How Brands Can Stay Ahead of Beauty Industry Trends: 4 Challenges and Opportunities

On February 13, 2024, iconic beauty and wellness brand The Body Shop folded after almost fifty years in business. 

One retail expert analyzing their collapse noted, “Being environmentally conscious was Body Shop’s key differentiator when it started. Since then, more and more organizations…have followed suit…which makes it far more difficult to stand out.”

The moral of the story? With competition so fierce in the health and beauty industry, you can’t focus on one customer demand at the expense of others. For example, a commitment to sustainability — while important — won’t be a competitive advantage if you fail to personalize product recommendations.

To remain competitive in today’s global cosmetics market, brands must pay attention to these four key beauty industry trends. And while each trend has its own challenges, overcoming them is possible. Keep reading to learn how.

#1: New consumer understandings of wellness + beauty

Many beauty customers don’t buy cosmetic products just to look good. They want the product to help them feel good, too. Brands that fail to understand how wellness trends impact beauty trends will be left behind.

This beauty industry trend has staying power. According to McKinsey’s 2023 beauty market report, “The melding of wellness and beauty will only become more pronounced in the years ahead, in line with an expected CAGR (compound annual growth rate) of 10 percent to 2027 for the wellness industry.” But how can you “meld” these elements into a product consumers want?

Look no further than the “clean beauty” category. Most generally, products in this category only contain ingredients consumers consider non-toxic. 

Becoming a clean beauty brand is not without challenges. Retail Dive reports that as recently as Q4 2023, “Because there is no industry standard for clean beauty products, customers are taking it upon themselves to do their own research.”

Ulta Beauty simply created its own clean beauty standards under the term “conscious beauty.” These standards include “clean ingredients.”

Ulta’s example has a three-part lesson for brands new to the beauty business:

• Understand what makes your target audience “feel good.” 
• Until the FDA defines “clean beauty,” be explicit about your understanding of it.
• Make it easy for shoppers to find your position on it.
  ‍

#2: Consumer demand for social responsibility

It’s no surprise that younger generations are increasingly withholding brand loyalty from companies that lack a commitment to social responsibility. These consumers feel better knowing their purchases benefit the planet and the people living on it. 

Social responsibility takes many forms. But today, many top beauty brands are making a big push to promote diversity and inclusion, as well as sustainable practices. The major challenge of each is showing consumers how this commitment drives measurable change. The last thing you want is to appear inauthentic.

Diversity and inclusion

As US consumers become more diverse, the number of skin tones needing care increases too. Making it easier for these individuals to find the right products isn’t just the right thing to do. It’s also good business.

Here’s a key finding from a 2023 Bolt report on the beauty industry’s future: “58% of shoppers said that diversity and inclusion are important when purchasing products from beauty or skincare brands.”

Brands like MAC Cosmetics are leading the way. Not only have they made “All Ages, All Races, All Genders” their mission statement, they catalog their advocacy on their site. 

New brands that share MAC’s commitment to diversity and inclusion — but don’t have MAC’s 40-year track record — can still have an impact. Here are a couple ways to get started:

• Include a diverse range of models in your product images.
• Donate a portion of each sale to an organization that works to elevate the concerns of people of color. Embed a video from the organization’s founder explaining how your donation was used.
  ‍

Environmentally friendly products

Given the amount of plastic required by beauty products, it’s no surprise consumers have concerns about their environmental impact. 

In a 2023 Nielsen survey, 69% of global consumers said “sustainability has become more important to them over the last two years.” But at the same time, 41% said the cost of sustainable options is the biggest barrier to buying sustainably. High inflation doesn’t help.

The high cost of sustainable beauty products is mainly due to three factors:

• Virgin (new) plastic is cheaper than recycled plastic.
• Plastic-free packaging is difficult to reuse, especially for cream-based beauty products.
• Small brands can’t take advantage of volume discounts.
  ‍

With higher costs of production, many brands simply can’t be 100% sustainable. But they can make it easier for their customers to practice sustainability once their products arrive. Two brands are leading the way.

Noble Panacea: Keeping packaging out of landfills

Noble Panacea sells individually packaged, daily skincare applications. To reduce the risk of these packages ending up in landfills, the brand includes envelopes with each order. 

Customers simply slip used daily-dose packages in the envelope and return them to be recycled through a partnership with the recycling company TerraCycle.

