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Mass-Market Beauty Showing Signs of Life. Will It Last?

December 18, 2022
December 18, 2022
CVS Skin Care Center

The mass makeup market is recovering. But the next few months will determine if it is a trend with legs, or just a spike driven by replenishment after the pandemic purchasing pause.

After almost two years of decline in dollar makeup sales, IRI, a Chicago-based research firm, clocked gains in almost all cosmetics segments for the 52-week period ended October 30, 2022, in mass-market outlets. One of the most notable gains was a 19% uptick in lipstick sales. Facial products produced a 10.2% sales bounce, eye was up 6.5%, and nail (which was one of the only makeup sectors that produced gains for the same period in 2020 and 2021) rose only 1.1%. Skincare was a category that was not as impacted over the past two years in both mass and class. Mass marketers posted skincare gains of 5.7% for the tracked period. Fragrances remain flat in mass.

Yet to be determined is if the upgrades mass marketers have made in the ambiance and product assortments are enough to siphon shoppers away from prestige competitors. Past economic downturns, such as in 2008, pushed shoppers to save by downscaling to mass beauty products. While there has been talk for a year that the US is close to a recession, there has been no official declaration, leaving many to debate the future.

Although sales are heading in the right direction, mass increases lag prestige gains, suggesting many shoppers are still clinging to luxury beauty options—even as their pocketbooks are being pinched. Apparently, consumers didn’t get the memo that in tough times, they are supposed to trade down.

Third-quarter results from The NPD Group revealed more robust gains in prestige than in mass. Prestige beauty sales in the US expanded to $6 billion, up 15% versus 2021’s third quarter.

“Unit sales and revenues are both growing by double digits for beauty products sold in the prestige market,” said Larissa Jensen, Beauty Industry Advisor for The NPD Group.  Makeup sales surpassed pre-pandemic 2019 levels, according to Jensen. Lip was the fastest-growing segment at 32%. Skincare in prestige rose 14% (almost three times that of mass). Both hair and fragrances performed well in prestige, up 23% and 11%, respectively.

Digging into the mass numbers to see if gains were accrued by moving more or by selling higher-priced SKUs reveals differences in the category examined. There was a 10% leap in lip units and a 4% uptick in face. Unit sales dropped marginally (down 0.7%) in the eye category. For mass to surpass competitors, there needs to be greater unit movement and higher tickets, experts said.

The beauty category has long been under the microscope in the mass market. Inventory turns are slow versus other categories (like groceries), and the investment in space is costly to accommodate all the SKUs needed to have meaningful assortments. The category must pay its way.

Target, Walmart, and CVS, in particular, have invested in burnishing their departments. Ulta Beauty also just announced plans to overhaul its store layouts, which could mean more competition for big-box competitors as mass products will get equal footing with luxury.

There’s been a great deal of buzz about the evolution of beauty at Walmart, with some suggesting the nation’s largest chain is supplanting Target as the “cool” discounter. The upgrades started with Jody Pinson and kicked into overdrive with Musab Balbale who totally changed Walmart’s approach to courting brands. Merchants sent direct messages to brands rather than waiting for brands to knock on their doors. One nascent brand told BeautyMatter that Walmart helped her by paying 90 days (versus 120 from other retailers) and keeping her on shelves even with a slow start. At the helm now is Creighton Kiper (who recently accepted the WWD Beauty Inc. award as Mass Retailer of the Year) who brand founders say is maintaining the speed-to-market pace.

“Unit sales and revenues are both growing by double digits for beauty products sold in the prestige market.”
By Larissa Jensen, Beauty Industry Advisor, The NPD Group

In the last year, Walmart announced an accelerator program called Walmart Start, which resulted in five brands getting a shot—Dossier, a perfume brand; Undefined Beauty, a BIPOC-founded skincare and wellness line; PaintLab, a press-on nail that mimics gel manicures; Pardon My Fro, a Black-female-founded and -owned haircare brand; and The Hair Lab by Strands, a customized haircare brand.

