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After the economic slowdown of the early 2020s, the cosmetics industry was back on top in 2023.
The cosmetics industry was worth an estimated 451 billion dollars in 2023, reflecting a +4% increase compared to 2022 (Transparency Market Research). This growth was driven primarily by the European Union. Furthermore, the Asia-Pacific zone accounts for the largest share of the global cosmetics market (more than a third).
Several trends marked 2023 for the cosmetics industry and the most significant among them will continue to shape this industry for the year to come:
At Sia Partners, our cosmetics industry experts have decoded the main trends of 2023 for you!
The beauty industry is experiencing a transformative shift with the rise of hyper-personalization, a trend that delivers individualized product offerings to cater to the specific needs of consumers. This approach serves as a significant catalyst for building strong customer relationships, emphasizing efficiency, speed, and high-quality service as its fundamental pillars.
In this evolving landscape, hyper-personalization is revolutionizing the beauty sector by offering consumers an elevated level of customization and personalization. Leveraging advanced technology to analyze extensive customer data, companies can craft products that are uniquely suited to the distinct needs and preferences of each individual.
One notable manifestation of this trend is the emergence of personalized beauty routines facilitated by technology. Cosmetic brands are responding to the growing desire for customized routines among customers by employing cutting-edge technologies. For instance, the brand Chloé (within the Coty group) with its fragrance collection Atelier des Fleurs exemplified the key trend of tailored client experiences in 2023. The brand introduced a pop-up boutique in Singapore replicating a Parisian florist, where customers could create their unique fragrance by mixing and matching from 17 niche scents. Coty caters to diverse preferences, offering face-to-face assistance from beauty advisors for those who prefer personal interactions and a digital "Bouquet Finder" for solo shoppers, providing a customized fragrance layering experience. This initiative highlights Coty's commitment to adapting to individual customer needs.
Moreover, L’Oréal, and Verily, a precision health technology company under Alphabet, have jointly unveiled a study called My Skin & Hair Journey in 2023. This extensive, multi-year study aims to enhance researchers' comprehension of the biological, clinical, and environmental elements influencing the long-term health of skin and hair. L'Oréal will use the knowledge derived from the registry to create advanced and tailored beauty solutions, to support the diverse skin and hair objectives of consumers.
The tailored client experience trend was also proven by the new retail concepts of customization. To develop customer loyalty, retailers have redesigned their space to offer a unique experience. For example, the Sephora flagship in Paris has been completely renovated with a new corner of fragrance discovery so that clients find the one that suits them the best, with the possibility of having their perfume bottle engraved. Furthermore, a new VIP space was added with multiple services: makeup, massage and meeting with a personal shopper.
Hyper personalization also continued to develop itself online with Virtual Try On. This technology empowers users to digitally preview and experiment with products using an augmented reality system, aiding them in making well-informed purchasing decisions. According to research conducted by The NPD Group, consumers are six times more inclined to purchase personalized cosmetics online compared to traditional brick-and-mortar stores. Virtual-Try-On eliminates the final barriers to making a purchase, providing customers with an experience like the one in-store. For instance, Chanel's "Lipscanner" application enables users to virtually try on various lipstick shades and identify the closest match to their desired color among the luxury brand's offerings. Similarly, NYX Cosmetics not only allows customers to test familiar products but also explore enticing combinations that can captivate their interest.
In 2023, more and more tech innovations and Web 3 initiatives were initiated in cosmetics. If investments are multiplying, it is because Web 3.0 offers an opportunity to upgrade the customer experience and meet new challenges set by consumers. Major beauty players continued to invest massively in Web 3. Indeed, in early 2023, the L'Oréal Group announced, via its BOLD venture capital fund, an investment in DIGITAL VILLAGE, a U.S. start-up specializing in the Metaverse and the NFT marketplace.
Moreover, to mark its 150th anniversary, Shiseido introduced 150 NFTs along with a community initiative that provides members access to various rewards and privileges. Mugler launched its first NFT collection to celebrate the thirtieth anniversary of its Angel fragrance. In June 2023, NARS (part of the Shiseido group) made its debut in the Roblox metaverse with the NARS Sweet Rush virtual experience. This immersive experience featured mini-games, video content, and stylish avatars equipped with customizable wearables. Participants were also allowed to earn exclusive rewards and obtain free virtual accessories by taking part in the event.
As an essential component of Web 3, DAOs (decentralized autonomous organization) enable collaboration between members of a community, without a central direction. Based on a blockchain, the community makes decisions through electronic voting and a predefined set of rules. DAOs contribute to reinforcing the sense of belonging in a community. In early 2023, NYX (part of L’Oréal group) launched GORJS, the first DAO dedicated to the beauty world, inviting a community of Web 3 designers, 3D artists and beauty product manufacturers to collaborate to shape the future of digital beauty.
Brands will continue to develop Web 3 projects for brand awareness and customer loyalty. Social networks and the metaverse enable brands to create new touchpoints with their clients. The more engaged and entertained clients are by Web 3 brand content, the higher the sales will be.
CSR remains a strategic pillar for companies in the sector, who have continued to innovate both in terms of product composition and packaging.
