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Beauty Ecommerce Trends: Growth Strategies, Stats & Brands To Follow

beauty-ecommerce-trends:-growth-strategies,-stats-&-brands-to-follow

Once exclusively reserved to physical in-store shopping, the beauty industry is increasingly online. Currently, the beauty industry generates $100 billion worldwide, and in 2023, US shoppers will spend close to $24.5 billion on beauty and cosmetics online. Shopping online for beauty products is becoming popular with all demographics.

But how can your beauty ecommerce brand stand out from the competition?

Read this guide to beauty ecommerce trends to dig into the key stats, ecommerce strategies, and innovation defining the industry in 2023.

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What’s the state of the beauty ecommerce industry in 2022?

In 2022, US cosmetics and beauty retail ecommerce sales will be more than double those of 2019 ($18.6 billion versus $9.21 billion). By 2026, those ecommerce sales will account for nearly a third of the category’s total retail sales.

Over on e-retailer giant Amazon, health, personal care, and beauty ecommerce sales will grow by 24.4%––the fastest-growing category.

Sephora.com is the online shop with the highest ecommerce sales in the US, with a revenue of $2.3 billion in 2021, followed by ulta.com, with US$1.889 billion.

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Worldwide ecommerce beauty purchases are expected to account for 25% of all beauty retail sales in 2023––up from 11% in 2019.

Consumer spending in prestige categories is also rising. In only the first six months of 2022, consumers with an annual household income of more than $100,000 have spent nearly $9 billion on beauty products. That highlights a 14% increase over the year, with Gen X and millennials leading spending.

The double-digit growth is due to a combination of more buyers in the market and consumers spending more compared to 2021, per Retail Dive.

While thoughts of inflation cutting back consumers’ spending and a looming recession have spooked many retailers, ecommerce beauty is proving to be resilient.

The beauty market is stronger than other discretionary retail categories, Neil Sanders, managing director of GlobalData, explained to Retail Dive.

“Outside of indulgences, it is also the case that many beauty and skincare routines are very much embedded into people’s lives so there is great reluctance to cut back on any of the products associated with them,” Saunders said.

1. Consumers expect personalized beauty offerings

Far from being a nice-to-have bonus, personalization has become ingrained in customer expectations. According to McKinsey & Company, 71% of consumers expect companies to deliver personalized interactions and 76% get frustrated when this doesn’t happen.

Mckinsey’s study also found that personalization fuels performance and better customer outcomes. Companies that grow faster drive 40% more of their revenue from personalization than their slower-growing counterparts.

In beauty, personalization can boost conversions too––consumers who get personalized recommendations are 75% more likely to make a purchase.

Beauty brands that don’t deliver tailored experiences to individuals risk leaving money on the table and losing out on customers.

According to a recent Optimizely survey, 63% of consumers are more likely to do holiday shopping with brands that customize the experience to their needs.

Increasingly customers demand that brands understand and anticipate their needs––88% of shoppers feel the experience a brand provides is just as important as its product.

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So how can ecommerce beauty brands tap into consumer preferences for personalization in 2023 and beyond?

Beauty brand Sephora has nailed personalization, thanks to its approach to customer experience.

For the fifth year in a row, with a score of 65 out of a possible 80, Sephora claimed the top spot in Sailthru’s Retail Personalization Index.

Sephora’s mobile app is one of the best retail apps out there. The brand’s in-app messaging is personalized to match user profiles, which include options like hair and skin type.

Its high-touch loyalty program is well-organized across all channels too. Everything from customer answers to quizzes and regular buying habits are all stored and used to personalize interactions.

Every interaction on each of Sephora’s different platforms displays the customer’s loyalty points. Store associates can also see a customer’s profile in-store and track recent purchases and items that were sampled, making it easier to find and buy them either in-store or online.

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Sephora syncs personalized communications across all channels to provide a consistent experience. An email subject line may read, “Dry skin? Meet your [foundation match].”

Customers who are regular users of certain products but haven’t purchased in a while may receive personalized discount codes to encourage them to stock up.

