How much is the beauty industry worth? Key Figures and Trends for 2022/2023
The beauty industry has gone through a period of unparalleled change and adversity these last few years. With an unprecedented pandemic in the rearview mirror and a possible economic crisis ahead, the industry is certainly going to have to weather some waves. And despite all that, the beauty industry is likely to continue growing and we have some very exciting times to look forward to. So, how much is the beauty industry worth? And where is the beauty industry going? Here's what you need to know.
How much is the global beauty industry worth?
According to Statista via Oberlo, the global beauty industry is worth $534 Billion in 2022. This is an incredibly positive figure for an industry that was badly hit by the pandemic because it's the first year that the figure was greater than it's pre-pandemic counterpart ($508 Billion in 2019).
The 2022 figure is a 6% increase year on year and is the second fastest increase in the last 9 years which just goes to show that the industry is roaring back to life. But it doesn't stop there, as growth is expected to reach 10.3% in 2023, which would be the fastest annual growth rate in 13 years.
Looking further, growth is expected to continue (though perhaps at a more reasonable 4.4% rate), right through 2026. So, the short to medium term looks very positive for the beauty industry.
Of this aggressive growth, the largest segment is Personal Care with a market volume of US$238.60 Billion in 2022 where, interestingly, a quarter of a sales 25.4%, have come online. This is a trend that we will be looking at in greater detail and underlines what the future of the industry may look like.
How much is the UK beauty industry worth?
The UK beauty industry is worth an estimated £12.14 billion in 2022 which puts it at the third largest beauty industry in Europe. This value is underlined by the strong skincare segment which is worth £3 billion.
Backdrop of the pandemic
Before we can look towards the future of the beauty industry, we must first understand where the industry came from. How did the pandemic change the beauty sector and what impact will it continue to have as we move forward?
Beauty was one of the industries hit hardest by the pandemic and saw a very serious contraction. This is something the industry has never really prepared for before because it has typically been notoriously resilient in times of economic downturn.
Why beauty normally does well during recessions
The beauty industry's typically good performance in bad economic times comes down to something called the "lipstick effect". This refers to people's tendency to purchase affordable luxuries in times of economic hardship. In other words, people tend to buy smaller items that make them feel good and don't cost too much. This often means people buy things like makeup and skincare during a recession to make them feel better, even when there's not a lot of money to go around.
What was different about the pandemic?
The pandemic's impacts were so severe that it was different from a typical recession. Unlike normal times, Covid saw millions of people stuck working from home and hiding their face behind masks. This means that people simply didn't see the need for the beauty cosmetics they would normally buy. What's the point of putting on a full face of makeup when no-one can see you behind a mask or in a digital meeting with your camera turned off.
This caused a major contraction in the beauty sector, with an overall drop of 7% in 2020 when compared to pre-pandemic numbers.
Other impacts of the pandemic
The pandemic, while largely a negative for the beauty industry, did lead to some interesting outcomes that are likely to influence the beauty industry for years to come.
- Self care: While beauty cosmetics like lipstick and makeup certainly took a hit during the pandemic, it was somewhat offset by an increase in interest for self care products. Instead of wanting to look good for other people, many turned to self care products to help them feel better. This led to a surge in sales growth in the health and wellness industry, which includes skincare, haircare and other beauty treatments.
- Online shopping: One of the most notable outcomes of the pandemic has been the increase in online shopping. This was already a growing trend before Covid, but the pandemic accelerated it dramatically and it is likely this is a trend that will never reverse. This has seen the rise of many e-commerce beauty companies and has made the beauty industry more accessible than ever before.
- Work from home: Finally, one aspect of Covid that is likely to last is the flexible work options that many organisations have shifted towards. This means that many employees now work from home, meaning they don't need to put on makeup for the office but can still look presentable in digital meetings. This could mean that makeup and skincare products may take on a more utilitarian role as people change their beauty habits to fit this new lifestyle.
- Supply chains: The beauty industry has clearly committed to the idea of online shopping, and consumers seem to be on board. The question now is will global supply issues strained by issues like the Ukrainian war and China's zero Covid policy be able to meet this increased online demand.
What's driving growth of the beauty industry
Next, we are going to dive into some of the factors that are driving the impressive growth that we are seeing in the beauty sector.
1) Covid rebound
Perhaps the most obvious factor driving the growth of beauty is simply the recovery from the pandemic. With economies slowly opening up and people once again feeling comfortable to go out, more and more money is being spent on beauty items like makeup, skincare and haircare products.
This is, of course, a very wide-ranging factor that will have sub factors that impact it too. Many people are back in the office so they feel the need to wear a fresh face of makeup again and look their best in social settings.
We are also seeing many people looking for an excuse to spend money. During the pandemic, many people saw an increase in savings due to things like stimulus checks and general expenditure going down. Now, many are looking for ways to spend this money, and beauty products have become a popular way of doing so.
When influencer first began to pop up due to platforms like Instagram, many believed that it would be a flash in the pan, but that's simply hasn't been the case. Influencers have become a key driver of the beauty industry, with many brands now paying large sums to certain influencers to promote their products.
This has allowed smaller brands to compete with larger companies and advertise directly to their target audience in an effective way. It's also allowed more obscure beauty trends like sheet masks to become mainstream due to influencers talking about them on social media.
One unique recent trend is the emergence of the micro-influencer. Brands have found that you don't need to spend enormous amounts of money on a huge name influencer with millions of followers when you can actually get better results from smaller influencers with a more engaged, loyal audience.
