How Many Billions Of Dollars Are In The Makeup Industry

Nature is beautiful because it looks similar Art; and Fine art can merely be called beautiful if we are conscious of it as Art while however information technology looks like Nature.

Immanuel Kant, Critique of Judgment

Humans are visual and social creatures. Information technology makes sense thus that, historically, nosotros have been collectively preoccupied with beauty. Someone's advent is the first affair we notice about them upon meeting them. The nature of dazzler itself has been the focus of Aesthetics, a major field of study in Western Philosophy, and has occupied the brilliant minds of numerous philosophers, from Plato to the aforementioned Kant.

People have been using makeup and cosmetics since ancient times: the Egyptians' use of dark eyeliner is present in everyone's mind through their paintings and deities, while most know that Victorian women often fainted non because of their demureness, simply because of the broad-spread use of lead-based creams to "better complexion" together with constricting girdles.

For the about role, these rituals were conducted past women, and were relatively secret: one had to uphold the idea that beauty was natural and effortless, not an bamboozlement.

So how has the beauty industry, as old as the idea of beauty itself, get non only mainstream but also lauded as one of the all-time sectors in which to launch a company? This is particularly notable in a time in which traditional industries are struggling, and in the extremely challenging times for the retail industry.

In this article, we attempt to respond this question. We kickoff by defining the industry and its main players, both traditional and incumbent, nosotros briefly touch on industry size and trends as well as the anti-cyclical qualities of the beauty sector. Subsequently, we will use companies that exemplify success in this sector, Glossier and Deciem's The Ordinary, to understand how they approached (and cracked) the problem of enticing consumers, edifice brand loyalty and creating unique experiences, drawing a few lessons relevant for all direct-to-consumer (DTC) companies.

Beauty Industry Analysis - Market place Size and Major Players

The beauty manufacture is, in fact, quite wide: information technology includes both services (such every bit hairdressers, barbers, etc.) also as products. In the United states solitary, the dazzler services sector employs over 670,000 people, and its job growth outlook is "faster than average" according to BLS information at a charge per unit of 13% (2016-2026). According to a study, it was worth $532.43 billion in 2017 and is expected to reach a market value of $805.61 billion by 2023.

The table below highlights the unlike segments and their relative weight past revenue.

US Beauty Manufacture Segments by Revenue

Information technology is nevertheless an extremely concentrated industry, with the 20th largest manufacturer in the earth even so producing simply 5.5% of the revenue of the largest one: French giant 50'Oréal, which commands an eye-watering twenty.ii% market share in Western Europe.

Acquirement of the Leading 20 Beauty Manufacturers Worldwide in 2018 (United states $ Billions)

Traditionally, the industry is divided into a premium and a mass-marketplace segment. The premium segment represents 28% of total sales worldwide, while mass-marketplace accounts for 72%, according to a 2017 written report.

Traditional distribution channels focus on bricks and mortar, particularly sales through supermarkets, specialty stores, pharmacies, and salons. Direct sales and eCommerce, nevertheless, have become increasingly prominent, with online sales for beauty companies growing at a much faster rate than general internet sales: the category grew at 23.six% in 2017 to reach more than $5 billion in web sales, according to Net Retailer data. It outpaced the US eCommerce market's 15.6% growth rate in 2017 and the overall Internet Retailer Acme 1000's 18.5% growth rate. The company was Glossier, which we will cover in more than item after in this article.

For the purposes of this analysis, nosotros will focus on the production side rather than services, and on younger companies (which, not entirely coincidentally, fall in between the premium and mass-market segments) that are utilizing product and other innovation equally an engine of growth.

Beauty Industry Trends

The beauty industry is notably anti-cyclical, and then much so that a famous economic phenomenon, the lipstick effect, is derived from it. This phenomenon, which is only partly confirmed, alleges that consumers will however purchase luxury items in an economical downturn, privileging however smaller ticket items, such as lipstick. Even if this theory has been criticized past many (notably, The Economist, when it comes to lipstick specifically, many studies have found a statistically significant correlation when information technology comes to the broader beauty category.

Growth in the beauty industry, even so, has boomed in recent years, in a tendency that many link to a broader generational tendency of attention to physical wellbeing (which we covered in our recent article about the growing plant-based market and Across Meat). Millennials are often quoted every bit existence the primary drivers backside the meteoric growth of the beauty segment. There have been many articles written on this trend, citing everything from the aging of the millennial demographic to a focus on "self-intendance" as a coping method against a difficult political and economic climate.

