COVID-19 has affected retailers in all industries, but cosmetics brands face a unique problem with the shut down – given the predominance of store and concession-based sales. Much of the customer experience of cosmetics purchasing revolves around trying on and testing shades and looks either alone or with an in-store makeup artist. In a post-COVID-19 world, this is likely to be a less popular method for shoppers to utilize.

How has COVID-19 affected the cosmetics industry?

Cosmetics sales, which had significantly dropped since the pandemic started – with reporting a 22% decline in the first quarter of 2020 for year on year sales – are seeing an uplift in recent weeks with brands such as Estee Lauder believing that such an uplift will offset the damage done by Coronavirus, and profits will be more or less in line with predictions made before the outbreak.

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This is not to say that all brands are seeing the same results or that changes won’t have to be made – with most cosmetic sales happening in store (85%), cosmetics retailers have a clear need to pivot to online channels in order to mitigate against the impact of the pandemic.

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Cosmetics industry pre- and during COVID-19

The cosmetics industry has traditionally been resilient. Even during the 2008 recession, the industry  experienced only a relatively small set back compared to other industries and quickly bounced back with sales reaching almost US$500 billion annually by 2019.

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The COVID-19 situation is clearly different to the last recession in many ways, especially when it comes to the unique and unprecedented challenges facing hair and beauty salons, as well as department stores and other traditional sellers of cosmetics, who are being obligated to close for indefinite periods of time. While closing hair and beauty salons impacted wholesale channels for brands, there has been something of a boon in sales of DIY products such as hair dye and nail polishes. Sales for these types of products have increased in the short term as people seek to do these treatments themselves at home.

While the initial shock of the crisis hit the industry hard, with China showing an 80% decline in sales in February, by March the difference in year on year sales was a decline of just 20% which reflects a strong rebound in a short period.

In fact, beauty and cosmetics sales are prone to a phenomenon known as the ‘lipstick factor’ where people want to treat themselves to something not too expensive that makes them look and therefore feel better, traditionally lipstick, but lots of cosmetics products would fall under this category, be it hair dye, bath or body care products or eyeshadow. This is good news for cosmetics retailers who will no doubt benefit from the lockdown fatigue that is hitting shoppers now and will look for small ways to treat themselves and make themselves feel good during this time.

Cosmetics industry post-COVID

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There will undoubtedly be major impacts on retail globally, with cosmetics sales being no exception. From refining the supply chain to mitigate production being disrupted in a similar way again, to new rules around hygiene and testers for cosmetics specifically, things are going to look different when things go back to ‘normal’.

Cosmetics retailers will have to adapt to a new or improved way of delivery of their products to shoppers, both during and after the crisis, as there will no doubt be impacts on the way such products are sold in the future.

Brands who sell online are in an advantageous position in these times, but do face limitations in selling to some areas due to certain cosmetics products being classified as ‘Dangerous Goods’ – such as anything containing alcohol like perfume or nail varnish.

6 tips to help cosmetics retailers navigate eCommerce in a time of COVID-19 and beyond:

1. Provide free shipping over a threshold to incentivise purchases

It has been shown repeatedly that free shipping will encourage conversion and while there is a cost to retailers, it seems to be one that is worth it. One way that cosmetics retailers can mitigate against the cost of free shipping is to create thresholds or incentives for shoppers to spend a certain amount to avail of free shipping. This can be adjusted for domestic or international shipping as necessary.

2. Relax and clearly outline shipping and returns policies

Cosmetics retailers must adhere to high standards regarding their products and often goods that are returned for whatever reason must be destroyed, which of course comes at a cost to the retailer.

While all eCommerce retailers should have clear and comprehensive shipping and returns policies outlined on websites and in pertinent customer communications, cosmetics retailers need to be doubly careful regarding outlining terms and conditions of sale to shoppers as returns of cosmetics cannot usually be resold and are generally destroyed – even if they hadn’t been used.

That being said, many brands are relaxing the expiry of their returns policies in the current climate, given the delays present in the logistics supply chain.

3. Utilize in-store stock for online fulfillment

During the pandemic, for as long as lockdowns last, retailers should – where possible and where it is safe for staff to do so in a socially distant fashion – fulfill online orders from store stock. This is a good option for domestic orders especially if most orders are generally filled from a centralized hub as it can decrease shipping time and costs. Following the pandemic when stores are open again, retailers will undoubtedly find that this implementation of an omnichannel method of managing stock one worth maintaining.

4. Utilize social media influencers

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Social media influencers – already very common in the cosmetics industry – tend to have large and dedicated followers and brand collaborations – particularly for new product releases – often sell out within hours.

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With beauty content having one of the biggest shares of videos on YouTube, generating more than 169 billion views in 2018, and video content being the most engaging and shared, brands who haven’t collaborated with influencers yet should avail of the opportunity to reach an expanded new audience.

As 80% of YouTube users are from outside the US, eCommerce retailers, whether US-based or not, who ship internationally will have an additional advantage.

5. Special offers and sales

While retailers tend not to want to reduce product prices to move stock, sometimes it’s an inevitability. During this time, when products may not be selling as well as normal, as people are concerned about finances, giving a limited time catalog-wide discount or even a product-specific one might be enough to motivate a reluctant shopper to snap up a bargain and turn a potential shopper into a loyal customer.

6. Promote DIY options

With nail and hair salons closed there has been a higher than usual demand for at home dyes and nail kits, a trend eCommerce cosmetic retailers can capitalize on. Creating bespoke sets of commonly ordered items or giving loyal customers discounts on their most-bought items are possible ways to encourage sales from both new and existing customers.

As a country slightly farther into the pandemic than others, what happens in China is likely to be replicated across the world, and beauty brands in China such as L’Oreal have seen appetite for skincare and hair care greatly increasing – putting sales on track to increase by double digits in Q2.  CEO Jean-Paul Agon said, “What we are seeing everywhere right now, is that where salons are closed, sales in hair color are up 50%.”

Long-term impact on the cosmetics industry

As new measures will be implemented to protect the public from the spread of disease it is likely that testers and other methods of trying on makeup will not be allowed/advised due to hygiene concerns. Cosmetics brands are likely to rely more and more on AR/VR technology to show shoppers what cosmetics will look like virtually, so investing/implementing this sort of technology now will be crucial.

Brands such as L’Oreal are already utilizing AR technology having recently rolled out an AR lens for Snap’s desktop app which allows customers to virtually try on looks from brands such as  Garnier, Lancôme, L’Oréal Paris and Maybelline.

Pinterest has also released their own AR facial recognition tool, ‘Try On’ which allows shoppers to view how they’d look in different shades of lipstick.

Even in 2018, brands such as Sally Hansen (nail care and polish) and Sephora were already offering AR experiences to allow customers to ‘try on’ shades of nail polish, eye shadows and lipsticks. As these technologies improve, they will be increasingly adopted by eCommerce retailers to aid shoppers make a purchase.

eCommerce cosmetics retailers who implement such technology and stay ahead of the curve will benefit from being early adopters in this space.

Conclusion

Retailers of all types will continue to be affected by COVID-19 and the future is uncertain, but the cosmetics industry appears to be in strong shape once past the initial impact. eCommerce cosmetics retailers who manage to pivot their business model to incorporate online sales, reaching new audiences or providing new solutions, and implementing measures to fulfill online orders in a timely manner should manage to come out of the crisis with additional data that will allow them to form an even stronger relationship with shoppers.

eCommerce retailers who wish to successfully expand into international markets can contact our Sales Team here to find out more.

 

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