According to McKinsey Consulting, the beauty industry saw its sales halve on a year-over-year basis. McKinsey predicts global revenue will fall by up to 30% during 2020. But consumers are still buying beauty products and the industry is adapting to the COVID-19 era. Ironically, this industry is like a cockroach. It always figures out how to survive.
In the early days of the pandemic, large corporations such as Estée Lauder Companies Inc (NYSE:EL) and L OREAL S A/ADR (OTC:LRLCY) (OTC:LRLCF) shifted their production to hand sanitizers. By meeting the demand, they managed to keep their factories open. Luckily, it was easy for beauty companies to shift their production to sanitizers as alcohol is contained in the majority of their products. But the story goes far beyond sanitizers.
Beauty In The COVID-Era
These days, beauty companies sell sanitizers that smell and look much fancier than the regular edition of this simple hygienic tool. Sanitizers and masks became the new fashion statement. Some brands have even started infusing healthy additions like zinc into cloth masks to boost their value by claiming they have antimicrobial properties.
No More Need For Makeup
Beauty companies are astute at identifying a problem and trying to solve it. Sometimes, they even succeed in creating a need out of thin air. When the pandemic started, brands tried to convince women they need makeup for conference calls on Zoom Video Communications Inc's (NASDAQ:ZM) platform or meetings via Microsoft Corporation (NASDAQ:MSFT) Teams. But as the lockdown went on and on, we just got used to seeing imperfections as well as pets and kids running around. Zoom's beautify feature was an unbeatable blow as all users need to do is check the box named "Touch Up My Appearance."
Estee Lauder – The Image Of The Industry
Estee Lauder's fourth-quarter earnings reported skincare sales were up by 1/4 while makeup sales more than halved. The rise in online sales was not enough to compensate for store closures as both revenues and profit dived. Estée Lauder revealed net profits more than halved to $680 million in the year to June. The fall came despite the group making $800 million worth of savings including cuts to advertising, travel and a recruitment freeze. June's quarterly dividend was not handed out. Estée Lauder will be trimming its global workforce by 2,000. The cuts are expected to save the company up to $400 million a year.
Estée Lauder's latest earnings report does a good job at reflecting the overall industry. Even L'Oréal saw its sales dropping more than 11% during the first six months of the year.
Masks Replaced Makeup With Inner Beauty Wellness
NPD reported that prestige makeup has seen sales drop 37 percent in the last six months. Out of seventy-one percent of women in the firm's study said they wear makeup less often as a consequence of their new lifestyle. Women have become more concerned about inner beauty that radiates from the inside out. The famous lipstick index met its match, but companies found a way to put other products in consumer's minds and on even on their faces such as eye makeup, according to NPD's sales data.
One of the reasons DIY treatments are popular now is that SPAs and salons were closed during the lockdown. Nail polish sales had been suffering before the pandemic but are now booming as women couldn't get their manicures done at salons.
The New Buzzword
Face masks will continue being part of our future for a while. Beauty loves a good buzzword to throw around, and this time that word is maskne. It describes the appearance of acne around the area where one wears a mask. This is not a new term as it is simply derived from basic inflammation and irritation caused by physical friction. The humidity and dirt inside the mask can only worsen the underlying condition as they create an ideal environment for bacteria to thrive.
From Lipstick To Skincare
The "lipstick index," a term coined by Leonard Lauder, didn't hold this time. NPD reported that lipstick sales tanked over the last six months when masks became the known way to fight the spread of COVID. Skincare replaced it. But there's no reason to think that beauty won't surf the wave like it did during the recession in 2008 because the fundamental factor didn't change. People are eager to splurge on small luxuries to help themselves feel better both physically and mentally during these unprecedented times.
But it seems makeup sales will continue being soft for the foreseeable future. The pandemic brought long-term changes in consumer behavior. Consumers are still buying beauty products, but their priorities changed, as well as the way they value brands. COVID-19 redefined the look of the beauty industry.
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