DEW MIGHTY: Promoting reuse

DEW MIGHTY sells jelly serum bars for skin health. Rather than include replacement bars in new metal containers, the brand creates attractive containers consumers buy once and reuse.

The containers are portable, durable, and easier on the environment than glass and plastic.

#3: Evolving modes of consumer engagement

Brands should prioritize social responsibility because it benefits consumers and their communities. But getting the word out about these benefits — and convincing customers to pay attention — is a huge challenge. 

Many beauty brands are opting out of channels once thought to be silver bullets and finding other ways to engage their audience. And it’s not just because social media algorithms keep shifting.

UK-based brand LUSH, in a push to be more authentically sustainable, extended their “do no harm” mission to social platforms. They dropped Facebook, Instagram, and TikTok despite their millions of followers. 

Citing a study that social media is harmful to children, they shifted their engagement strategy to improving in-store experiences and pursuing branded partnerships. (They continue to post on Pinterest and YouTube.) 

Sales didn’t suffer as a result, reported LUSH.

Rise of micro-influencers

If you’re an emerging ecommerce beauty brand without physical stores, it’s not practical to reject all social media channels. But you can adapt your strategy to reach more qualified customers.

Many social media marketing strategies involve influencers. But trying to partner with beauty influencers who have the most followers is not always the best approach. 

Amy Rollinson, senior analyst for beauty and fashion for Euromonitor, told Vogue Business: “Big influencers in particular are struggling to engage their audiences…By becoming successful, they’re like celebrities and are no longer relatable [to fans].”

A recent study from Influencer Marketing Hub backs up Rollinson’s claim. Micro-influencers, or those with 15,000 or fewer followers, saw an engagement rate of 2.7%. Influencers flirting with a million followers had a 1.5% engagement rate.

Emerging beauty brands should consider seeking out micro-influencers and encouraging user-generated content. Consumers are more likely to trust posts containing people who look like them, not out-of-reach celebrities.

#4: The demand for hyper-personalization in ecommerce

Each individual has a mental image of themselves at their most beautiful, and will happily buy products that get them closer to this ideal. But if they shop online, finding the right product can be tricky. Fortunately, advances in technology have made hyper-personalized experiences possible.

Decision stage

Augmented reality, or AR technology, is a powerful tool allowing virtual try-ons. It helps spare shoppers the disappointment of buying the wrong product and beauty retailers the financial hit of a return.

A leader in the AR revolution is Estée Lauder. From their phones or laptops, consumers can engage their webcams and apply different foundations and lipsticks. 

But is AR worth the investment? According to the Bolt survey, Estée Lauder saw online shoppers who used the tool convert at a 2.5-times higher rate. The same survey revealed 57% of Gen Z would “pay as much as 11–20% more for their beauty purchases if it involves custom online shopping journeys.”

It might seem like AR is out of reach for smaller merchants without an operating budget the size of Estée Lauder, but think again: Shopify offers AR technology to its retail partners.

Post-purchase stage

Ecommerce hyper-personalization shouldn’t stop once a customer has purchased an item. It can also improve the post-purchase experience, a key battleground for customer loyalty.

An unfortunately common post-purchase event is a stolen package. When this happens, brands can either foot the bill for a replacement or direct the customer to the shipping carrier. Either way, both customers and brands get a less-than-ideal experience.

Beauty brands like Glamnetic took a different approach by adding optional shipping protection from Extend to their checkout flows. 

Customers who purchase it can file claims online with their email address and receive personalized attention from Extend’s 24/7 virtual assistant Kaley. Within a few minutes, Kaley will issue a decision on a customer claim and provide next steps.

In addition to the convenience, the peace of mind provided by shipping protection is a powerful incentive to purchase. According to Extend co-founder Rohan Shah, “Since launching with Extend, Glamnetic has seen a 6% increase in its overall purchase conversion rate, and over 68% of its customers add Extend Shipping Protection to their purchases.”

Fortify your beauty brand with Extend

Your investment in a sustainably produced, clean-beauty product — backed by micro-influencers — will bear more fruit if you have a customer-centric way to cover lost or damaged packages.

Extend Shipping Protection is the added investment you need to safeguard customer investments in your products. Not only will they feel good when they resolve a claim in minutes, they’ll pay future visits to your online store.

To read more about shipping protection and how it benefits merchants, click here.