age 18-24 say the top natural benefit is fragrances that are sustainable and eco-friendly
- 45% of these consumers expect natural scents to be cruelty-free
Prestige makeup sales rose just 1% in the United States in 2018, according to NPD data—representing a loss of 1% in physical retail and a 13% jump in online retail. Sales fell 7% in the United Kingdom and 4% in France.
The top prestige launch of the year in the U.S. market was Anastasia Beverly Hills’ Soft Glam Eye Shadow Palette. Notable launches for the year included the Benefit Gimme Brow+ Volumizing Eyebrow Gel and MAC x Aaliyah Lipglass.
The category, which has been hit by slowing sales, has experienced rising rates of discounts. Face, eye and lip categories all saw roughly 3-4% rises in sales attributed to discounts between 2017 and 2018 (see Beware the Discount below).
Brands have countered discounts by focusing on increasingly popular makeup minis category, which posted 29% dollar growth in 2018. These products account for just 5% of the market but are responsible for 83% of dollar gains in the category. Jensen noted that minis present consumers with high value for a lower price.
Karen Wolfe, vice president, client consulting, Nielsen, noted that physical retail has been impacted by space contraction and SKU optimization. She added that brands need to help their retailers to find reasons to come into the store.
However, NPD data shows that while online prestige beauty sales rose 21% in 2018, compared to 3% in physical retail, 80% of prestige beauty sales are happening in the physical retail channel. Critically, physical retail achieved dollar sales increases in each of the last three years.
Department stores such as Nordstrom have reinvented themselves with open-sell spaces that carry unique indie brands. This channel had massive same store sales growth—dollars per day, per door—that more than doubled the overall brick-and-mortar category.
Online sales penetration varies among the top categories, according to NPD data, with hair leading, followed close behind by skin care, while makeup and fragrance are experiencing much slower online migration, with fragrance nearly flat between 2017 and 2018.
Gen Z and millennials are, no surprise, are the most likely shoppers to have purchased from a digital-native brand. Brands overwhelmingly supported by women under 18 include Jeffree Star, KKW and The Ordinary, while unquestionably Gen Z-dominated brands include Peach & Lily, Beauty Counter and Agent Nateur.
While direct online sales offer growth, expansion isn’t distributed equally. Direct-to-consumer brands with the biggest 2017-2018 growth, according to NPD, were Curology (147%), Glossier (69%) and Beautycounter (27%).
Jensen noted that 33% of consumers only purchase makeup products that are on sale or come with a free gift. This accounts for the industry’s sales spikes around events like Black Friday, Sephora’s ViB Insider or Ulta’s 21 Days of Beauty.
At the same time, the market has witnessed the rise of price-transparent brands like Brandless, A.N.Other, Beauty Pie and Stowaway Cosmetics, which openly discuss how much products cost to manufacture and how much added cost is derived from marketing expenses.
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