Business Categories Reports Podcasts Events Awards Webinars
Contact My Account About

How Beauty Brands Are Lowering Prices Amid Economic Uncertainty

Published July 5, 2022
Published July 5, 2022

It appears the global market uncertainty fervently feared in 2020 has finally come to fruition.

The beauty industry is not excluded from supply chain disruptions, inflation, and increases in price in everything from bottles to ingredients to printing of packaging and shipping triggered by the COVID pandemic.

Beauty is historically known to be a recession-proof category, with consumers more likely to spend a few bucks on lower-priced “affordable luxury” items like beauty products while delaying bigger purchases. This phenomenon, known as the “lipstick effect,” has become an economic indicator of consumption patterns since it was first coined by Leonard Lauder, Chairman of Estée Lauder, in 2001. In the first few months of the pandemic, the lipstick effect held true, with nail polish sales surging 24%, according to the NPD Group.

Over two years later, all signs suggest that the lipstick (and/or nail) effect isn’t strong enough to carry the beauty industry out of this particular crisis. Revlon has filed for bankruptcy, citing "macro-economic issues," including growing debts and supply chain issues. In the last year, custom haircare brand Prose, e.l.f. Cosmetics, The Ordinary, and most recently Glossier have all raised their prices, providing increases in raw ingredient prices, packaging, and shipping, as well as employee wages, as reasons for the price hikes. CPG conglomerates including P&G and Unilever hiked up prices across its beauty and personal care divisions, with the latter warning that additional increases are on the way.

While some brands are increasing their prices in reaction to global economic shifts, others are actually lowering their prices in the midst of market uncertainty. Hawthorne, Babe Original, Lime Crime, about-face, and Rita Hazan have all recently marked down their products. As inflation continues to erode consumer confidence, these brands are putting their best and final offer on the table in order to entice both shoppers and retailers. BeautyMatter spoke with a few of these brands along with industry experts to help put these extreme price fluctuations in perspective.

The Beauty Brands Dropping Prices

It’s apparent why beauty brands are raising prices, given the state of the global economy, but how are some managing to decrease prices across their SKUs? Hawthorne, a men’s grooming brand that recently launched in Target, seemingly pulled off the impossible. Brian Jeong, Hawthorne CEO and co-founder, says the brand is on a mission to make premium men’s care more accessible, in both distribution and price point. The expansion into Target and the price break are both reflections of this ambitious brand mission.

Despite some luxury brands expanding into men’s care, the average men’s care product purchased in the US is still priced at $5-$7, according to Jeong.

"We needed to find a way to get our exceptionally high-quality products to an everyday low price point in order for all guys to give us a shot," Jeong tells BeautyMatter. “In order to maintain our premium formulations while offering them at an everyday low price, we had to rethink our supply chain and rebuild our products from the ground up. We reevaluated our manufacturing partners and even looked at domestic partners given the shipping delays everyone has been experiencing."

Hawthorne’s VP of Operations Aki Terasaki (previously at Harry’s and Walmart) led this charge for the brand, and thanks to his expertise, the brand didn’t have to make many sacrifices in terms of quality. Terasaki helped the execs at Hawthorne see that the benefits of more distributions and lower prices would actually benefit the brand in the long term.

“It’s no secret how large the margins are in the space,” says Jeong. “Thus, it was getting comfortable—both ourselves and our manufacturing partners—with smaller margins per unit in exchange for unlocking larger scale and distribution.”

Babe Original, a beauty brand best known for its lash-enhancing serum, recently slashed $16 off the brand’s hero SKU in order to meet consumers’ demand for more accessible pricing. Babe Original is currently available on Amazon and in aesthetic salons, but the brand hopes the price change will make its products more appealing to potential retailers.

Babe Original’s director of e-commerce and marketing, Paige Johnson Morris, spearheaded the initiative to slash prices in direct response to consumer feedback and increased competition— without changing the formula of their best-selling SKU.

“We didn’t want to take away from our formulas because that’s why we're here, but we needed to cut costs somewhere,” Morris tells BeautyMatter. “That mostly stemmed from secondary packaging, and then a little bit on our vessels. We wanted it to be more accessible to everybody, and at the same time, we started reaching out to retailers. If we're able to continue to grow and scale, then we can make the margins work.”

Morris spent the last year and a half reconfiguring the packaging in order to accommodate a lower cost. Supply chain disruptions in 2021 almost threw a wrench in her plan, but against all odds, Babe Original rolled out the new packaging and price break in June 2022, just as many brands were announcing price increases.