New brands on shelves include Bubble, Sweet Tooth by Sabrina Carpenter, Luna Magic, Solo Noir, and an assortment of textured haircare brands. Walmart was also privy to several exclusives such as Halsey’s af94, Brooklyn and Bailey McKnight’s new skincare line ITK, and a joint effort haircare brand with Procter & Gamble, NOU. In the past, many proprietary lines, especially influencers and celebrities, used Target as the launch pad.

The industry is closely monitoring if Beauty SpaceNK shops in Walmart, with lines like By Terry (with retail prices hitting $80) and Mario Badescu, resonate with its shoppers. With more of its customers earning more than $100,000, Walmart officials don’t think those prices are out of line.

Walmart’s challenge—its huge portfolio of more than 10,000 doors—makes it difficult for stores to reflect the upgrades. It will take a long time to burnish beauty in all of its stores, some of which are showing their age.

Target, with fewer than 2,000 doors, has had an easier time rolling out its new look, which features clear areas for clean beauty, fixtures for on-trend launches, and nontraditional shelving that makes the department look “less like a discounter.”

Although Target did not hit its most recent quarterly goals, beauty was a top-performing category, according to Christina Hennington, Executive Vice President and Chief Growth Officer for the retailer (and an architect of Target’s beauty department). Sales were up in the mid-teens for beauty, driven by skin, hair, and makeup. Total sales volume of Ulta Beauty at Target nearly tripled year over year, fueled by more installations of the department, estimated to exceed 350 on the way to a total of 800.

Ulta had a stellar quarter, with revenues rising 17.2%. Cosmetics sales soared 44%. Dave Kimbell, Chief Executive Officer, did allude to Ulta Beauty’s secret weapon if shoppers are further impacted by rising costs of living. “It is hard to know with certainty if we are starting to see consumers trade down. Ulta Beauty is uniquely positioned to capture any consumer shifts within price points in the beauty category,” he said of the format that combines accessible and luxury brands under one roof. Mass outperformed prestige, but the higher-end brands also showed gains over 2021.

Ulta Beauty is revamping its store layout in a move that is democratizing beauty. Instead of domiciling affordable lines on shelves located in the left quadrant of stores (in most units) and prestige on the right, Ulta Beauty now presents products by category. According to Monica Arnaudo, Ulta Beauty’s Chief Merchandising Officer, the move reflects shopper feedback on how they navigate stores. The highest-end lines like Estée Lauder and MAC have homes in the center of the store. There are also special areas such as Cue the New, Wellness Wall, Beauty Bar (for services), Sparked at Ulta Beauty, and Conscious Beauty.

Drug chains are zeroing in on wellness and synergy with the pharmacy. CVS is the most vibrant example. Building upon its BeautyIRL experience designed to encourage discovery of new and social brands, the chain recently introduced Skin Care Centers.

“Skin Care Center took the BeautyIRL format to the next level by once again bringing in more new-to-CVS efficacious prestige brands, but also offering new interactive elements, such as on-site skin diagnostic tools and guidance from CVS Beauty Consultants and licensed estheticians,” said Andrea Harrison, Vice President of Beauty and Personal Care at CVS Health. There are currently three stores with the premium lines. Brands include Wander Beauty, Blume, and Volition Beauty—all new to CVS—alongside clinically proven mass skincare brands that have been sold at the chain such as La Roche-Posay. CVS recently added Proactiv, making it the first drugstore to secure the once DTC-only brand.

Upscale skincare could also be bait to lure shoppers into the entire beauty department. All eyes are on Musab Balbale, who energized Walmart and is now SVP, Chief Merchandising Officer at CVS. Already he has made headlines with an initiative to eliminate unfair costs of period products through a program called HERe, Healthier Happens Together.

As the year wraps up, drug chains in particular are waiting for the last-minute push. Even with same-day Amazon deliveries, there will also be someone on a gift list that is forgotten, and only a late-night run to the drugstore will fill the need.

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