Many companies are continuing with the work-from-home policy for their employees even after the lockdown has been eased. Others have introduced flexible days to work from home. With WFH and wearing a mask when one steps out the new reality, the way people are consuming skincare, haircare and beauty products is changing.
McKinsey & Company in a special report released in May analyses the short and long term impact of COVID-19 on the beauty sector. It predicts that global beauty industry revenues could fall by 20 to 30 per cent in 2020. In the United States, if there is a COVID-19 recurrence later in the year, the decline could be as much as 35 per cent.

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But, on a positive note, it also states that the beauty industry is resilient. “During the 2008 financial crisis, spending in the industry only fell slightly and fully bounced back by 2010,” the report notes. During the 2001 recession, lipstick sales rose. Leonard Lauder of the Estée Lauder Companies coined the term “lipstick index” to describe this phenomenon. “The principle is that people see lipstick as an affordable luxury, and sales, therefore, tend to stay strong, even in times of duress.”
Source: Unsplash
“In China, the industry’s February sales fell up to 80 per cent compared with 2019. In March, the year-on-year decline was 20 per cent—a rapid rebound under the circumstances,” states the report.
When it comes to beauty products, approximately 85 per cent of people across major markets, prefer to buy products in-store. Even online-savvy American millennials and Gen Zers (those born between 1980 and 1996) made close to 60 per cent of their purchases in stores, states the report.
Source: McKinsey & Company
With stores across the world had shut for various durations because of COVID-19, McKinsey predicts that some of these stores will never open again while new openings will likely be delayed for at least a year.
To navigate their way through the crisis, beauty product brands and retailers are scaling up their e-commerce sales with numbers twice as high as their pre-COVID-19 levels.
As per the report, Sephora’s US online sales are reportedly up 30 per cent versus 2019, as were Amazon’s beauty-product sales for the four-week period ending April 11. In China, McKinsey research has seen online revenues for beauty-industry players rise 20 to 30 per cent during the outbreak.
While the report is focused on USA, it throws light on trends that could transcend markets. Here are the highlights:
The return to in-store shopping could be slow and differentiated
Stores in China reopened in March and despite reports of revenge spending, sales have not bounced back. As of mid-April 90 per cent of drugstores, supermarkets, beauty-product specialty retailers, and department stores in China had reopened. However, depending on the sector and type of store, traffic remains down 9 to 43 per cent compared with pre-COVID-19 levels.
Using promotions to attract consumers and clear inventory
Prestigious brands are offering online discounts of up to 40 per cent to compete with departmental stores to attract promotion-oriented consumers. It also helps move unsold inventory. As more stores open, the report predicts more promotions to reclaim footfalls.
Demand for above-the-mask treatments will rise
The report foresees a 55 and 75 per cent decline in cosmetic and fragrance purchasing from prestigious brands, respectively, versus a year ago. As people return to work, they will continue to wear masks. As a result, above-the-mask treatments will rise. In China, Alibaba reported eye-cosmetic sales increased 150 per cent, month over month, during the week of February 18, 2020
Source: La Chatelaine
DIY beauty and self-care will attract greater market share
As beauty salons were closed during the lockdown, self-pampering products were on the rise. Going forward, people may still forego visiting salons for some time due to concerns over physical proximity.
“NPD, which tracks consumer spending and point-of-sale data, recorded that sales of luxury hand soap in France were up 800 per cent the week of March 16, 2020, as the country went into lockdown. Zalando, Europe’s largest fashion and lifestyle e-commerce marketplace, reported a boom in pampering and self-care beauty categories, including candles, aromatherapy, and detox products; sales of skin-, nail-, and hair-care products were up 300 percent, year on year.”
“That is consistent with results from Amazon, for which most makeup sales in the United States are showing slight declines, compared with the same month in 2019, while sales for nail-care products (218 per cent), hair coloring (172 per cent), and bath-and-body products (65 per cent) are way up.”
“In the United Kingdom, online sales of prestige-brand nail polish have seen double-digit growth every week since lockdown began in March.”
LONG TERM IMPACT
McKinsey & Company notes that while 2020 will be one of the worst years for the industry, it will be a relatively stronger position than other consumer categories and will be attractive in the long run. “The COVID-19 crisis is likely to accelerate trends that were already shaping the market, such as the rise of the global middle class and the use of e-commerce, rather than mark entirely new ground.”
Strengthening digital platforms
“Consumers will increase their online engagement and spending as a result brands’ own e-commerce stores, shops on social media and marketplaces will become even more important. On the operations side, brands will need to use artificial intelligence for testing, discovery and customization as hygiene concerns will derail product testing and in-person consultations.”
Accelerating Innovation
“Even before the pandemic, brands were under pressure to overhaul their product-innovation pipelines in inspired by the ability of digital-native direct-to-consumer brands to go from concept to cupboard in less than a month. Now, the need for speed is even greater. To achieve it, there may be a greater role for contract manufacturers, both to diversify (and thus reduce production risks) and to serve as thought partners in product innovation. There is also potential for closer collaboration—among brands and retailers, in particular—through data sharing and inventory pooling.”

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