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Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

HBA Global 2014 Recap: Beauty Goes Digital

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The HBA Global conference took place in New York City’s Javits Center from 10-12 June. Digital beauty was a big theme at the conference as speakers talked about how growth in e-commerce, digital products, and social media has impacted the beauty industry.

Consumers Going Online to Buy Beauty Products

Online beauty sales are outpacing the beauty industry according to Diane Miles, Operating Partner at TSG Consumer Partners. Data from Euromonitor International shows that sales of beauty and personal care through internet retailing grew by a 15% CAGR from 2008 to 2013. In contrast, total global beauty and personal care sales grew by just 4% in the same time period. Ms Miles said that one in four beauty shoppers make beauty purchases online. Fifteen years ago, women purchased prestige beauty products from department stores in shopping malls and mass products from drugstores.  Now, consumers have a wider range of options, including internet retailing, infomercials and home shopping, speciality retailers like Sephora, and subscription beauty boxes like Birchbox. Consumers are not just buying online but going online to obtain product information and compare prices. Avid beauty shoppers are also using smartphones and tablets to research beauty topics, sometimes even while they are in stores, a melding of modern and traditional shopping habits.

Convenience Drives Growth in Internet Retailing

In my Trends in Global Beauty Retailing presentation, I spoke about how convenience is driving internet retailing’s rapid growth. Companies have invested heavily in technology to make online shopping faster and easier. Apps for smartphones and tablets allow on-the-go consumers to easily place orders or look for information while they are at home or on their way to work.  Online shoppers who previously had to wait several days to receive an order can now get it the next day. Millions of Americans pay US$99 a year to obtain free two-day shipping through Amazon Prime. For an additional US$3.99 per item, Amazon Prime members can get the item the next day through local express delivery in select cities. Consumers looking for near immediate gratification can choose eBay Now’s local delivery in two hours in Chicago, Dallas, New York City, and San Francisco peninsula.

Digital Disruption

During the Beauty in the Digital Age panel, Robert Ricci, Chief of Digital Strategy and Social Media Strategy at Marina Maher Communications, spoke of how he loves digital because it is “immediate, visual, experiential, mobile, and disruptive”. In terms of visual content, Robert said that “90% of information transmitted to the brain is image-based” and that “pictures are processed 60,000 times faster in the brain than text”.

He called the Mink 3D printer “disruptive” to the beauty industry. Mink is a 3D printer that can print make-up using Food and Drug Administration-compliant ink and substrates into a blush, eye shadow, or lipstick. By allowing women the ability to choose any colour from a photo, a beauty blogger’s video, or a celebrity’s red carpet appearance, “The Mink enables the web to become the biggest beauty store in the world”, founder Grace Choi said during her presentation at Tech Crunch DISRUPT in May 2014, “turning any phone, laptop, or camera into an endless beauty aisle”.  Her pitch was that Mink offers the selection of prestige (Sephora) with the convenience of mass (Walmart). She is targeting women aged 13-21 because they are less brand loyal and more willing to experiment.

The Mink is scheduled to launch in late 2014 with a retail price of about US$300. Mink will appeal to young women looking to express their creativity and individuality. But Mink’s high price puts it out of the reach of most young women unless they have affluent parents willing to buy it as a gift – a Christmas or Hanukkah present, for instance. Mink will also have to compete with the multi-million dollar budgets of Cover Girl and Mac. As a result, Mink is likely to be a niche player in colour cosmetics. However, Mink’s ability to print any colour instantly may put beauty companies under pressure to offer wider colour selections or offer a custom shade service.

Beauty Industry is Investing in Social Media

Beauty companies are investing more time and money into social media as they begin to understand its ability to impact influencers. One of the leaders is Shiseido’s Nars Cosmetics division. Nars became the first cosmetics company to use Snapchat to introduce a collection in September 2013. The company previewed the Guy Bourdin limited-edition collection on the social media app where pictures disappear after ten seconds. Heather Park, Director, Digital Media, Nars Cosmetics, talked about the importance of social media. She said that “social media supports the need for social interaction”, “creates a virality effect”, offers the “democratisation of knowledge and information”, and “transforms content consumers into content producers”.

Future of Beauty

Online sales (via mobile devices) and social media (Snapchat ads) represent the future of the beauty industry. Smart phone penetration is high, particularly amongst the young and affluent. Targeting the young, who tend to be the most concerned with being fashion forward, with new technology such as Snapchat and Mink offers a new and more modern way to sell beauty products. Online sales of beauty and personal care products are expected to be strong in the years ahead with expected growth of 14% CAGR in constant value terms outpacing the 3% CAGR of total beauty and personal care. As online delivery times get shorter and smartphone penetration increases, internet retailing is expected to gain more consumers. Beauty companies are expected to continue investing more in social media at the expense of traditional print and television advertisements to reach young consumers who prefer to learn about brands from their peers than from ads.

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