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How Customization is Reshaping the Cosmetics Industry
The beauty industry has long been known for its one-size-fits-all approach to skincare and makeup products. However, with the rise of hyper-personalization, that is quickly changing. Hyper-personalization refers to the creation of customized products that are tailored to an individual's unique needs and preferences.
This trend is revolutionizing the cosmetics industry. According to one study, 72% of consumers are willing to pay more for customized cosmetic products. An IFOP study found that 42% of consumers are interested in personalizing cosmetics, up from 30% in 2016. In an ultra-competitive world, personalization has become a right rather than a privilege for consumers.
At Sia Partners, our team of cosmetics industry experts have decoded this trend for you.
As an emerging trend in the beauty industry, hyper-personalization is a driver of customer relationships, based on 3 pillars: efficiency, speed and quality service. For 9 companies out of 10, this concept is considered to be strategic, and it is essential to capitalize on its added value. Indeed, it is about establishing an efficient and sustainable strategy to ensure customer satisfaction and loyalty, to increase the volume of sales and strengthen brand image.
With the explosion of Big Data and the massive use of Artificial Intelligence, cosmetics leaders are investing in Beauty Tech to meet the new consumers' needs. Thanks to these technological innovations, cosmetic brands are offering increasingly personalized experiences to their customers.
Today, more and more consumers are willing to buy personalized cosmetic products online. This new technology allows users to digitally preview and test products through an augmented reality system, helping them make informed buying decisions. According to a study by The NPD Group, consumers are 6 times more likely to buy personalized cosmetics online than in physical stores. Virtual-Try-On removes the final barriers to purchase, and allows customers to benefit from an experience like the one in store. For instance, thanks to its "Lipscanner" application, Chanel allows consumers to virtually test lipstick shades or to find the color closest to their preference from the entire catalog. As for Nyx Cosmetics, consumers can test their favorite products, but also, new product combinations that will seduce them.
Cosmetic brands can meet an emerging need: a personalized routine. They use cutting-edge technologies to analyze each customer's skin in detail and develop customized formulations. For example, L'Oreal offers a device called "Perso" that instantly produces personalized skincare formulas and cosmetic products using artificial intelligence. Other brands such as "Function of Beauty" offer personalized shampoos and conditioners based on consumers' specific needs. Finally, Allergan's "Custom D.O.S.E" brand also uses AI to create personalized serums for consumers based on their skin care needs, adjustable to their lifestyle.
Despite the benefits of hyper-personalized cosmetic products, this approach has challenges for companies. This new business model requires profound changes in organization and production for companies, which must rethink their marketing mix.
The production of personalized cosmetic products can be quite expensive due to the need to use high quality ingredients and advanced technologies. As a result, companies may limit their custom product line or raise prices to cover the additional costs. For smaller players in the industry, the task is more difficult: they need to grow fast, without slowing down delivery times to avoid frustrating customers.
Another obstacle is the regulation on cosmetics, which is particularly demanding in Europe, as toxic ingredient combinations are banned. In addition, Hyper-personalization requires the collection of sensitive customer data, such as product preferences and usage history. Companies need to be transparent about how this data is used and ensure customer privacy to avoid confidentiality issues.
The production of personalized cosmetic products can be complex and requires specific technologies and processes. Therefore, companies must be prepared to invest in the right technologies and processes to deliver a quality personalization experience. According to one report, few French companies are using AI in data collection and analytics tools.
The internal organization of the company is strongly impacted. To successfully implement it, the development of personalization must be considered throughout the customer journey and constructed with the customer. It is a subject that must also be supported and monitored by general management. Thus, 65% of managers consider "the management, quality and availability of data a major difficulty". The strategic vision is lacking, as is the support of the hierarchy.
Hyper-personalization is a trend that is reshaping the beauty industry by offering consumers a high level of customization and personalization. By using advanced technology to analyze customer data, companies can create products that are uniquely tailored to an individual's needs and preferences. This trend is leading to increasing customer satisfaction, loyalty, and sales, while also enhancing brand image and reputation. As technology continues to advance, it is likely that hyper-personalization will become even more prevalent, so it’s important for companies to be supported by experts.