The Future of Beauty: Trends Shaping The Global Beauty Industry In 2020
10 Min Read |
More than any other category of consumer goods, the beauty industry is driven by trends. And the last few years has seen the emergence of many new trends — each promising to revolutionise the industry; organic, transparency, fitness and wellness.
So how can a company know which direction to take — which trend to follow?
The answer is to find a connection between a developing trend and an actual consumer need- something that is constantly changing as times change.
Trends that can tap into an underlying consumer need develop to become mainstream.
For brands trying to expand in the market, or even keep pace, choosing which trends to follow or adopt can be a real dilemma.
The overall consumer trend towards healthier living, that has given rise to demand for organic foods and more beneficial household products, has also had an influence on the beauty sector. Natural is not a new phenomenon in the beauty market; it has been around in one form or another for many years. But the last few years has seen a marked trend towards more natural, pure products. However, it’s no longer enough for a brand to merely claim to be natural; customers want transparency and they want brands to demonstrate how they arrive at their claims.
The definition of ‘natural’ is also evolving and while it may mean one thing to one person, it may mean something quite different to another. Brands need to be aware of consumer perceptions of natural. For some it means including beneficial ingredients while for others what matters is the exclusion of harmful ingredients, such as parabens.
Increasingly it seems that the story is no longer about what’s in the product; but more importantly — what’s not in it. Recent research points that 53% of FMCG consumers are more concerned about the exclusion of harmful ingredients than they are about the inclusion of beneficial ones.
When looking at the trend in cosmetics, sales through traditional outlets is falling, with a decline of over 1% over the past year. Sales of natural products have followed a similar path; falling 1.25%. However, that’s not the full story and the trend is reversed when looking at products that exclude certain ingredients — like parabens (widely used as preservatives in the cosmetics and pharmaceutical industries). Removing certain ingredients from a formula appears to be an acceptable way for brands to achieve the term ‘natural’ product; although in some cases manufacturers are only engaged in “greenwashing”, a term used when a “paraben-free” markets themselves as natural, when in fact they use other harmful or irritant synthetic alternatives.
Parabens come highest on the list of ingredients that consumers wish to avoid.
The anti-bacterial ingredients used by many cosmetics brands to ensure longer shelf life are seen by many consumers as bad, not just for humans, but also the environment. In 2004, a British study found traces of five parabens in the breast tissue of 19 out of 20 women studied. The study didn’t go as far as to prove that parabens caused cancer, but identified that the parabens were able to pass through the skin and remain in the underlying tissue. However, while it’s unclear if parabens are as bad as many believe, there are so many alternatives now available that it’s no longer necessary to use them.
The response by the beauty industry has been to reduce the use of parabens; now at 35% — down over 7% over the past two years. But that still leaves a significant share of categories of products that still contain parabens. According to the report, over the past few years there has been a significant move towards paraben-free, the category share percentage for facial cosmetics has shifted from 43% to 54% and for eye cosmetics from 45% to 55%. The biggest change was in in facial cleansers where 61% are paraben-free.
While the exclusion of certain ingredients and simplification of formulas is one aspect of the health and wellness trend, the other aspect is that consumers are looking for the inclusion of other ingredients. Taking a cue from the health-foods market, many brands are now including popular superfoods in their formulations; spending on products containing avocado oil have increased by 31%
The term “natural beauty” means different things to different people. So, for brands, the challenge is to interpret the needs of the consumer into products that provide them with an authentic natural experience.
Personalisation isn’t a new phenomenon in the beauty industry; it has usually been available only to a wealthier few who could afford it. However, the last few years have seen a significant move in this direction as consumers demand the sector caters to individuality. While in some quarters it may be popular to blame millennials for all our woes, there are many factors at play; societal changes, the internet, data-gathering techniques, new technologies, equality issues and greater awareness of the individual nature of people, have all played a part. This has provided huge challenges to many established brands but also provided many more opportunities to others.
Understanding individual consumer needs and engaging on a one-to-one level takes serious commitment. Consumers want to identify with brands as ‘their’ brand — on a personal level. Nearly a quarter of cosmetics consumers want to identify with the brands they buy — more than any other category of packaged goods surveyed in a recent Nielson report on ‘The Future of Beauty’. Many direct-to-consumer brands emphasise an anti-big-brand image and say they derive their value from stripping away many of the overheads that weigh down the bigger brands.
Consumers have always sought individualisation, but up until a few years ago, their choices were limited. Increasingly, generic products are becoming irrelevant; ‘nude’ colours are now an underperforming category as consumers look for diversity in product ranges. The range of products available to shoppers has increased exponentially over the past few years; the number of unique facial cosmetic colours available is up 22% over the past five years.