In an interview with Retail Brew, Michael Simoncic, managing director at Alvarez & Marsal Consumer Retail Group, explains how personalization should be about making customers’ shopping experience simpler.

“It is about knowing the customer’s preference and then tailoring the response,” he said. “It should be a seamless, frictionless experience. … Personalization efforts that require significant time and investment from customers don’t work.”

Made-for-you beauty is another way ecommerce brands are personalizing their product offer to individuals. For example, clean beauty brand Pure Culture uses surveys and at-home skin tests to build custom skin care formulas.

Each set is sold for around $80 and takes into account variable factors like customers’ lifestyles, diet, genes, and personal skin goals.

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Joy Chen, co-founder, and CEO at Pure Culture Beauty, explained in an interview that customers often have trouble finding the right type of skin care. This ultra-personalized approach helps them find what’s right for them.

“There’s a lot of confusion with the consumer, in terms of how they get information about what’s best for their skin. … So we really believe that the only way to get at this is going to be customization,” Chen said. “Consumers today are demanding more. They’re demanding that they have something that’s right for them.”

Product recommendation quizzes are another way ecommerce beauty brands are personalizing their customer communications and offers.

In the absence of third-party cookies––Google Chrome is eliminating them by 2024––beauty brands will need to find new ways of collecting customer data. Product recommendation quizzes are one way to find out personal information about consumers and then tailor your offering.

For example, direct-to-consumer (DTC) hair care brand Prose has an online quiz that asks consumers about their age, hair type, lifestyle, and other factors that may impact their hair care routine, From that, the brand matches customers with a personalized assortment of hair care products, like shampoo, conditioner, masks, and serum.

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2. Brands will look to AI to innovate individual offerings

In 2023, more beauty brands will increase their efforts to use artificial intelligence for personalization.

A core use of AI is helping online shoppers identify the right products for them without having to go into a physical store. Artificial intelligence can also be used to create unique formulas for individuals, pioneering individualization in beauty.

For example, skin care brand Proven uses AI to match products to people’s individual skin types and lifestyle.

Ming Zhao, co-founder and CEO of Proven Skincare, launched the brand after struggling to identify products that were suited to her skin type.

With her co-founder, Dr. Amy Yuan, the pair first created the Skin Genome Project, an AI-powered beauty database. The Skin Genome Project analyzes data from 20,238 skin care ingredients, 100,000 products, 28 million testimonials, and 4,000 scientific publications. The brand also asks consumers to complete a short quiz about their skin concerns and lifestyle.

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Using this data, Proven makes personalized skin care products based on nearly 50 factors, including an individual’s genes, routine, and the environment––for example, water hardness, UV index, and humidity.

Proven then adjusts individuals’ products every eight weeks along with changing seasons, the skin’s tolerance to active ingredients, and lifestyle shifts.

3. Loyalty programs continue to win over customers

Loyalty programs represent a huge opportunity for beauty brands to personalize their offering and retain more long-term customers. Pioneering beauty brand Sephora led the way with its ultra-personalized loyalty program, Beauty Insider, in 2007. But in 2023 consumers are still looking to purchase from brands that offer rewards.

Around the world, 56% of consumers said they’re more likely to buy from a brand with a loyalty program. Consumers cite automatically applied rewards and personalized rewards as some of the top reasons for using them.

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A great example of a brand that successfully rewards loyal customers is Shopify merchant 100% PURE.

Its Purist Pro program for estheticians and makeup artists offers a 35% discount on most products and first access to new product launches, while the Purist Perks loyalty program includes seasonal savings, birthday gifts, free shipping, points based on customer spend, and more.

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So what makes a great loyalty program?

Simplicity is key to getting people to join. “It has to be easy to understand,” Julie Bornstein, co-creator of Sephora’s Beauty Insider program, told Retail Brew. “The more complicated the program is, the more you just lose people. And the harder it is to sign up, the more hoops you have, you lose people.”

Bornstein also realized early on that the loyalty program needed to be omnichannel and link customer shopping across all platforms together.