3) Social media
Social media in general has also been a huge influence on the beauty industry, allowing people to showcase different looks and create trends that can quickly spread across platforms like Instagram and TikTok. This allows for an even quicker dissemination of information than before, allowing many beauty trends to become widespread in a very short space of time.
4) Online shopping
As we mentioned before, the pandemic has completely changed the way many people shop. While there were plenty of sceptical people who perhaps didn't trust the online shopping process, an extended lockdown meant that consumers were forced to shop online whether they wanted to or not.
Now we have a whole swathe of people who have been used to shopping online for their beauty products and are unlikely to go back to physical stores any time soon. This has also allowed smaller brands who don't have the budgets of larger companies to compete in a new way, as they can set up shop online quickly and easily, allowing them access to millions of potential customers with little effort.
There has also been an interesting trend in the kind of shopping people do online. While those who prefer retail shopping typically are very price sensitive, those who engage in online shopping are interested in spending bigger from brands they are loyal to. This means that a brand can capture those customers with loyalty schemes and other incentives, allowing them to spend more money with the same brand in the long run.
5) Increase availability of sustainable brands
In the next section, we will talk more about the interesting trends that will define the next era of the beauty industry. One of the trends that will be examined is the increasing demand for sustainable, cruelty free and vegan beauty options.
And we are clearly seeing that this demand is being met with plenty of new sustainable brands popping up, ranging from luxury high end brands to budget friendly options. These brands are appealing to consumers who want to purchase beauty products that are cruelty free, natural and Eco-friendly.
6) Rise of indie brands
The rise of indie brands has been huge in the beauty industry. Smaller companies are now able to compete with larger conglomerates and offer unique products that cater towards a specific audience. We saw this over lockdown when many people were searching for particular items, such as hand sanitizers or face masks, and indie brands were able to fill the gap and provide these items.
Indie brands often also offer unique experiences through their products, such as subscription boxes that come with special gifts or giveaways. This has allowed them to capture a loyal following of customers who appreciate being able to purchase something special from a local business.
7) D2C Brands
Finally, we are seeing a number of beauty brands launching their own direct-to-consumer (D2C) platforms, allowing them to bypass the traditional retail shops and sell directly to customers. This has been a great way for brands to cut out the middleman and control prices better, as well as offering much quicker service times for delivery.
Beauty industry trends
Looking to the future, there are clearly a number of trends that will define the kinds of products, marketing strategies and customers that the beauty industry will cater to. This includes:
As we have mentioned, sustainability is becoming increasingly important to consumers, with many people now looking for products that are vegan, cruelty free and made from natural ingredients. This has led to an increase in demand for sustainable brands, as well as a focus on educating consumers about how the beauty industry is impacting the environment.
Not only do we expect consumers to be more conscious of sustainability, we expect this to have a greater impact in the minds of many buyers than brand loyalty. Many brands will quickly realise that even their most loyal customers will switch to sustainable options, if given the choice.
2) Indie Brands
The rise of indie brands is also something that we expect to see more of in the coming years. More small businesses are launching and competing with larger established companies by offering unique products and experiences. We expect this trend to continue as independent brands become more competitive and the landscape becomes more saturated but less focused on major labels.
3) Flexible working
Perhaps the biggest holdover of the Covid era (even more so than masks), is flexible working. Many companies are now allowing their employees to work from home and this has created a new way of working. We expect more beauty businesses will react to capture a set of consumers who don't intend to wear makeup as often as they once did.
Products will need to become more focused on wide ranging benefits rather than just aesthetics which brings us onto our next trend.
4) Self care
The focus on self care products and brands is also something we expect to increase in the future. Consumers are now looking for products that can offer them both physical and mental benefits, such as reducing stress or calming their mind after a long day.
We expect beauty brands to increasingly provide products that cater towards this need for self care and relaxation. Products will likely boast of benefits other than just looking good like feeling good or improving mental health.
5) Black, Asian, and multi-ethnic consumers
This is an area that the beauty business has historically dropped the ball on with estimates that the UK beauty industry alone is missing out on as much as £2.9 billion per year in potential sales by not catering to black, asian and multi-ethnic consumers.
We expect this not only to improve but for brands to actively reach out to these customers with specialised products, marketing and services.
6) Male grooming
Similar to the attitude the beauty industry has had toward ethnic groups, men have been historically ignored as a potential customer base. This is now changing with a rise in awareness and acceptance of men grooming and taking care of their appearance.
We expect more brands to emerge that cater specifically towards male customers, offering products like beard oils, face masks and even makeup for men.
7) Subscription services
Finally, subscription services is another area that we expect to increase in the coming years. Brands are working hard to carve out their own niche spaces by using direct marketing, sustainable options and easy to use online shopping.
The culmination of these things have allowed brands to fully capture their customer base and make them loyal. So, rather than trying to blindly expand their base, we expect brands to work harder to maximise the customers they do have and offer them subscription services, tailored to their needs.
This would allow for the companies to continue offering very focused experiences towards a small set of dedicated customers.
The beauty industry has been set back by the unprecedented Covid pandemic but is finally roaring back to life. The industry is clearly booming and we expect to see real growth over the next few years. But while the industry seems to be back, it's also a new industry that's emerging from the ashes of the pandemic. Trends like sustainability, online shopping and micro brands will likely change the face of the beauty industry as we know it.
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