In our analysis of the global hair & beauty market, we have often underlined the positive trends seen in many regions over the past few years. We’ve invariably tried not to be too optimistic about industry performance, due to the many disruptive factors characterising the global economy.
We are therefore happy see our optimistic stance being justified in the State of Fashion Report on Beauty by BOF, a thorough and complete analysis of industry trends, including data from McKinsey’s 2023 survey of consumers across China, France, Germany, Italy, the United Kingdom, and the United States.
Here are some of the most important aspects of the report, with special focus on the hair & beauty industry.
“The glow of the beauty industry has proved hard to resist, attracting many new companies and investors. Brands must make differentiating choices to find success in this shifting and increasingly competitive landscape.
In 2022, the beauty market—defined as skincare, fragrance, makeup, and haircare—generated approximately $430 billion in revenue. Today, beauty is on an upward trajectory across all categories. It has proven to be resilient amid global economic crises and in a turbulent macroeconomic environment. Beauty is now an industry that many people, from top-tier financiers to A-list celebrities, want to be a part of—and with good reason. Following a solid recovery since the height of the COVID-19 pandemic, the beauty market is expected to reach approximately $580 billion by 2027, growing by a projected 6 percent a year.
This is in line with or slightly higher than other consumer segments such as apparel, footwear, eyewear, pet care, and food and beverages.
Overall, beauty is expected to be characterized by “premiumization,” with the premium beauty tier projected to grow at an annual rate of 8 percent (compared with 5 percent in mass beauty) between 2022 and 2027, as consumers trade up and increase their spending, especially in fragrance and makeup.
Meanwhile, consumers are increasingly shopping across price points and report that both online and offline stores influence their shopping behaviour. Their preference for omnichannel shopping is expected to continue to fuel legacy brands’ shift online and independent labels’ move into a brick-and-mortar presence.
E-commerce in beauty nearly quadrupled between 2015 and 2022, and its share now exceeds 20 percent, with significant runway ahead. This compares with a 2022 e-commerce share of approximately 30 percent in apparel and footwear, and around 65 percent in toys and games.
.… E-commerce is expected to continue to be the fastest-growing sales channel, at 12 percent per year between 2022 and 2027, but growth in traditional channels—including specialty retail, grocery retail, and drugstores—is expected to pick up post-pandemic, as consumers’ preference for omnichannel is partly driven by their continued desire for in-store discovery and trial of products. Department stores are expected to continue to lose market share globally.
Structural and competitive dynamics are shifting.
Where to play will become just as important a question as how to win…. The changing dynamics will render the industry’s largely homogenous global playbooks of the past decades less effective and require brands to reassess their global strategies and introduce greater nuance and tailoring.
Geographic diversification will become more essential than ever. China and the United States will remain mighty forces for the industry, with the beauty market expected to reach $96 billion in China and $114 billion in North America by 2027.
But in both markets, growth will be harder to come by for individual brands, not least due to fierce local and foreign competition.
Meanwhile, other countries and regions, including the Middle East and India, are ready to step into the limelight, offering distinct potential for specific categories and price tiers. …
Across geographies, another growth opportunity will be products and services in the top tier of the pricing pyramid: the true luxury and ultraluxury beauty market has the potential to double, from around $20 billion today to around $40 billion by 2027”.
The Report also underlines some not favourable elements that could prove to be disruptive to the further development of our industry.
Some of the most menacing subject of discussion being:
– The redrawing of the growth map. Slowing growth in China, along with increased local competition, means the country will no longer be a universal growth engine for the industry. As a result, the US, the Middle East and India markets will become even more important, with strong growth, especially over the next few years.
– The rise of wellness. As consumers are increasingly engaging with beauty products and services to not only look good but also feel good,
–The influence of Gen Z. Gen Zers scrutinize brands as part of their search for value.
– The recalibration of M&A. Amid continuously increasing interest in the beauty industry from a variety of players—from “strategic” to private equity funds—M&A will continue to play a major role in the industry.
“The years ahead will offer all the right ingredients—from agile channel mixes to consumers eager to explore new products—for the beauty industry’s continued growth. For beauty leaders and challengers alike, there will be plenty of opportunities to flourish, if they develop and execute tailored strategies that reflect the changing world of beauty”.
The Report Concludes