“We realized that a huge unlock was to tie the experience together between stores and web. We also learned through research that customers shop [at] many places for beauty, so we wanted to give customers a chance to consolidate their purchases,” Bornstein says. “Beauty Insider let us do all three of those things. But it took us time to get to the point to know this and to build it out.”

E.l.f. Cosmetics’ mobile app for its Beauty Squad program does this well, too. Its mobile app features receipt scanning for non-app purchases so members can receive rewards wherever they buy products.

4. Brands to innovate with AR & VR try-on filters

Half of US adults have either used or are at least somewhat interested in using augmented reality (AR) or virtual reality (VR) while shopping.

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People often first interact with AR via social media filters or lenses they find on Instagram, Snapchat, Pinterest, or TikTok. Beauty retailers have plenty of opportunities to tap into this trend by using AR filters to demonstrate their products or allow customers to try them on virtually.

Snapchat is currently the most developed AR platform, but Instagram is a top contender. Pinterest’s AR tools are currently designed for beauty brands and TikTok is focusing on becoming the go-to place for creator-led AR.

For instance, pioneering beauty brand L’Oréal partnered with Facebook to bring AR-fueled makeup try-ons to shopping on Instagram. Customers can go to the brand’s Instagram page, find a product, and virtually try it on before purchasing.

Sue Young, Head of Spark AR, Facebook, explains that using AR during the social commerce shopping journey has the potential to improve the customer experience.

“AR Try On is an exciting new foray within Facebook that’s already helping people shop online with more confidence,” she says. “Through this new integration with L’Oréal, shoppers can expect a more personal shopping experience from even more of the brands they love, right where they’re already finding beauty inspiration: on Instagram.”

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As social commerce increases in popularity, AR can help encourage customer engagement and personalize the shopping experience. AR is also showing strong signs of boosting conversions. According to our research, interactions with products featuring 3D/AR content had a 94% higher conversion rate than those without it.

In early 2021, Pinterest launched a set of AR tools also named Try On, specifically for beauty brands. For instance Try On lets users virtually see what eyeshadow products from Lancôme, NYX Cosmetics, Urban Decay, and YSL Beauty would look like on them.

Rachel Hardy, Pinterest’s Head of Shopping Product Marketing, said that this tool set has boosted conversions for beauty brands.

“We started AR Try On with beauty, and we’ve seen five times higher purchase propensity on Pins that have it enabled for beauty than those that don’t.”

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Ulta Beauty and Estée Lauder have also built tools to allow consumers to virtually try on makeup.

In Ulta Beauty’s case, the brand generated $6 million in sales and more than 30 million try-ons in its first two weeks of using Snapchat Lenses.

​Beauty brands are leading the way for AR shopping on social media. Marketers can experiment with social AR tools to create their own filters, effects, lenses, or even 3D experiences on social media.

These virtual experiences are what will help beauty brands stand out from the competition in the future.

“The game won’t be the same when you simply ask your voice assistant to buy the best mascara on the market for you. Or if you are able to watch a makeup tutorial directly on your face with a virtual try-on,” said Lubomira Rochet, L’Oréal’s global chief digital officer in a Think with Google interview. “The brands that master these experiences will be the ones people choose.”

5. Brands to partner with authentic influencers

Influencers continue to have an impact in the beauty industry. But the nature of influencer marketing is shifting. Instead of partnering with the influencer with the largest follower count, brands are focusing on engagement rate instead.

For brands looking to partner with beauty influencers, audience size no longer stands as the only indication of success, according to Glossy’s Influencer Index.

In a survey of US adults, 61% said they were interested in brands providing authentic content. Thanks to sometimes overly polished and seemingly fake campaigns, people have become suspicious of influencer-led campaigns.

In fact, 42% of consumers say that user-generated content was most influential when making beauty, health, and wellness purchasing decisions––only 10% said influencers were the most influential.

This also ties in with beauty brands moving to be more inclusive and diverse in their campaigns. Instead of always picking Photoshopped celebrity-endorsed images, consumers want to see images of real people they can relate to.

