By the time Beauty Pie opened its pop-up shop at Harvey Nichols in Knightsbridge on March 12, founder Marcia Kilgore was bracing herself for the worst. Around the world, countries were retreating into lockdown to staunch the spread of coronavirus, and the UK was rumoured to be next.
The result of six-weeks of frantic planning, the subscription-based online beauty brand's pop-up was supposed to be a chance to let customers interact with its expansive premium product line. Then the pandemic hit. The virus could spread easily in a busy beauty hall, Kilgore realised, with shoppers clamouring to try out an Instagram-pretty eye shadow or lipstick. All those shared testers, those tight queues.
“It wasn't the kind of shopping where you walk in and you have a lot of space around you. There were mobs,” Kilgore says. “We were trying to disinfect everyone with hand sanitiser, but people were not really paying attention as much as they should. We were trying to keep people behind the velvet rope and only letting a certain number of people in at the same time, but it was impossible to control them.”
On March 17, exasperated by the effort and uncomfortable with the risk, Kilgore decided to close the pop-up – just five days into what was meant to be a 12-week run. Two days later, Harvey Nichols followed suit. On March 23, the rest of the UK’s non-essential businesses joined them in lockdown.
What’s followed has been a challenging year for the beauty industry, which in 2018 represented £27.2 billion in consumer spending in the UK alone. In May, a McKinsey report predicted that global revenues could fall by up to 30 per cent this year, as companies tried to grapple with the closure of premium brick-and-mortar stores, which make up almost a third of beauty outlets worldwide, and decreased consumer spending across the board. On top of that, brands faced new stock issues as supply chains were disrupted around the world, and packaging facilities, labs and warehouses deemed non-essential were closed.
Even for the famously resilient beauty industry – which bounced back from the 2008 recession in only two years – the situation was unprecedented. With shops shuttered, duty-free outlets deserted, and would-be shoppers stuck at home.
“We had to [act] quickly without a lot of information. It became [a question of] are you going to sit in uncertainty and panic, or are you going to be disruptive and innovative?” says Audrey Ross, a logistics and customs specialist at Orchard Custom Beauty, a product development and manufacturing company whose clients include Urban Decay, Glossier, Estée Lauder and John Lewis. Some companies were able to roll with the changes, she explains, while others were hit by paralysis.
For many brands, fighting losses spurred by the pandemic has meant refocusing their attention on the one place people were still shopping: the internet.
For a long time, e-commerce has been an afterthought for the beauty industry. Even as our lives moved increasingly online, until now, most shoppers across generations tended to buy their beauty products in store.
“Often the ability to play and experiment with the product and this idea that you'd have unfettered access to put your hands in everything was a reason to go to the store. It was what made it so fun,” says Emily Gerstell, an associate partner at McKinsey.
Brands like Beauty Pie, who have staked their businesses e-commerce, were at an advantage once the pandemic took hold. “We were really lucky because we are perfectly set up to be selling beauty products in the middle of lockdown or a pandemic situation, not only because we sell direct to consumer, but we've always kept a lot of inventory on hold, just in case we hit the next tipping point of growth,” says Kilgore. While the brand wouldn’t provide specific numbers, Beauty Pie reports that new members are joining at three times the rate they were pre-Covid.
But legacy brands and newer brands that focused their efforts on perfecting the in-store shopping experience, have been playing catch-up. “A lot of brands were pulling inventory off the shelf and either moving it back to their [direct-to-consumer online shops], or some companies were having workers go into the stores and pull inventory off the shelf and package it up to ship from store to fulfil online orders,” Gerstell says.
Adding to the stress is the pressure to compete with digital-savvy stockists – department store websites and other multi-brand retailers who offer loyalty programs, regular promotions and a wider variety of products for shoppers to compare and choose from. In some instances, this has borne a race to the bottom, as brands offer online discounts to lure in customers.
“The companies that were able to shift supply to their e-commerce channels successfully ended up having to run fewer promotions. But it's been striking to see just the number of beauty brands that are on promotion,” Gerstell says.
Ross argues that this strategy isn’t an option for all brands or all products. “Beauty and fashion can be a bit odd, especially when it's luxury. When it’s a signature product, they don't want to discount it so they'll actually just take things out [of sales] or they'll destroy them, which is a bad secret of the industry,” she says.
Raffy Kassardjian, CEO of Parker Lane Group, which works with fashion and multi-product brands to make the most of their unsold stock, warns that sustained discounting could do more harm than good: “If you're talking about 40 to 60 per cent discounts, do you really want to do that to your brand? Is it going to be worth doing that? Because there are long term implications,” he says. “These people spend a lot of money in advertising and what they're in fact doing is building up the equity within their brands. To go off and sell it to TK Maxx or to aggressively discount doesn't really make any sense.”
Brands with successful core products and long histories also have more room to double down on what they do best. When experimentation isn’t possible, established products with satisfied customer reviews easily accessible online can be seen as a safer bet for buyers.
“If you’ve been consistently producing something, and there's very little innovation in that product, then it just makes sense for you to hang on to it for as long as you possibly can,” Kassardjian says.
Some brands have focussed on using tech to provide a novel alternative to the in-store experience. Beauty Pie, along with brands like Aesop, Charlotte Tilbury, Guerlain and Deciem, is offering virtual consultations, while L’Oreal, MAC, Estée Lauder and BareMinerals are pushing virtual try-on services – a nascent trend that was picking up before the virus.
“Any engagement is good engagement,” Gerstell says. “Companies tend to see 40 per cent plus increases on conversion when consumers start to engage in these kinds of virtual try ons.”
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This shift in the way we shop has also coincided with a shift in what’s being bought and sold. Just as comfortable clothing has outsold other lines, reports have found that “self-care” products like skincare, haircare, body care and nail polish have outsold makeup throughout the pandemic. According to NPD Group, 71 per cent of American women who wore makeup reported wearing less because of pandemic-related lifestyle changes, and McKinsey estimates that colour cosmetics sales were down as much as 75 per cent in the first quarter of the fiscal year.
“The Lipstick Index has been substituted by the Moisturizer Index,” Estée Lauder CEO Fabrizio Freda said in August, referencing the adage that, even in dire times, shoppers will still be purchasing cosmetics.
“What we're seeing is not actually a disruption of the market, but either an acceleration of trends that were already present, or a bringing to the surface things that were latent and that we thought would take more time to kind of reach the surface. The challenges in colour cosmetics and some of the challenges in fragrance were present in the market before we went into the crisis,” Gerstell says. “If we had spoken six months ago, I would have told you that I thought that in three years time, we would start to see an acceleration and a shift, especially a premium shift in haircare and bodycare. We're seeing that now.”
Four months after McKinsey released its initial projections about the fate of the beauty industry, things are surprisingly optimistic. Gerstell says the consulting firm has since changed its 2020 industry decline projection from 20 to 30 per cent to 15 to 20 per cent. Retail sales China, per its data, will finish the year above 2019 levels, and analysts predict a global recovery to 2019 levels by 2021.
“One factor has been the shift to digital and an unprecedented way,” she says. “We didn't anticipate that consumers would be as quick to shift as they are.”
This article was originally published by WIRED UK