Democratization of Beauty - Bringing Loftier and Low Under One Roof

The harbinger of this trend and the beauty industry growth was the arrival in the USA of specialized French beauty retailer Sephora in 1999, likewise as the ascent of its US competitor Ulta. These companies found a gap in the market: they created new shopping experiences for consumers, who had an additional pick beyond going to the mall or purchasing beauty products at a chemist's or supermarket. They importantly stocked products at different price points, from elite brands to store own-labels. In the U.k., there were similar concepts being launched at the aforementioned time: the local equivalent of Sephora, Infinite.NK, was founded in 1993 and started expanding their retail footprint in the early 2000s, growing to 69 stores in the UK and Republic of ireland and 31 in the US.

The Rise of the Indie Brand - Focus on Ingredients and Quality

The second significant tendency was the ascension of new and unknown brands focusing on ingredients and quality, originally coming from Korea, just at present also from Nihon or other countries. Korean skincare exploded in the Due west when Sephora started carrying a Korean make, Dr. Jart+ in 2011. The Korean skincare industry is heavily promoted by the Southward Korean government, which has fabricated Dr. Jart+, together with K-Pop, ane of its flagship cultural exports (and with amazing success). What is especially noteworthy near K-beauty, for the purposes of this article, is the focus on dermatological ingredients, the unbundling of products into different (and thus customizable) steps, and the proliferation of smaller, indie brands.

Finally, another meaning alter that propelled the dazzler industry forward has been the ascent of social media, in particular of paradigm-based social network Instagram. Manifestly, a visual medium is optimal for a dazzler make: information technology fully allows information technology to explore the visual potential of its products. Not merely, just Instagram has enabled brands to cultivate a stronger image, interact with consumers in a more direct manner, as well as creating an entirely new marketing category, that of influencers, which, in turn, have at times turned into fully-fledged entrepreneurs. Kylie Jenner, probably one of the nigh famous women in the world right now, was only this twelvemonth crowned the globe's youngest self-fabricated billionaire, thanks to her immensely successful makeup line.

Nosotros have thus identified some of the key success factors for established and upcoming beauty brands: a focus on consumer and experience, price-points that are potentially beneath those of premium brand but a focus on dermatological results and credentials, and finally, a strong digital presence and straight-to-consumer marketing. This leads united states of america into the next section of our slice, a small-scale case study.

Glossier and The Ordinary

Many smaller and newer brands have emerged in recent years, eroding the marketplace dominance of the large dazzler companies. Glossier and Deciem's The Ordinary are, notwithstanding, probably the most interesting of the incumbents, because of their deep understanding and intelligent use of the success factors outlined in a higher place, albeit in extremely different ways.

Glossier, on the one manus, is obsessively focused on customer experience and, as a digital-native visitor, has strongly utilized social media as a growth engine. The Ordinary, on the other hand, has built a huge make and received an investment from Estée Lauder past being obsessively focused on product innovation, scientific rigor in product evolution, and a very low price point. It also has a stiff social media presence, withal, whether that has always been a success gene is highly debatable, as explained below. We refer to The Ordinary, rather than the parent company Deciem, as information technology accounts for 70% of its sales.

Glossier

Glossier is arguably the most successful of the new ingather of beauty companies, and so much so that it became a unicorn subsequently its latest round of funding in March 2019. How has the company achieved this feat? Glossier started originally as Into the Gloss, a dazzler blog that profiled celebrities and customers in intimate pieces about skincare and makeup habits. The beginning 4 products were launched in 2014, reaching $100 million in revenue in 2018.

Source: Unsplash

Nosotros have identified the following equally keys to success for this innovative Direct-to-consumer (DTC) brand:

1. Digital presence and marketing: Emily Weiss, the founder, is considered by many to be an extraordinary entrepreneur, and has translated the ethos of her blog into a successful (and growing) product line. What Glossier is best known for is its use of social media to build a very stiff and instantly recognizable make. Glossier pink, the color at the base of the company's branding and colour scheme, has go universally recognized by dazzler customers, so much so that the hashtag #glossierpink has been used over 22,000 times on Instagram. In fact, Emily Weiss famously treats all of her customers every bit influencers and content creators for the brand. She was able to leverage the engaged customs that followed the blog and turn that into a committed and loyal customer base of operations.
2. Product innovation: Glossier approaches product innovation in a very similar vein: they regularly consult with customers on the mode they employ the company's products, on their wishes, and fifty-fifty have a defended slack channel with the 100 all-time customers, which is used finer as a highly engaged focus group.
3. Channels and distribution: Again, the approach that Glossier uses is extremely consistent, and based entirely on customer experience. The post-obit quote from Emily Weiss illustrates this best: when asked in an online Q&A whether she was planning on partnering with retailers for the distribution of Glossier, she replied "Corking question! One of the things we strongly believe, as a customer-axial company, is that we can't form the meaningful relationships that we value with our customers if we sell through other distribution channels. Being able to communicate and engage with our customers across various channels, and ensuring that we are delivering the true Glossier customer feel, is challenging if we go through other channels. I love discovering beauty products at all sorts of retail environments–for u.s.a., it's non about what retailers are doing wrong, merely more so ensuring we are able to deliver the Glossier customer feel that we're proud of."
4. Pricing strategy: Finally, fifty-fifty in its pricing, Glossier is consistent in its inclusivity: the products are positioned betwixt mass-market and premium, thus being an affordable luxury for its young customer base.

The Ordinary

The Ordinary, much similar Glossier, was born from the vision of an boggling founder, Brandon Truaxe. He was (he has unfortunately passed in tragic circumstances) a laic in the necessity for transparency and innovation in the beauty industry, and sought to exercise and so past launching a pare-intendance line (amongst other products in the range of the parent visitor, Deciem) that is projected to reach $300 million in sales in 2019. He did then through an extremely radical product idea: The Ordinary sells products based on unmarried agile ingredients at extremely low prices, which can then be mixed and matched by consumers for their specific needs. This creates an affordable and extremely personalized experience.

Source: Unsplash

The keys to success we've identified for The Ordinary are the following:

1. Digital presence and marketing: The Ordinary strongly utilized social media to build a brand connection and engage with their customers, as well as very clearly and strongly edifice a brand. They were initially renowned for responding to each private message and comment. The brand was built on scientific rigor and a minimalistic aesthetic. Deciem and The Ordinary are however likewise a cautionary tale for the dangers of social media: Brandon Truaxe's personal problems and conflicts with investors were prominently featured on the company'south Instagram for a long menses, which created intense (and at times morbid) interest in the company, and not necessarily in a positive style.
2. Production innovation: This is undoubtedly the chief reason for The Ordinary's extraordinary success (a success such that many products were on countless waiting lists and were effectively existence sold on the black marketplace). The make tagline goes "Clinical formulations with integrity," and summarizes the approach. The focus of the visitor is selling effective ingredients and formulations, that can then be integrated past the consumer. The focus is on product, and product but, with very express spending on packaging and marketing. The belief here was that if the product is valid, that in itself is sufficient marketing. The post-obit quote from the founder describes what he idea this to hateful: "Brand loyalty in the beauty industry is near zero considering the products don't work or they over-promise," says Truaxe. "What we're doing differently is only not promising what is not there." This extreme focus on effectiveness is also the result of extreme control of each phase of product development: everything is done in-house.
3. Channels and distribution: Deciem never spent on advertising exterior of its social media pages. The product is sold online, through flagship stores, and through a retailer network.
4. Pricing strategy: This is where The Ordinary absolutely stands out. The brand was built on selling products at extremely depression prices, with most products sold for less than $ten, a sharp contrast to more than circuitous formulations with similar active ingredients and significantly higher mark-ups. Nigh products, in fact just conduct the name of the agile ingredient and the force, such equally Niacinamide or Hyaluronic Acrid. Truaxe broke downwardly the cost of a production that retails for $5.lxxx as follows: "Our Vitamin C Powder is the best case. There are about 20 cents of vitamin C in it, and most 5 to 6 cents of other ingredients, and then the tube is most xx cents and the box is nigh 10 cents. I mean, the product costs less than a dollar."

Conclusion

The innovators in the beauty industry, and Glossier and The Ordinary in particular, can give very precise guidelines into what makes a consumer brand a success: knowing the strength of the company, whether it is consumer feel or product, building a unproblematic and clear make based on the company's ethos, and extreme command over all aspects that ascertain the focus in order to ensure constant quality. These are invaluable lessons for whatever entrepreneur.

If you are interested in a customized industry deep dive, you lot tin work with Toptal's market inquiry specialists and Toptal's consulting squad.

Source: https://www.toptal.com/finance/growth-strategy/beauty-industry

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