Beauty brand Glossier is worth $1.8 billion, but before it became a household name the brand used influencer marketing and Instagram to build a loyal audience. Whether it’s working with Olivia Rodrigo or an individual beauty creator with several thousand followers, CEO Emily Weiss credits the “regular women who promote their brand so devoutly that make Glossier so special and successful.”

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As shown by Glossier, combining authentic influencer-led content with UGC can be an ultra-effective strategy for beauty brands.

6. Consumers to interact with brand communities

As beauty brands want to improve relationships with customers, many are turning to community building. Brand communities have been increasing in popularity in the past few years, and for good reason––communities strengthen customer retention and encourage interaction between customers and brands.

For example, Shopify merchant The Skin Nerd has built a dedicated community and evangelist following known as the “Nerd Network.” Many of its community members come to its sites to educate themselves, whether by watching video content or reading a blog post on skin care.

The paid community provides one-on-one consultations and acts as a one-stop shop to provide pro tips for all skin types.

Communities are also a great place for brands to collaborate with customers on product innovation.

For instance, Cocokind, a skin care brand stocked in Ulta, Target, and Whole Foods, has an Instagram community of 315,000 people. The beauty brand uses its Instagram Stories for product research. With #Cocokindlab, the company includes customers in the product development lifecycle, asking questions about pricing, packaging, colors, and ingredients.

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Including customers in product development helps them feel seen and will encourage them to be more invested in your brand.

7. Generation Z look to buy socially through TikTok

Close to half of all US social network users will make at least one purchase on social media this year. People are also spending increasing amounts through social commerce––the average social media buyer will spend around $500 on social commerce this year, which will jump to nearly $800 by 2024.

But it’s Generation Z, a digitally native group, that’s most likely to engage in social commerce than older generations. More than half of Gen Z adult social network users (ages 18 to 24) are regular social buyers, and nearly half of Gen Z teen social network users (ages 14 to 17) are.

When asked which products they are most likely to buy due to social media, Gen Z said beauty/skin care products, which were only second to clothing.

TikTok will have 90.6 million monthly users in 2022, surpassing Snapchat and Pinterest, but significantly behind Instagram and Facebook.

US retail social commerce sales will increase 63.3% between 2022 and 2024, to $86.7 billion.

It’s TikTok, the relatively new kid on the block, that’s becoming a hub for beauty content.

#Beauty currently has 107.8 billion views and counting, and is one of the biggest product categories on TikTok, partly because of how the platform brings fun and education to the content.

And, TikTokers are 1.6 times more likely to turn to the platform for fashion and beauty inspiration.

Premium hair care brand Olaplex is one business that has tapped into TikTok’s base of beauty fans. The #olaplex tag currently has 1.1 billion views on the platform. As for Instagram, the brand has 2.3 million followers and 13.9 million #olaplex posts.

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As a result of its social presence, the US brand reported 54% growth in product sales in this year’s second quarter.

8. Shoppers want the best of physical and online shopping

Twenty-two percent of US consumers prefer to purchase makeup cosmetics and fragrances online, while 34% prefer a combination approach, purchasing both digitally and offline. Brands that can embrace this omnichannel approach can hope to capture and retain more customers in the future.

So how can beauty brands best combine online and in-store shopping experiences in 2023?

In an interview, Karla Davis, Ulta Beauty’s VP of marketing, explained that omnichannel shopping needs to properly connect all channels together.

“Omni really speaks to the integration of all the channels and not just having all the channels for channels’ sake, but really making sure that there’s a seamless experience across all of them in a way that really kind of works behind the scenes to give the guests what they need when they need it, and where they need it,” she says.

Glossier is one brand that managed to bring its online shopping experience alive in seasonal pop-ups in cities like London and Los Angeles. In fact, its pop-up shops were so successful, it opened several global permanent store locations.

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Image source: Vogue

But it’s far from being a typical pop-up shop. The direct-to-consumer cosmetics brand creates different themes in each space with experiential activities. It successfully builds excitement and drives brand followers keen to test out the products in real life.

