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For an industry that took in $46.2 billion in 2015 and is projected to rise to $51.8 billion in 2020 (according to Mintel) bending to millennial whims isn’t just a good idea — it’s crucial. They’re not only the largest generation in America, but according a 2015 study done by TABS Analytics, women ages 18 to 34 are also the biggest portion of the $13 billion dollar cosmetics market, and they’re more likely to be heavy buyers, meaning they purchase more than 10 types of products a year. Plus, today’s shopper isn’t against a splurge — the U.S. prestige beauty industry reached $16 billion in 2015, a seven percent increase over 2014 sales, according to The NPD Group. The biggest gainer: makeup at 13 percent — a jump attributed largely to the generation’s love for the Instagram-driven trends of contouring, strobing, baking, and color-correcting with dollars going to concealer, primers, and contour, highlighting, and sculpting kits as well as eyebrow products.
This distrusting, must-see-to-believe stance is impacting how, why, and where buying happens, and so the industry must respond. And with retailers and brands changing to accommodate these shifts, it’s effectively changing how all consumers shop for beauty. Here’s a look at the changing landscape.
The "Sephorization" of beauty aisles
Millennials don’t just want to witness a product in action, they demand it. Testing is vital to today’s buyer. This could partially explain why respondents in the TABS survey reported buying fewer beauty products online last year than the year before, and has certainly helped the rise of the sample box services like Birchbox, Ipsy’s Glam Bag, Memebox, and Scentbird. It’s also one of the reasons specialty stores Ulta and Sephora have seen such success. With testers out, they’re playgrounds for consumers to decide for themselves what’s worthy of a credit-card swipe.
Testing is vital to today’s buyer.
Trial stations are a great set up to break past several barriers of suspicion, which is why although the main store categories (mass retailers, drugstores, and department stores) are still top dog for cosmetic buyers overall, these two retailers are hot on their heels. In the TABS survey, Ulta had a 41 percent increase in regular buyer purchases compared to 2014. Sephora reported a 25 percent increase in buyer penetration and a 32 percent increase in regular buyer purchases over 2014. Another checkmark in their corner: people spend more there per visit.
The message is clear. Consumers want to try before they buy. And retailers are listening as more are offering samples and bringing products out on shelves vs. behind counters, a move Karen Grant global beauty industry analyst for The NDP Group calls "Sephoraization." A few other indications that the industry is rolling with these punches: Nordstrom has created a sampling and educational "conceirge" service. Target has created its own beauty trial box service.
Sephora even took things a step further with the debut of its TIP (an acronym for Teach, Inspire, Play) concept store in San Francisco last year, featuring education centers equipped with iPads loaded with information, USB ports, and WiFi, as well as makeover and skincare stations where consumers can get a customized prescription for the beauty look of their choice. The company indicated that the model is the blueprint for future stores.
One side effect of this environment is that anti-aging is down within this age group, as anything that takes time to see results is at a disadvantage. We’re seeing that reflected in the sales numbers, as fragrance is outperforming skin care, and the overall focus of the category has shifted to preparation with masks (the sales of which have doubled in the past two years, thanks in part to the growing interest in Korean-based skin trends) and conceal-while-they-correct CC creams.
No more one-size shopping
This overall feeling of skepticism isn’t stopping people from buying from the big brands — the TABS Analytics report found that in the U.S. makeup category mainstream players like L’Oréal Maybelline, CoverGirl, Revlon, Estée Lauder, and Clinique and well-known specialty brands like MAC and Urban Decay are still going strong.
As a group with a penchant for self-expression and individualism, millennials like choice.
What it does seem to be impacted is the belief that any one brand is the answer to all their problems. As a group with a penchant for self-expression and individualism, millennials like choice. "It’s like the a la carte menu instead of having it all set for you. You can’t image having your playlist dictated to you today," explains Grant.
This means the door is opening wider to specialty, niche, and indie lines. The NPD Group reports that in the prestige space, smaller brands like Anastasia Beverly Hills, IT Cosmetics, Too Faced, NARS, and Tarte have all seen significant growth. Whether these Davids will eventually cut into the sales of tried-and-true Goliaths remains to be seen. "[It’s] definitely not inevitable that big brands will lose sales to new brands," says Kurt Jetta, Ph.D., CEO and lead product developer for TABS Analytics. Why? "The consumer has demonstrated a very high capacity to try and use multiple brands and that tendency seems to be growing over time." In other words, they’re buying more of everything — both niche and big-name.
One growing area of interest: the natural segment. In a survey by Nielsen, 53 percent of respondents felt "all-natural" was important in their buying habits today. We can see this reflected by the 24 percent growth the organic channel saw over a four-year period, and is likely also fueled by the growing distrust in the use of chemicals.
Then there’s the ethnicity angle, something that’s being addressed by cross-culturual indie brands like black Up cosmetics, Korean cross-over brand Chosungah 22, and Miss Jessie’s hair care line — as well as household-name companies.
