COVID's Effect on the Cosmetics & Beauty Industry

Cosmetics and beauty (C&B) is a $50 billion market in the United States and like many other retail businesses, U.S. C&B companies faced significant challenges during the pandemic. For example, due to Covid-19, U.S. consumers visited brick-and-mortar stores, the primary channel for selling C&B products, much less often while e-commerce for some consumer products was booming. It’s undeniably challenging to offer essential personal services to sell C&B products online, such as product testing and skin color matching. Meanwhile, working from home, wearing masks, and other lifestyle changes have resulted in a significant shift in U.S. consumers’ demand for C&B products as the pandemic continues.

So, how have U.S.-based C&B companies been adjusting their merchandising and marketing strategies to appeal to consumers and survive the pandemic? To answer the question, we collected data from StyleSage, an AI-powered e-commerce analytics solution for the fashion industry, which tracks the detailed product assortment and pricing information of millions of C&B items at the stock-keeping unit (SKU) level in the U.S. retail market. We specifically looked into data during the height of Covid (March 1, 2020 to May 31, 2021) and compared it to the Pre-Covid period (December 1, 2018—February 29, 2020).

(About the authors: Valerie Light is a 2021 University of Delaware Summer Scholar and Dr. Sheng Lu is an Associate Professor from the Department of Fashion and Apparel Studies at the University of Delaware)

First, despite the tremendous challenges caused by the pandemic, the U.S. C&B retail market is not at all depressing. Data from Euromonitor shows that the retail sales revenue of C&B products in the U.S. only fell 2.5% in 2020 from the year prior in 2019. The sales revenue is forecasted to recover to the pre-COVID level by 2022 and enjoy a 3.5% compound annual growth from 2021 to 2025.

Consistent with the sales data, according to StyleSage, unlike some fashion sectors such as clothing and footwear, U.S. C&B retailers actually offered more products amid COVID-19 to meet consumers’ shifting demands. For example, U.S. C&B retailers newly launched more than 101K C&B items (at the SKU level) to the market from March 1, 2020 to May 31, 2021, up more than 160% from the pre-COVID period (i.e., December 1, 2018—February 29, 2020). U.S. C&B companies also leveraged new social media platforms like TikTok and video reviews to reach new customers and significantly expanded their digital presence.

Second, U.S. C&B companies adopted unique product assortments during the pandemic. On the one hand, as Table 1 shows, C&B companies’ new product offer prioritized three categories, namely fragrance (up 226.3%), haircare (up 150.9%), and skincare (up 165.6%). Fragrances and skincare products also accounted for higher shares of companies’ total C&B product offers to cater to consumers’ shifted demand (e.g., keep their home fresh and clean) and new lifestyles (e.g., work from home) during the pandemic (Table 2).

Table 1: Number of new C&B products launched to the U.S. retail market

Data source: Stylesage (2021);
Note: COVID period looks into data from March 1, 2020 to May 31, 2021 (14 months). Pre-Covid covers data from December 1, 2018 to February 29, 2020 (14 months).

Table 2: C&B products assortment: Covid vs. Pre-Covid

Data source: Stylesage (2021)

On the other hand, U.S. C&B companies launched much more unisex and men’s products during the pandemic. While most C&B products available in the U.S. retail market still target women (e.g., 82% of bath & body, 63% of fragrances, 85% of haircare, and 99.8% skincare products), the new product in the unisex and men’s categories saw much higher growth (see Table 3). Carrying more unisex products helps C&B companies increase sales as more consumers in the household can use them. There is also a growing call for C&B companies to be more inclusive and ensure consumers of all gender identities feel represented in product offerings on social media. Likewise, as many barbershops and hair salons closed during the pandemic, home-use male bath & body, shaving, skincare, and fragrances products became new hot sales for C&B companies.

Table 3: Number of C&B products available in the U.S. retail market: Covid Vs. Pre-COVID

Data source: Stylesage (2021);
Note: COVID period looks into data from March 1, 2020 to May 31, 2021 (14 months). Pre-Covid covers data from December 1, 2018 to February 29, 2020 (14 months).

Third, the average selling price went up for most C&B product categories sold in the U.S. retail market during Covid-19. Notably, the assortment change is a critical contributing factor to the “price hike.” Except for bath & body and haircare, U.S. C&B companies sold more popular items at higher price zones. C&B companies also created new price zones with unique product combinations to meet consumers’ shifting demands during the pandemic. For example, Charlotte Tilbury significantly increased the assortment of its makeup products priced between $111 and $120 (e.g., Magic Bridal Makeup Kit and Charlotte’s Soft Radiance Kit) but removed those products priced lower than $10. Nationwide, we also see more fragrances priced higher than $500, shaving products priced between $31 and $40, and skincare products priced higher than $110 during the pandemic.

Table 4: Average retail price of C&B products in the U.S. market: COVID vs. Pre-Covid

Data source: Stylesage (2021)

Further, many U.S. C&B retailers adjusted their discount practices during the pandemic. As Table 5 shows, C&B products were more commonly sold at a discounted price during the pandemic than before. This includes makeup (up from 3.1% to 25.5%), fragrances (up from 0.5% to 4.9%) and skincare (up from 1.0% to 5.8%). Some C&B products, such as makeup, were likely selling slower as they previously involved in-person product testing to bolster sales. C&B companies may also use more frequent discounts to lure customers, given that price comparison is much easier for consumers when shopping online.

Table 5: Percentage of products sold at a discounted price

Data source: Stylesage (2021)

However, it is also interesting to note that the depth of markdowns was lower for many C&B product categories in the U.S. market during COVID-19. For example, the average markdown percentage for makeup products significantly reduced from 43.2% (pre-Covid) to only 16.6% during the Covid. We can observe a similar pattern for skincare (down from 37.1% to 30.9%) and fragrances (down from 37.3% to 36.4%). A combination of a more frequent discount and less generous markdown percentage suggests that U.S. C&B companies tried to strike a balance between incentivizing consumers to purchase and controlling their profit margins.

In conclusion, despite the COVID challenges, the future of the U.S. C&B retail market remains bright and promising. Meanwhile, we can anticipate U.S.-based C&B companies continue to adjust their merchandising and pricing strategies to prosper and survive the pandemic. Home-use C&B products targeting unisex and male consumers, in particular, could become new market opportunities for C&B companies to reach out to more customers and generate sales in the new business environment.