The desire to appear and feel one’s best is so intrinsic to human nature that even during times of economic uncertainty, consumers see beauty products and services as essential, not just nice-to-haves.
With consumers consistently spending on skincare, cosmetics, fragrances, and grooming today, the beauty industry has proven resistant to a period of economic downturn, while players in the apparel and broader retail sector are reporting declining sales.
Recent developments in the beauty sector are also a testament to the industry’s potential for growth and profitability.
For example, Richemont, a conglomerate known for brands like Cartier, Montblanc, and Dunhill, identified potential in the beauty sector and subsequently introduced Laboratoire de Haute Parfumerie et Beauté, a dedicated division for beauty products. It also appointed a new CEO to head its new division, signifying the company’s dedication to gaining a substantial share in the beauty market.
Richemont’s expansion into beauty shows that established luxury brands are increasingly considering the beauty industry as a profitable venture — one that is largely inflation-resistant.
Inflation-Resistant Nature of the Beauty Industry:
The beauty industry is unique in its ability to handle inflation. There are several reasons behind this resilience:
- Brand Loyalty: Many consumers are loyal to specific beauty brands due to the trust and satisfaction they derive from their products. These loyal customers are often willing to absorb moderate price increases without switching to lower-cost alternatives.
- Innovation: The beauty industry is constantly evolving, with brands introducing new and innovative products to meet changing consumer preferences. Offering innovative products helps justify price increases as customers perceive enhanced value in the latest offerings.
- Diverse Pricing Segments: The beauty market caters to a wide range of price points, from affordable drugstore brands to high-end luxury products. This diversification allows consumers to adjust their spending based on their financial circumstances, making beauty companies less susceptible to economic fluctuations.
- Emotional Appeal: Beauty products often provide emotional benefits, such as confidence and self-esteem. Consumers often prioritize these emotional rewards and are thus less price-sensitive and willing to spend more.
But it is not just the inflation-resistant nature of the beauty sector that is appealing to luxury brands. As Retail Bum pointed out in August 2023, many of these players, including Prada and Hermès, are strategically targeting the aspirational shopper demographic, who may not be able to afford their luxurious clothing and accessories but yearn to taste the extravagant lifestyle these brands represent through beauty lineups.
An aspirational shopper is someone who aims to replicate the lifestyle and prestige linked to luxury brands, even if they lack the financial means for frequent high-end purchases. They are attracted to the appeal of acquiring luxury items, with the aspiration of joining an exclusive and prosperous community.
While they may not presently possess the resources to purchase couture dresses or Birkin bags, they still long for a link to the brand and search for affordable products that allow them to align their lifestyle with the brand’s prestige.
Recent developments in the beauty industry support these ideas, including reports of Kim Kardashian’s interest in regaining ownership in SKKN and Kering’s recent entry into the beauty sector through its acquisition of Creed.
Beauty giant E.L.F Beauty also recently agreed to acquire skincare brand Naturium for $355 million in cash and stock.