"We’re seeing a revolt in the beauty aisle by consumers who don’t understand why ‘multicultural’ products are often sold on separate shelves."
"We’re seeing a revolt in the beauty aisle by consumers who don’t understand why ‘multicultural’ products are often sold on separate shelves, and this reflects changing demographics," says Shepherd Laughlin, director of trend forecasting at J. Walter Thompson. "Going forward, any brand is going to have to create products for all types of hair and skin in order to be considered a mainstream brand." One giant leading the way: L’Oréal, which recently created its own multicultural beauty division.
Consumers also like to vary how much they’re spending. "There’s this sharp differentiation in the pricing," says Dr. Jetta. "They either go really inexpensive and still look for quality [with products] below $5 or indulgent in the $20, $30, $40 range." This kind of high-low buying that has ruled fashion for years means that now a consumer has a beauty wardrobe of "luxury" and "affordable." This fact is an advantage for Ulta, which carries budget, mid-level, and prestige brands side by side by side, offering a one-stop-shop for the cost mixer-and-matcher. This also may be a clue as for what’s to come at Macy’s with the company’s recent acquisition of luxury retailer Bluemercury. Looking forward, Dr. Jetta says, "If one of the major retailers like Walgreens, CVS, or Target cut a deal with the heritage brands like Chanel or Lancôme that would be a major coup."
Death of a (traditional) salesman
Besides the traditional products-behind-the-counter or products-in-packaging set up another traditional store element is now on the endangered species list: The traditional sales associate. While folks are still showing up in the flesh to buy their products (90 percent of shopping is still done at brick and mortar stores), buyers today are taking the experience into their own hands and researching before they buy.
"Most purchases are planned — the buyer now goes in knowing what she wants at least 70 percent of the time."
While they still want to try the products in the store to seal the deal, "Most purchases are planned — I would say that the buyer now goes in knowing what she wants at least 70 percent of the time," says Grant. So where are they turning? Online reviews for one. Beauty blogs and YouTube are also two winners here (with social media platforms like Facebook, Pinterest, and Instagram trailing behind them, according to the TABS report). But perhaps the gold standard is the advice of a friend. The majority of shoppers in this key age group said that a recommendation from someone they know is influential to their decision to buy a brand, second only in influence to price, according to Adriot Digital’s Millenials: The New Age of Brand Loyalty report.
In fact, shoppers are so disillusioned with biased advice that even if they haven’t had time to research beforehand, asking for help is still not something they’re likely to do. A recent poll found that the number of people who would rather reach for their smart phones for a quick check on a product’s reputation or price comparison rather than ask the salesperson has reached 58 percent.
This DIY research boosts buying confidence and helps match product expectations with reality. But it also means that the traditional salesperson is out. Once the gatekeeper to the world of beauty and the leading role in the buying experience, the sales associate is now the helpful supporting cast member that people want only involved when absolutely necessary — and without any pressure or tie to one particular line in a multi-brand store. This impacts all retailers across the board, as a pushy employee could scare off a jittery browser. The shift is also perhaps one of the reasons why brands like CoverGirl, MAC, and Honest Beauty have tried to take product education into their own hands with the release of try-on and how-to apps to increase consumer knowledge without the help of a sales person.
Clear labeling and brand messaging is becoming increasingly important in the environment — when a consumer is picking on their own, they want to know what they're getting. Nielsen indicates that consumers are now looking for terms that are easily understood (like "retinol" and "collagen" rather than something like "hexinol technology") as well as specific details about what to expect — for example, they want to know how long it takes to see results up front. It's also a way that users can make sure products and the companies making them align with their values, says Dana Cho, partner at global design firm IDEO. For a generation that likes to stop responsibly and sustainably, the demand for transparency in everything from sourcing to production is sure to grow.
Eyeing the future
Surely there are more changes to come, but here’s what we can predict: Customization will continue to grow from all brands both big and small, with build-your-own palettes, and skin, hair care, fragrance, and makeup products created to be layered for a customized finish ("They’ll have to create more opportunities to mix and match," says Grant). The demand for natural formulas, sustainability, and information about ingredient safety will likely increase.
The hope is that this all leads to more more extensive results-testing, more transparency, and, finally, more effective products.
With Sephora and Ulta announcing plans for expansion and web-native brands like Credo and Birchbox continuing to set up shopping destinations, buying will most likely stay largely in the physical world — where the consumer will have more control and opportunities to play, try, and learn before they buy.
The hope is that this all leads to more more extensive results-testing, more transparency, and, finally, more effective products. As millennials continue to dominate the beauty-buying space, products that deliver on promises and live up to the hype created by social media campaigns will become more important than ever. After all, with a generation that buys with one groomed eyebrow raised, one disappointment could lose a customer’s trust for good.