Consumers still have high expectations for cosmetics products in terms of sustainability: it is one of the key trends of 2023 and beyond (Nielsen). 62% of consumers stated that sustainability is more important to them than it was two years ago. 45% of consumers consider responsible sourcing to be among the most crucial sustainability assertions. Additionally, 24% of consumers express a desire for brands to enhance their utilization of ingredients manufactured in a more sustainable manner.
The main trends regarding sustainable cosmetic packaging and formulation are:
Increasingly sustainable and environmentally friendly materials for packaging
Empty product take-back programs to simplify and encourage packaging recycling
Refillable products (+64% increase in searches in the USA in 2023 according to Nielsen)
Eco-designed and solid products
Developing cosmetic products using natural and vegan ingredients
Labels for designing green and vegan formulations
Transparency about formulation
Among notable CSR initiatives of 2023 in this direction:
Chanel launched its first refillable lipstick made of glass, the “31 rouge”.
Shiseido made a strategic partnership with CHITOSE Group, a biotechnology specialist, to develop a range of cosmetics based on micro-algae and thus create a new circular economy model.
Gucci Beauty, part of the Coty group, launched the first fragrance made with alcohol entirely derived from industry carbon gas emissions.
All these initiatives will remain key to retaining eco-conscious clients, and target concerned Gen Z or millennials.
Beauty is holistic: a healthy mind and face.
The vision of inner and outer beauty spread over the cosmetics market in 2023. The pursuit of holistic beauty aims to achieve serenity through a new way of life. Cosmetic products are just one of the allies in this journey towards a more positive and inclusive beauty. Skin becomes not only an appearance but also a reflection of health.
In this context, the beauty supplements market is expected to grow fast over the next ten years by +13.6% worldwide and from 2.7 million USD in 2023 to 4.5 million in 2033 (Future market insights). Beauty supplements are sold in liquid, capsule, powder or "gummy" form. They are usually made from plants, natural ingredients and effective agents such as hyaluronic acid, collagen or zinc. A lot of specialized brands emerged over the past years, creating best-sellers, like Aime Skincare, D-Lab Nutricosmetics, The Nue Co or D+ for care.
Furthermore, more traditional skincare brands launched their own beauty supplements. Neutrogena presented at CES 2023 its collaboration with Nourished: personalized gummies produced with 3D printing from skin diagnosis data. “76% of consumers now expect beauty brands to offer dietary supplements that complement their traditional topical product offerings such as skin care, hair care, and body care”, according to Neutrogena’s former Marketing Director, Desiree Dowe.
The trendy brand of Dr Barbara Sturm launched sun support pills in 2023, in addition to its supplements for hair care and anti-ageing. The beauty supplements market is poised to be a closely watched sector in 2024, given the fervor and enthusiasm surrounding it, indicating significant growth potential. As consumers increasingly recognize the importance of nourishing the body from within, the trend towards holistic beauty is likely to continue shaping the beauty industry, promoting a comprehensive approach to both inner and outer radiance.
Beauty is inclusive: it is not only for women but all individuals
The concept of beauty has undergone a transformative shift towards greater inclusivity. No longer confined to conventional notions predominantly associated with femininity, today's understanding of beauty extends beyond gender boundaries to include men as well. According to a Morning Consult survey conducted by the health advocacy group EWG, there has been a nearly twofold increase in the use of personal care products by men since their last study in 2004. On average, men now incorporate 11 personal care products into their daily routine, compared to six in 2004. Not surprisingly, the data indicates that younger men are more inclined to use personal care products, suggesting that as these men age, the market will continue to grow, becoming even more significant and impossible to overlook.
For instance, Dior states that the updated formulation of its Capture Totale serum has been designed without gender distinction, catering to both men and women and incorporates a universal testing platform. Chanel launched “Boy” in 2018, its own men's makeup franchise, to target Asia. In addition, a lot of brands specialized in men's cosmetics are booming like Horace in the European market or Bulldog skincare for anti-ageing issues.
Moreover, there has been a heightened recognition of the intrinsic beauty within individuals facing diverse physical challenges or disabilities. A key example of this trend is the launch of HAPTA by the L’Oréal group. Unveiled at CES 2023, this innovation is “an intelligent, portable, high-precision make-up applicator” designed to enable people with reduced arm or hand mobility to apply lipstick easily. Another key example is the success of Selena Gomez’s brand, Rare Beauty, launched in 2020. The brand embraces authenticity and aims to support people with mental health issues with the Rare Impact Fund. Thanks to their ball caps, the various products of the brands are easy to open when hand movements and strength are compromised. This progressive transformation signifies a departure from the historically narrow and exclusive standards of beauty, emphasizing the importance of embracing diversity in all its facets. The evolving definition of beauty reflects a collective realization that it is not confined to any gender or physical condition, fostering a more inclusive and compassionate approach towards appreciating the varied forms of beauty.
To conclude, in the ever-evolving landscape of cosmetics, the trends forecasted for the next year are set to endure and flourish. The seamless integration of personalized customer experiences, coupled with the transformative power of innovations within the Web 3.0 sphere, positions the beauty industry at the intersection of technology and individualized care. Simultaneously, a growing commitment to eco-responsibility echoes the industry's dedication to sustainability. Furthermore, the profound shift towards a new vision of beauty—one that embraces the holistic concept of well-being and champions inclusivity—serves as a testament to the transformative power of the beauty industry. As we step into 2024, these enduring trends redefine the cosmetic landscape and must be considered in the strategic plans of cosmetic companies.