The author is the Co-Founder of Reflect Health, a digital health startup revolutionising personalised skincare technology. At Reflect, he leads efforts to empower users to understand, track, and optimise their skin health like never before. He holds a master’s in MedTech Innovation and Entrepreneurship and a BSc (Hons) in Economics, Finance, and International Business from King’s College London.
The beauty market has undergone a significant transformation, evolving well beyond traditional foundations and lipsticks. The shift from local retail to online shopping has created a new paradigm in which consumers can conveniently access customised shades for their cosmetics from the comfort of their homes. This new era is characterised by improved ingredient quality, more informed consumers, and the integration of technology that personalised the entire beauty experience. In the post-pandemic landscape, the beauty industry reflects a redefined engagement that spans all age groups—from children to adults. Today, beauty products encompass a wide array of categories, including skincare, beauty technology, fragrances, makeup, haircare, and beyond.
Written by: Arjun Singh Deep
Source: Mckinsey: The beauty boom and beyond: Can the industry maintain its growth?
The retail sales of the global beauty market reached £446 billion in 2022, marking a 10% increase from the previous year. Projections indicate that sales will exceed £600 billion by 2024. India, China, South Korea, and Japan are witnessing significant growth and are ranked among the top five beauty markets, directly behind the United States. Notably, several of the world’s leading beauty brands, such as L’Oreal, have their origins in Europe. Furthermore, increasing disposable incomes in Eastern markets have prompted consumers to explore new products and innovations. The industry demonstrates resilience despite challenges such as rising living costs, supply chain disruptions, and other macroeconomic factors.
Source: Barclays: The beauty boom: redefining consumer ‘essentials’
This statistic pertains solely to UK and American millennials, who spend $2700 annually on beauty products, which amounts to nearly 6% of their income. This illustrates that beauty products have shifted from being a want to a necessity, and e-commerce—a disruptive distribution channel since the pandemic—has further accelerated growth in this market. Several factors have contributed to the expansion of this industry.
Changing consumer preferences:
The pandemic marked a significant transformation in consumer purchasing
behaviour. Within the beauty market, there has been a notable shift towards prioritising personal health and home-centred lifestyles. Individuals increasingly engaged with skincare products and experimented with various items and routines that not only provided relaxation but also evolved into a new form of self-care.
The growth of e-commerce platforms has been a primary driver of revenue in the beauty industry, with projections indicating a 12% increase by 2027. This trend has contributed to a rise in luxury beauty products, redirecting attention back to specialty retailers, which experienced a 13% growth in 2023, despite accounting for only 4% of the total revenue. Such dynamics create ample opportunities for emerging brands and skincare boutiques.
Additionally, there is a growing trend towards sustainable ingredients and packaging as consumers increasingly demand organic components. In response, brands are concentrating on consumer education, enabling consumers to understand the products they utilise on their skin and emphasising the importance of brand transparency. This shift has catalysed increased innovation and the introduction of new products into the market. One notable example is Skin+Me, a UK-based company that successfully secured ￡13 million in Series A funding led by Octopus Ventures.
The rise of beauty technology.
AI, VR, and AR technologies have transformed the beauty industry. With skin analysers, virtual try-ons, smart mirrors, smart sensors, and IoT devices capturing real-time data to monitor skin hydration levels and UV exposure, the game is changing for in-house devices aimed at consumers. Brands such as L’Oréal and CareOS are redefining the landscape in the beauty market. L’Oréal was the first beauty company to attend the Consumer Electronics Show (CES), the largest trade show in the world, and has recently become the first beauty company to deliver a keynote speech there. They introduced innovations like L'oreal's Beauty Genius , an AI-powered 24/7 beauty assistant that is reshaping personalisation and diagnostics like never before. CareOS is a smart mirror for health and beauty that has won multiple CES Innovation Awards, creating new opportunities for advancement in beauty technology. What raised further eyebrows was Blackstone’s acquisition of L’Occitane earlier this year.
Samsung's smart mirror is another example of how try-on technology transforms the retail landscape and in-person consumer interactions. It enables users to customise and visualise the outcomes of their choices, assisting them in making effective decisions with greater options and personalisation. Smart mirrors are also revolutionising the retail experience, allowing customers to try on dresses instead of waiting in long fitting queues. This not only saves time but also enhances efficiency, facilitating quicker sales for brands.
Changing Market Trends:
Since the pandemic, the market has changed rapidly, shifting towards cleaner and more natural products. This aligns with evolving consumer preferences and sustainability goals. With the surge in information, consumers have demanded transparency regarding ingredients, their sources, and their impacts, prompting brands to become more conscious of their formulations. With the aid of AI, new technologies, natural ingredients, and the notable rise of Korean products, brands have had to adapt their branding, marketing, and, most importantly, their products. Brands are investing heavily in technology and acquiring startups that will facilitate a personalised experience for users.
Source: Accenture: The reinvention of beauty
Brands like L’Oréal are making investments in science-backed formulations and innovations, as consumers often prefer brands rooted in science and evidence. Nevertheless, marketing remains crucial in driving product sales, especially with the rise of TikTok and beauty influencers. Brands like SkinCeuticals and Obagi are becoming the preferred choices for consumers, as they possess strong scientific validation and belong to the premium, dermatologist-recommended category.
While this may sound promising, several challenges persist. Consumers are apprehensive about their data, as beauty tech products increasingly leverage AI and AR. Many of these devices collect vast amounts of personal data, ranging from images to lifestyle information, raising concerns about data security and control. The lack of standardisation in the beauty tech industry raises additional concerns. With the market now filled with similar products, consumers are worried about the accuracy of analyses provided by AI and AR-powered services, which could lead to misdiagnosis or inappropriate recommendations from the system. This segment is heavily driven by brand loyalty, and consumers tend to be hesitant to trust new brands, exacerbating the competition. Another significant factor is that the beauty industry is influenced by trend cycles and ever-changing consumer preferences, a feat only the most established brands can achieve, thereby creating a barrier to entry. The beauty market is expanding rapidly, leaving ample room for growth. How various brands utilise generative AI and new technologies to personalise experiences will be pivotal for their success in selling products.
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