Online First Brands
Independent, small and niche brands are eating into the share of major incumbents, and the past five years has seen retails stores own-brand sales of cosmetics grow nearly three times faster than the entire cosmetics category.
The increasingly diverse needs of consumers has opened up opportunities for many new brands who are prepared to step in. With access to a worldwide online audience and minimal infrastructure, these light-footed indie brands are talking directly to their consumers and fine-tuning their products and brand story in real time to provide them with limitless choices.
Customers no longer go to a retail store to talk to a beauty advisor. They research online, looking for products that are of benefit to their individual needs. For brands who are prepared to tap into this new consumer behaviour, the benefits are obvious. New data collection tools enable companies and retailers to create individual customer profiles so that formulations can be tailored to individual needs.
In the competitive fragrance sector, developers of fragrances are looking at diagnostics to determine how to tailor for specific individual preferences. Demand for mature fragrances is in decline as consumers are presented with an overwhelming variety of choices. Customisation is fast becoming a central element in this category where demand is now driven by scent preference and personal aspirations.
Innovative technologies like Artificial Intelligence, Augmented Reality and the Internet of things are providing vast amounts of data for the beauty industry to make products more targeted and personalised than ever and Startups like Proven, Curology and Shiseido are challenging beauty existing major beauty players by investing heavily in these new technologies.
The ubiquitous mobile phone has overtaken the desktop; 61% of online time in the UK is now spent on mobile and, for many people, there is no distinction between the web and ‘mobile web’. Why is it the preferred option? Facebook suggests that it’s because our connection to our mobile phones is much more personal than it is to our TV or desktop computers; we can switch between interacting with our friends and our favourite brands seamlessly. For beauty brands, mobile offers them the opportunity to establish a more direct and intimate connection with their customers. Just as someone may ‘like’ a photo shared on Facebook, the same person will do the same on a favourite brand’s Instagram page without a second thought and there is very little difference between how people interact with friends or brands.
Therefore, it’s not surprising that the online spending on beauty products has grown faster than almost any other packaged goods category. In the US, almost one in three dollars spent on beauty products is spent online; in Europe online beauty retailers reportedly get 50% of their business from online devices.
But there is still room for development as consumers increasingly use mobiles for beauty advice and to research new products. Although fragrance, hand and body lotion currently generate the greatest share of online sales, there is still considerable room for growth for hair care and hair colouring.
The type of brand that will succeed in this new online landscape will be very different from previous brick-and-mortar stores. The balance of power between large beauty brands and smaller ones is reversed when we compare bricks-and-mortar stores to those online. Nielson reported recently, the big brands dominate the physical retail space, with the top twenty brands taking 90% of spending. However when it comes to online those same brands are only taking 14% of the market share.
Discovery and research
The success of online stores isn’t simply a result of their online activity on their website or apps. In fact, a large part of their success is down to the fact that consumers now do their own research online and share their experiences through social networks; mobile devices have made it easy to research and share with others. The opportunity is for brands to tap into this conversation, gather the data, then analyse for trends and consumer needs, and then respond with products that fulfil those needs. However, this takes commitment as consumers are now presented with more choice than ever before and technology is smoothing out the buying process. The old model digital marketing model of the shopper’s journey has been reduced to a few moments; from desire, to research to click-and-buy.
Although still at a relatively early stage in development, voice-based assistants are becoming more commonplace. As the technology develops, we can expect to see voice-command systems replace screen-based tapping, swiping and clicking. This presents more opportunities for brands to engage on a deeper level with consumers through online assistants who can guide the consumer through the shopper’s journey, providing personalised advice and recommendations and then taking an order for a product.
Brands will have to think differently on how they engage with consumers. Without an on-the-shelf presence consumers will no longer be swayed by packaging, brand logos or any of the other traditional methods of enticing the customer to buy. Finding a way to provide personalised, useful services to customers by leveraging new technology will be the greatest challenge.
Consumer needs remain fundamentally the same even if new technology influences the way they seek to fulfil those needs and the pathway to brand building remains the same; create a product that fulfils a consumer need, then leverage the available technology to deliver a solution and scale up while still remaining authentic.
Transparency, flexibility and authenticity while staying relevant will be the markers of the brands who succeed.
Subscribe & Join 50,000 Fellow Beauty Industry Professionals
Get our complimentary briefing, featuring agenda setting news & analysis on the global beauty industry.