The Global Beauty Market is a Lovely Thing!

The global beauty market is growing, with shoppers upping their spending on beauty products by 3.6% in 2014. The market is poised to break $400 billion. Even a modest global growth of 3.5%, will bring the market to $412 billion in 2015.

Much of this boom is due to economic growth in markets in Asia-Pacific, Latin America and the Middle East & Africa regions. Regions with lower expected performance in beauty will be Russia due to recession and China because of a slowing economic growth. It’s also possible that a Grexit will hit the European consumer spending later in 2015. However, the US should see a stronger economic output and retail growth overall this year.

Global beauty brands dominate the market. In most regions, the top ten brand owners account for more than half of all spending on beauty and personal care (BPC) products. Yet at retail level, the picture is more fragmented, with spending splintering to different sectors and, in some regions, relatively small players.

How are retailers preparing to take advantage of opportunities in beauty? One way is a shift in focus to tech innovation. The in-store experience is about much more than technology, but this is an emerging field that can be leveraged to offer new experiences and improved services in stores. Alternatively, it can be used by e-commerce pure plays to deliver convenience and restore some of the tangibility that’s lost with online shopping.

We look at in-store tech as not just about building a competitive advantage in lower-growth mature markets, but more about gaining first-mover status among smartphone-wielding, cross-channel shoppers in faster-growing markets such as Latin America and the Asia-Pacific region.

Of course, the saavy brand retailer knows by know that they need to stay relevant to their end-consumer, engage them and capture that valuable data tied in with their shopping habits. In terms of product presentation, technology has brought marketing and communication to a new level. Responsiveness is key, and gamification adds an element of fun. In August 2014, DKNY launched a new fragrance in London’s Debenhams: DKNY MYNY. Incorporating a full street of windows, the store installed an interactive digital screen with motion detectors and an integrated camera that snapped photos as passersby stopped and played a game. The campaign resulted in the brand reaching top-seller status during the marketing period, while also driving social media attention.

Here’s what we expect looking ahead.

Across markets, we’re anticipating flux at the retail level, given the characteristics of the beauty retail sector outlined above and the rapid changes we’re seeing in many consumers’ shopping habits.

In less mature markets, we expect:

  • Consolidation in the specialist sector as national chains displace independent, neighborhood BPC stores.
  • Channel switching among shoppers as adjacent sectors, notably grocery, modernize and shift to larger formats that incorporate more beauty lines.

In more mature markets, we anticipate that:

  • Internet retail, including online pure plays and beauty subscription services, will further destabilize established patterns of consumption.
  • Discounter shopping and off-price retailing will further shake up established routines.

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