Over the past several years, the beauty and personal care space has experienced significant growth, even outpacing other consumer categories. But, naturally, the industry has been hard-hit because of the pandemic, as have most others.
A survey of consumers conducted on April 20, 2020, by L.E.K. Consulting shows that people are spending an average of 15-20% less per month on beauty than before the COVID-19 outbreak began. That’s a bigger drop than consumers anticipated in an earlier round of the survey conducted a month earlier, on March 18, when they said they expected to spend 5-10% less on beauty.
Also, top retailers, like Sephora (about 460 stores) and Ulta (about 1,200 stores), closed all stores by late March. And a number of national chain services providers, such as Dry Bar, also proactively shut down all locations, while most local and regional providers are following local government guidelines. As restrictions begin to ease around the country, service providers and retailers are slowly reopening.
Of course, it’s uncertain what the lasting impact of the pandemic will be on the beauty industry. That said, the vast majority of consumers—over 80%—expect their spending on beauty categories to return to or exceed pre-crisis levels, according to the first round of the L.E.K. survey. But in the meantime, it’s important for players in the beauty industry to understand how their specific segment (at-home beauty products or out-of-home beauty services) is being impacted, and to consider ways to adapt most effectively.
When it comes to the at-home beauty segment—from regular daily hygiene to occasional specific usage—the pandemic’s effect is moderate, and varied. Products that give people a sense of “self-care”—skincare regimens, lotions, face masks, at-home facials, essential oils, and aromatherapy—are the most likely to see consistent demand during the crisis. And products that either supplement or replace out-of-home services, like at-home haircare treatments, nail care, and hair removal, may encounter increased demand.
The same may not be true for those at-home beauty products that are specifically enhancing one’s outward appearance. Shelter-in-place and work-from-home have certainly reduced the demand for items like color cosmetics, fragrance, sunscreen, and hairstyling products and tools.
For out-of-home beauty services, COVID-19’s impact has, of course, been severe. Most salons and spa services (including hair, nails, waxing, facials, tanning) have largely been at a standstill, whether due to government mandates or owners’ fears of spreading coronavirus at their businesses, although some are starting to reopen in areas where restrictions are lifting. While many large corporate-owned chains originally closed all locations, Blo Blow Dry Bar and European Wax Center, among others, are also beginning to reopen slowly where possible. Chains that are primarily franchised have relied on franchisees to decide whether to close locations, per local mandates and/or their own discretion. Some have made the tough choice to seek bankruptcy protection, like Mynd Spa & Salon.
There is light at the end of the tunnel for many out-of-home beauty businesses. Consumers are unlikely to replace all spa services with full at-home treatments. Many people eagerly await the opportunity to have a professional serve them. Undoubtedly there’s pent-up demand for things like hair and eyelash extensions and dermatological treatments.
So what can beauty brands do in the short term to help mitigate the impact of the pandemic and prepare for a rebound?
1. Drive continued demand by focusing on what consumers are craving. For instance, brands can generate loyalty by providing live demonstrations through streaming platforms like Instagram Live or Facebook Live. And by focusing more efforts on at-home wellness products, companies can meet the needs of consumers in their current situation. This is also a great time to offer trial kits; as consumers practice isolation and social distancing, they have more space for trying new products. Again, that could drive sales in the short term and build loyalty in the long term.
2. Strengthen digital capabilities. While brick-and-mortars are closed, it’s critical for companies to make sure their products are able to reach consumers through other channels, especially e-commerce. Even service providers that don’t often participate in e-commerce can offer haircare products, gift certificates, and other support. Reaching consumers with appropriate messages through digital marketing is a great way to keep brands top of mind and prompt consumers to try new products.
3. Shore up the supply chain. As current manufacturing capabilities continue to fluctuate around the world, it’s important for businesses to understand the levels of risk within their system—and to look for alternatives if the risk is too high. It’s equally important to determine current restrictions for product distribution, and evaluate current supplies of ingredients and product inventory and what inputs may be challenging to find in the near term. It’s also important to pinpoint all outstanding receivables and payments over the next few months to get an accurate picture of the rate of cash burn.
4. Plan for post-recovery business changes. As storefronts reopen, people will likely be reluctant to test beauty products in-store for fear of contamination. Retailers and beauty brands need to handle this by providing individual trial sizes (instead of communal samples) and offering digital and augmented-reality tools so people can try products virtually.
What’s almost certain is that there are steps brands and companies in the beauty and personal care space can take to mitigate the short-term effects of the pandemic—and build some advantage for the near and longer-term.
