While global beauty sales in the first half of 2020 declined between 10 percent and 30 percent, the sector — including makeup, fragrance, hair care, personal care and skin care — is recovering. On Wednesday, the authors of McKinsey & Company’s first annual The State of Beauty 2021, Sophie Marchessou, Emily Gerstell, and Emma Spagnuolo, presented their findings to select media. Overall, the global consulting firm estimates Beauty will rise to more than $490 billion in global sales in 2021, up from $485 billion in 2019 (pre-COVID). The reshaped market that will emerge out of the crisis, however, will reflect significant shifts across different regions, categories and channels. Here, the highlights featured during the call.
- Recovery by Country: McKinsey research shows that China’s beauty market rebounded in August 2020, aided by on-shoring of international travel retail sales with continued dynamic growth 8% to 10% compounded annual growth rate [CAGR] expected in 2021. The U.S. is forecast to rebound next, while Western Europe and Japan face longer recovery. The U.S. is expected to return to growth by mid-2021, with continuing growth of 3% to 4% CAGR through 2022. Europe and Japan will be slower to recover, not reaching 2019 sales levels again until 2022, driven by deeper initial volume loss.
- Self-Care for the Win: Self-care categories, such as skin, hair and personal care, are predicted to gain share as markets rebound, said McKinsey. From 2019 to 2021, Hair Care is expected to grow 2% CAGR, Skin Care is estimated to increase 5% CAGR and Personal Care looks to inch up 2% CAGR. Color Cosmetics and Personal Fragrance were hit especially hard by social distancing and widespread shut-downs of prestige brick-and-mortar retail, explained McKinsey, with additional challenges for makeup from mask-wearing (in the U.S., growth in eye in Q2 did not off-set declines in lip and face product sales) and challenges for Fragrance from disruption in Travel Retail (which accounted for 15% to 20% of 2019 Fragrance sales. Fragrance is predicted to dip 12% CAGR between 2019 and 2021 while Color Cosmetics will fall 2% CAGR.
- Digital will take share from brick and mortar: McKinsey estimates that digital will be the big winner, almost doubling its channel share globally. The global consulting firm predicts total ecommerce sales will rise to 19% of total beauty sales in 2021, an increase of 36% CAGR from 2019. Department stores’ physical retail, on the other hand, will comprise 6% of total beauty sales, a dip of 12% CAGR from 2019. Other notable trends will be share shift within Beauty Specialty from in-store to their websites, while Department store share shift to online will likely fail to offset significant impact from store closures and weakened value proposition. Drug and grocery physical stores will cede some share as they continue to face challenges in providing specialized beauty expertise, proving more vulnerable to dollars shifting to Amazon and Tmall.
- The U.S. will see a significant shift to online purchasing post-COVID: The shift to online is also a function of bringing new consumers into the channel. McKinsey research shows that the number of consumers who purchase skincare and makeup online could jump from, pre-COVID, 44% of U.S. and 30% of U.K. consumers to 58% of U.S. and 41% of U.K. consumers post-COVID. While a significant increase, the U.S. and U.K. will still be far behind China, where 86% of consumers purchase skincare and makeup online.
- Social media purchasing to increase: While still small, 4% of U.S. consumers are shopping on social media more since COVID-19 started, with 9% of U.S. consumers in total saying they shop on social media (for context, 21% of Chinese consumers use social media to shop). Consumers are trying other new purchasing behaviors, particularly when it comes to new retailers or ways to shop for value: in the U.S., approximately 7% of shoppers said they increased purchasing from a new store; 7% increased purchasing pre-owned goods; 5% said they used an app more often to find a deal during this period of time. Consumers are reporting high levels of satisfaction with time.
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