The first quarter sales of the global beauty industry were weak, amidst widespread store closures due to COVID-19 pandemic, indicates consulting firm McKinsey & Company, but the industry remains resilient.
The global beauty industry has responded positively to the crisis, with brands switching their manufacturing to produce hand sanitisers and cleaning agents and offering free beauty services for frontline response workers. The COVID-19 pandemic has, in fact, introduced some shifts that could alter the beauty industry in fundamental ways.
Digital continues to rise, as consumers indicate they are likely to increase their online engagement and spending. Beauty industry players will need to prioritise digital channels to capture and convert the attention of existing and new customers, suggests McKinsey & Company.
On the operations side, the use of artificial intelligence (AI) for testing, discovery and customisation will need to accelerate as concerns about safety and hygiene fundamentally disrupt product testing and in-person consultations.
The pace of innovation will accelerate. Even before the pandemic, brands were under pressure to overhaul their product-innovation pipelines; now the need for speed is even greater. There is potential for closer collaboration among brands and retailers, through data sharing and inventory pooling.
In several markets’ consumers have indicated reducing spend on beauty, but still shell out more than they would on apparel and footwear. While the COVID-19 pandemic has adversely affected the global beauty landscape, there are signs that the industry may once again prove relatively resilient.
McKinsey & Company estimates the global beauty industry revenues could fall 20-30% in 2020. In China, the beauty industry’s February sales fell up to 80% compared with 2019. But in March, the year-on-year decline was 20%, a rapid rebound under the circumstances. On the other hand, in the US, if there is a COVID-19 recurrence later in the year, the decline could be as much as 35%.