By interacting with consumers in the real world, Glossier builds stronger connections with customers beyond digital encounters.

9. Beauty subscription boxes remain popular

Beauty subscription boxes remain a great way for the cosmetics industry to retain loyal customers over the long term. US subscription ecommerce sales are forecast to grow by 15% year over year in 2022, totaling $33.48 billion.

Plus, more than a quarter (27.6%) of worldwide subscriptions come from beauty and personal care.

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Nearly a third of Americans signed up for a retail subscription box as of last year—spending $57 a month on average.

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Shopify clean beauty subscription brand Beauty Heroes sends members a monthly discovery delivery of one clean beauty product, always valued at more than $120. In-store, subscribers receive 15% off products every day.

10. Shoppers expect beauty products to be produced and shipped sustainably

Consumers are increasingly demanding that brands uphold sustainable values that match theirs. Conscientious shoppers are choosing brands based on their environmental impact.

When surveyed about the importance of select sustainability attributes when choosing a retailer, 24% of respondents said they considered products free of harmful or synthetic materials “extremely important.” Eighteen percent of people also cited products with sustainable packaging as important.

In the UK, 29% of adults are making an effort to limit their use of single-use plastics when buying beauty and personal care products. Plus, 46% of customers are more likely to purchase a product online if they’re able to recycle the product packaging. This is part of the reason why 40% of brands are highlighting more sustainable packaging as an area of investment.

To match this demand, brands like Uni are shifting away from non-sustainable products and packaging, encouraging customers to refill and reuse their dispensers instead of throwing out single-use packaging.

For instance, Uni offers a reusable dispenser made from aluminum and recyclable bio-resin (plastic made from biological sources instead of petroleum). A 100%-recycled aluminum refillable bottle twists into the dispenser to allow people to pump out the product.

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Shoppers can purchase a Uni starter kit or subscribe to monthly refills so they can send back empty dispensers in the box to be refilled.

Shopify merchant personal care retailer Boie is another brand with a clear pledge to the environment. Each year, toothbrushes, loofahs, and other plastic personal care items contribute to more than 50 million pounds of annual landfill waste.

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Through Boie’s recycling program it receives used personal care items like toothbrushes. Using these items, as well as scraps from other products, the brand created new products like bathroom hooks. Since it doesn’t need to put extra material back into the manufacturing process, it’s become a scrap-free operation.

Forty-two percent of consumers we surveyed said that “knowing a brand is actively working on reducing their carbon footprint” is important when deciding whether to purchase a product online. One way to address your carbon footprint is through offsetting. Currently, only 23% of brands are offsetting emissions, but this is predicted to grow significantly in the years ahead.

For instance, Love Beauty and Planet made a $100,000 grant pledge to help reduce carbon emissions.

In an interview with eMarketer, Sonika Malhotra, co-founder and global brand director of Love Beauty and Planet, explained how as well as offsetting emissions the brand is taking steps to help environmental programs.

“We’ve always taxed ourselves for the carbon we generate as part of our production and distribution,” she said. “So, we started an initiative called The Love Beauty and Planet Project, which gives grants to individuals and small entities that are making a difference to the planet, be it through clean energy programs, recycling, or anything that takes care of carbon emissions.”

“We’re also partnering with the NAACP Environmental and Climate Justice Program to make sure we prioritize communities of color and other minority groups that take a bigger hit when it comes to environmental issues.”

Now is the time for your beauty brand to examine how it can manufacture, package, and ship its product lines more sustainably. Then, make your pledge to the environment clear on your website so customers can relate to and understand your values.

Where is beauty ecommerce heading in 2023?

Growth signals are strong for online beauty brands in 2023. Online sales are up and consumers are increasingly confident in using digital channels to purchase cosmetic products. Tech innovation, social shopping, and sustainable initiatives are all fuelling development in the industry.

Before you tap into these trends, first clearly define your brand values and identify your audience’s unique preferences. Then test out a couple of these ecommerce marketing strategies to see what your customers prefer.

This originally appeared on Shopify Plus and is made available here to cast a wider net of discovery.

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