According to the Office for National Statistics, 87% of adults in the UK reported an increased cost of living from August to September 2022. Aside from this, the report also stated that 16MM Britons have had to cut back on food and essentials, with a further 15% taking on more hours at work and 4% having to take on an extra job to make ends meet. But what does this mean for beauty?
To put this into industry perspective, research from the British Association of Beauty Therapy & Cosmetology (BABTAC) shows that almost 94% of salon owners are struggling due to a considerable increase in utility rates over the past year. 40% have faced a 100% price increase, and a further 10% have experienced a damaging 200% price increase. Meanwhile, the National Hair & Beauty Federation found that 77% of hair and beauty businesses are paying more for energy than they were six months ago, leaving three-quarters of companies either partially or wholly reliant on government support.
“The hike in bills is just another blow to those who have already had to contend with the negative impact of the pandemic, which was estimated to be an average financial loss of £11,603 on earnings,” Lesley Blair MBE, CEO and Chairperson of BABTAC, told Beauty Pie.
As suggested by Blair, the beauty industry's financial struggles originated from the pandemic and have only been made worse due to the looming cost-of-living crisis. While some may feel the pandemic and its effects are over, this is certainly not the case, and several brands and businesses are still trying to pick up the pieces due to the monetary effects COVID took on their sales.
Last year, to help tackle the financial impact of the pandemic, the British Beauty Council fought for a larger amount of money to be granted to the personal care sector from the government's Restart Grant, increasing the initial sum of £6,000 to £18,000. This move was imperative, as according to Millie Kendall, CEO of the British Beauty Council, 95% of Britain's hair and beauty businesses are small to medium enterprises, with a majority having less than ten employees. As of 2021, it was estimated that the government's Restart Grant had paid around 1,000 new employees' wages in the beauty industry.
Speaking on the grant, British Prime Minister Rishi Sunak (former Chancellor of the Exchequer) told Elle, "The past year and a half has taught us that the beauty industry is an essential service because what it provides is things that can't be measured on financial spreadsheets. It's a sense of confidence and esteem or well-being, and that's why when we reopened the economy, we ensured that beauty was right at the beginning of that process."
In response to the combined consequence of the pandemic and the cost-of-living crisis, the UK government announced a six-month postponement for non-domestic consumers from rising energy costs in September. While this is a positive step for salon owners, many start-ups would have continued to struggle to make their pandemic losses back even if the UK had not hit an energy crisis—meaning now, it'll only be harder to do so, despite government efforts.
To make matters harsher for beauty businesses, due to the cost-of-living crisis, consumers are now unable to spend as much as they once would have on self-care practices, which will only further dent the revenue being made by brands. According to Beauty Pie's Beauty Futures 2025: Beauty, Beautility and the Rise of the 'Question Everything' Economy Report, the period of financial uncertainty and increased free time due to the pandemic has only allowed consumers to spend more time researching, creating a generation of hyper-knowledgeable consumers expecting brands to provide the best for them. Marcia Kilgore, founder of Beauty Pie, believes that consumers are now being much more mindful about value, questioning what they're getting for their money and seeing if they can get products and services for less elsewhere.
Several industry names have increased their prices to try and keep up with the struggles of running their businesses in these uncertain times. Unilever, for instance, increased the prices of their products by 11.2% in the second quarter of 2022, and of course, as Kilgore states, consumers will begin to stray from brands they usually invest in if a cheaper alternative is available.
Furthering the problem, aside from cost issues and energy bills, several brands are currently battling with a shortage of ingredient supplies, shipping delays, and increased production costs. According to Audrey Depraeter-Montacel, Global Beauty Lead at Accenture, these challenges are very cost damaging and unlikely to be resolved before Q1 of 2024.
However, it's not all bad. Beauty Pie's investigation provides positive news that the lipstick effect (an increase in consumer spending during the economic downturn) is still very much in place, with many swapping their usual summer holidays and brand-new cars for more minor luxuries such as self-care treatments. Despite several consumers opting for cheaper beauty offerings, there has still been a sales increase of 23% for prestige beauty in 2022. "Luxury represents a way to escape,” says Benjamin Voyer, behavioral scientist, professor at ESCP Business School, and chair-holder of the Cartier—ESCP—HEC Turning Points Research Chair. "It's about indulging, enjoying, and treating yourself. As the economic situation forces people to optimize their budgets, high-quality beauty has a significant role to play."
Ultimately, it is more than clear that the British beauty industry and consumers alike are struggling with increased bills and knowing how and when to invest in the industry. As a result of the cost-of-living crisis and the pandemic, finances are the hardest they have been for a long time. While there is no way for brands and consumers to fix the problem, these issues can be lessened if the industry considers the beauty community's best interests. Industry professionals and business owners need to ensure they're honest with their customers, offering them the best products and services they can, and consumers need to be patient with financially struggling brands having to make price adjustments. While it is not clear when the financial strain will end, if at all, as the Brits always say, it's essential to "keep calm and carry on."
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