“We took our hero SKU from $65 to $49, which makes it the most affordable lash serum on the market by far,” says Morris. “Hopefully, people appreciate it now more than ever, because of [rising costs] everywhere.”

Lime Crime, a Los Angeles-based beauty brand, was founded by beauty influencer Doe Deere in 2008 and acquired by private equity firm Tengram Capital Partners in 2018 following a string of scandals with the controversial founder. Chief Executive at Lime Crime Andrea Blieden was tasked with reinventing the brand, and in doing so, rolled back prices in an effort to cater to Gen Z, who Blieden says is the brand’s target audience. Products are marked down an average of $4-$10 across its offerings, which includes haircare and color cosmetics. The brand launched in Walmart and Target in February, where it’s going head to head against budget brands and products made famous on TikTok. In order to compete on the shelves at these mass retailers, Lime Crime had to come down on cost for them to have any shot at remaining competitive in this space.

Haircare brand Rita Hazan also cut prices in order to stand out on the shelves at mass retailers. The eponymous brand founder says she made changes to her formulas by using a less expensive fragrance in order to make it more affordable for consumers. The brand is betting big on the exposure they’ll receive from launching in Walmart earlier this year, a decided move away from the luxury positioning Rita Hazan embodied since launching in 2011.

While Lime Crime and Rita Hazan were both able to reduce prices after more than a decade of being in-market, about-face, a beauty brand founded by the singer Halsey and launched in January 2021, waited just over a year before decreasing prices in April 2022.

“When I launched about-face, my goal was to create makeup that empowers self-expression and individuality—accessible to everyone, everywhere, every way," Halsey wrote in an Instagram caption announcing the changes. "Being able to sit in front of a mirror, tune out the world and play with makeup has served as a creative outlet more times in my life than I can count. It’s a feeling I want to share with everyone."⁠

Before April, products ranged from $17 to $32. Today, most products are available for $20 or less, with select bundles available for less than $100.

"We needed to find a way to get our exceptionally high-quality products to an everyday low price point in order for all guys to give us a shot."
By Brian Jeong, CEO + co-founder, Hawthorne

What the Experts and Retailers Are Saying

The decision to lower prices is one that takes time to plan and execute, which is even more impressive considering supply chain constraints. These challenges have led to raw ingredient shortages and massive delays in freight forwarding from China to the US, pushing out lead times that used to be six weeks to six months, according to Britt Martin, Head of Marketplace and Supply at Novi Connect.

The digital platform helps beauty brands access ingredient sustainability metrics, and is uniquely positioned in the center of this complicated ecosystem, working closely with brands, manufacturers, and retailers to ensure transparency within supply chains and sustainability compliance.

Martin tells BeautyMatter that she cannot think of one area that has been untouched by the supply chain challenges, but she does have an explanation as to why some beauty brands are able to lower prices in the face of widespread rising costs.

“Either they had an amazing margin ahead of time that they're willing to accept a lower margin, because they're doing a lot higher volumes,” she says. “Or, when they set up their supply chains, they were largely domestic. Those brands are going to be less impacted than those that source from overseas.”

Ginger King, a cosmetic chemist and formulation expert, has seen 5-10% increases in raw materials costs, especially when it comes to the more natural ingredients which are commonly seen in clean beauty brands. These price hikes are due to weather, war (sunflower-related products), or simply overall inflation.

“Perhaps they want to get rid of some inventory from the past two years, as all products have shelf life,” King says about certain brands lowering their prices. Her hunch may not be too far off, as many fashion brands are making moves to reduce their inventory ahead of what many believe to be a potential recession.

Unlike in fashion, beauty products have an expiration date, and at a certain point, those products become unsellable. The danger of sitting on inventory is far more urgent in beauty, and while getting into mass retailers is important to smaller brands to achieve scale, the last thing retailers want is for inventory to be sitting on their shelves. Target saw share prices drop 9%  after it lowered prices in a last-ditch attempt to clear out unsold inventory in early June. Walmart is under similar pressure, with inventory up 32% in the last quarter, which executives say will take another two quarters to reduce.

In the face of such uncertainty, lowering prices is a calculated risk that some brands are willing to take if it means more exposure, greater accessibility, and potentially the chance to offload inventory. The last two years have proven that the beauty industry isn’t immune to economic cycles, and while a recession isn’t a preferable solution to supply chain issues, that may be what it takes to balance out some of these extreme price fluctuations.


2 Article(s) Remaining

Subscribe today for full access