Beauty sales are booming in both mass and prestige. Although the mass market produces more total dollar shares, the prestige sector pumped out higher dollar and unit gains over the past few years.

Prestige beauty sales jumped 14% in 2023 versus 6% for the mass market, according to Circana. The class-beating-mass trend baffles experts who point to upgraded beauty assortments in mass market stores, including the Target/Ulta Beauty and Kohl's/Sephora partnerships.

Walmart is also upgrading its beauty assortments and store experiences. Compounding that, consumers have expessed interest in pulling back on spending—just not on beauty, yet.

The drugstore segment is taking the hit for some of the softness. Footfall in pharmacies has suffered since consumers are not rushing in for vaccines and test kits at the pace produced over the past two years. That has a rub-off impact on overall front-of-store sales, including beauty, which is often an impulse purchase.

NielsenIQ (NIQ) data bears that theory out; the drug channel produced the second-lowest gains in beauty sales last year at 5.8% (behind DTC, which posted an 8.5% loss). Compounding the results is that a portion of the gains can be traced to price increases since drug unit movement declined by 1.9%.

In comparison, mass stores (excluding drug) generated a 10.3% increase in beauty dollar volume. Grocery retailers who have been burnishing their beauty assortments produced increases of 7.6%. That is on a smaller total dollar measure, but units rose 9.5%, so the hikes weren't only price-based.

Prestige retailers, beauty specialty, and department stores all posted increases of over 12%—proving consumers continue to treat themselves to pricier beauty products.

Beauty departments in drug chains aren’t the issue, say experts who point to upgrades in product selections at the nation’s major chains.

In addition to foot traffic subsiding, the industry faced pharmacists walking off the job, which caused temporary pharmacy closings. But chain drugstores are also rightsizing their store portfolios by closing underperforming doors. Walgreens and CVS/Health pharmacists were among those protesting what they called inadequate staffing and increased work requirements. The nation’s third major chain, Rite Aid, was forced to file Chapter 11 last year.

CVS is in the process of closing 900 stores through the end of 2024, including some of its pharmacies under Target roofs. Walgreens Boots Alliance reported a 6.1% decrease in retail sales (which includes beauty) for its first quarter of fiscal 2024. The company attributed the decline to macroeconomic-driven consumer trends and the impact on store traffic from a weaker flu and respiratory season. Rite Aid continues to close "underperforming stores" as it seeks to emerge from Chapter 11.

Drug chains have also been among the hardest hit by thieves, and many stores lock down pricey beauty items. The channel also doesn't have the competitive edge of a discount or grocery store with the convenience of apparel, groceries, and beauty needs under one roof. Shoppers often sought other outlets for staples like toothpaste or razors, which didn't require store assistance—online was one option.

What pharmacy retailers have on their side is a wellness positioning. Retailers plan to leverage the intersection between health and beauty to widen their beauty sales.

“People used to define wellness as the products in front of the pharmacy, but now wellness is not just physical health but has expanded to appearance, nutrition, fitness, mental health, sleep, and skincare,” said Andrea Harrison, Vice President Merchandising-Beauty at CVS Health. 

CVS is at the forefront of leveraging the wellness connection. CVS Skin Care Centers are a perfect example. The centers sell derm-quality skincare with trained professionals who can access skin diagnostic tools like the SkinScope. 

The retailer is also paring back stock-keeping units by as much as 18% in select stores to simplify the shopping experience and clear more space for educational materials.

Harrison sees potential for CVS to attract more beauty customers with an elevated experience. "There used to be hard lines between channels—prestige, luxury, dollar—and that was the lane you stayed in. But when you think about it, nobody shops on one channel. There is a democratization of space," Harrison said.

Walgreens maximizes the link between beauty and health in its stores. Its 3,000 beauty consultants frequently collaborate with pharmacists to recommend the best products for customers’ needs.

“When I think of an oncology patient, for example, a lot of medications are going to affect their skin. We're not just treating a condition and disease; we're treating the whole patient,” said Laly Havern, Director of Clinical Pharmacy at Walgreens. “The best success we have had is when we combine beauty and wellness with pharmacists.”

Even while struggling to emerge from bankruptcy, Rite Aid is pushing beauty with a new advertising campaign called It Means More. One storyline focuses on a father rushing into a Rite Aid for a solution after his daughter cut her hair before picture day. A Rite Aid beauty associate fits her with a headband.

Drugstores can't shoulder the entire blame for the mass channel taking second place to prestige. Consumers are treating themselves to premium beauty products.

"What we are seeing that is really interesting is that US consumers are actually increasing their spend on beauty, even as they cut back in other areas," said Anna Mayo, Vice President of Beauty Vertical for NIQ.

The price tags between lines sold in discount and drugstores are starting to intersect. At the same time, premium brands have launched minis and kits with appealing price points that invite trade up. Fenty Snackz by Fenty Beauty at Target is an example. Exposure of brands such as Drunk Elephant at Kohl’s or Tarte at the Ulta Beauty presentation in Target entices shoppers to trade up beyond standard popular-priced brands.

That trend is reawakening interest in "masstige," a concept that emerged in beauty in the 1990s and achieved critical mass in the early 2000s. Brands falling into the classification are priced higher than mass but lower than luxury.

Larissa Jensen, Vice President of Beauty and Industry Advisor at Circana, pinpointed masstige brands as having the fastest growth rate in the industry. "Masstige brands, although the smallest in size representing about 11% of market sales, are also growing the fastest in dollar volume, up about 16% or about twice that of mass brands.” Masstige is up in all segments, but especially in the hair care category.

Jeffrey Ten, President Global Brand Development, attributes lower mass gains to simple math. “Consumption is not what it used to be. People would buy a cheap lipstick or eyeshadow for $5 or $6 and not be upset if they didn't like it," he said. Today, there isn't a big enough difference in price to sacrifice service and trial, he explained.

For example, the top mass-selling brand in skincare is Olay at $30—shoppers can visit Sephora for The Ordinary and pay less than $15. 

“Innovation is also on the prestige side,” Ten said. Ten pinpointed e.l.f and Milani as mass brands bucking the trend.

Shoppers might be ready to pump the brakes on the spending fee, suggested Ashley Helgans, a Vice President at global investment banking firm Jefferies. “We’re definitely starting to see more trade down from prestige skincare to mass, which is something we didn't see in the [2020] recession," said Helgans.

In a report, Robert Gorin, Consumer Products Practice Leader at Getzler Henrich, noted that student loan payments are back, and shoppers are ladened with credit card debt. “Consumers will be buying less.”

For some shoppers, the option might be dupes. These less expensive versions of luxury brands are gaining steam thanks to exposure on social media. According to research from NIQ, 46% of consumers state they will purchase less expensive products to save money. 

Surprisingly, NIQ research revealed dupes don’t necessarily siphon from prestige. “Beauty dupes aren't cannibalistic; they are actually helping to grow the beauty category," said NIQ's Mayo. “The copycats ignite sales of the original, too.”