The Good, The Bad and The Ugly….

The global beauty industry generates over a quarter of a trillion pounds in sales each year and accounts for millions of jobs across the health and beauty supply chain, including retailers, suppliers and distribution.

However, beauty industry revenues contracted by 20-30% in 2020. With Government guidance advising us all to work from home, social distance, and wear a mask, it’s unsurprisingly makeup and fragrance sales have suffered.

For luxury brands, it is expected that there will be a 55% and 75% decline in cosmetic and fragrance purchasing, respectively.

Before the Covid pandemic, in-store shopping accounted for up to 85% of beauty product purchases, with some variation by subcategory. With the closure of premium beauty-product outlets, approximately 30% of the beauty-industry market closed shop. As we have already seen with the demise of Debenhams and the Arcadia Group, some of these stores will never open again, and new openings will likely be delayed for at least a year.

Whilst bricks-and-mortar pharmacies and supermarkets have remained open, their footfall traffic and revenues have plunged. Boots reported its overall sales fell by two-thirds between March 25th and April 3rd, 2020, with beauty-product revenues contributing to the decline.

With the closure of some department stores, many brands are losing their route to market.

So how must the Health and Beauty market change as a result of the Covid-19 pandemic and how will consumer behaviour change the way the beauty brands and the market operates?

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Winners & Losers

As a result of the pandemic, there has been a rise in “Do it Yourself” and self-care beauty ranges. This has highlighted the need for a direct-to-consumer model, already a pre-COVID trend. The need for brand websites, social-media shop platforms, and marketplaces have become even more critical to survival.

Across the spectrum of verticals, consumers indicate they are likely to increase their online engagement and spending. Colgate-Palmolive and Johnson & Johnson reported strong figures for 2020, highlighting an increase in the self-care range and hygiene products via a direct-to-consumer model.

Some brands adapted to the circumstances and increasing demand for hygiene products by expanding their production lines with hand gels and sanitisers.

Transalis customer, The Hut Group, has outperformed its own forecasts, according to Global Cosmetics Media Ltd, reporting sales up by 51 percent, six percent over its predicted 40-45 percent margin. The online beauty company attributed the surge to the influx of new customers, having gained an additional 3.5 million customers in the three months to 31 December 2020.

Encouragingly, hair and beauty professionals developed creative ways to serve their customers throughout the pandemic. Product and technology developments such as DIY hair and nail colour kits, is testament to the industry’s ability to adapt, taking a typically “non-digital” product and exploiting technology to maintain contact with clients.

However, other giants such as Proctor and Gamble were hit financially due to the impact of travel restrictions on their travel hub concessions, which accounted for circa £1bn of their previous annual sales.

Shift in consumer buying habits: and how the industry is reacting

Thankfully at the beginning of 2021, Personal Care has been recognised by the UK Government as a specific sector, meaning beauty, spa and hair will no longer be associated with retail or hospitality when Government decisions are made.

With the tangible shift in consumer buying habits from a walk-in to online trend, businesses have the opportunity to prioritise how they can streamline their operational model and maximise efficiencies to support an increasingly prevalent digital channel to the consumer.

Beauty-industry organisations will need to prioritise digital channels and the importance of visibility of real-time data to capture and convert the attention of existing and new customers.

There is also the need for closer collaboration between retailers and brands. Many brands are now prioritising the opportunity to share inventory and sales data to enable a streamlined supply chain operation. As well as reducing costs, this will help to combat turbulent times and improve the chances of coming through the pandemic as a stronger and more agile organisation.

How EDI can support your business

Transalis eDI™ connects businesses to their trading partners to implement, enhance and optimise the benefits of automation and integration. EDI can absorb data in any format from any source and translate it to integrate with back-office systems.

Transalis is a UK based Digital Transformation partner for organisations of all shapes and sizes in the Health and Beauty industry. Supporting automation of supply chain communications, enabling streamlined operational efficiencies, reducing errors, improving visibility of revenue and stock, as well as giving businesses the advantage over the competition.

Source: McKinsey: How Covid-19 is changing the world of beauty