Business of Fashion — BY RACHEL STRUGATZ, SEPTEMBER 13, 2019
Many of the largest cosmetics brands are seeing US sales drop as new rivals enter the market even as consumers spend less on makeup.
NEW YORK, United States — Beauty brands are good at generating hype. Nars just celebrated its 25th anniversary with a splashy release of 75 new lipsticks; Anastasia Beverly Hills’ new 50-shade foundation launch was unavoidable on social media and Urban Decay’s highly anticipated Game of Thrones collection sold out of its first run in hours.
But the beauty industry has a dirty little secret: all of these brands are struggling. According to NPD, the L’Oréal owned Urban Decay’s sales dropped by 19 percent in the first half of 2019 compared with a year earlier. Anastasia’s sales decreased by 24 percent and Nars’ saw a seven percent dip. In fact, 18 of the 20 largest prestige makeup brands in the US saw sales fall in the first six months of 2019. Overall sales for the sector fell four percent.
The decline is hitting both stodgy department store brands and newer labels that point to millions of devoted social media followers and support from mega-influencers. Stila was down 27 percent; Hourglass was down 15 percent; CoverFX was down 31 percent; Lorac was down 48 percent; Tarte was down 11 percent; It Cosmetics was down 12 percent and Laura Mercier was down by four percent. The only two brands in the top 20 to skirt the cosmetics slump were Benefit Cosmetics and Charlotte Tilbury.
Beauty brands and retailers are struggling to adjust to the new reality. L’Oréal Chief Executive Jean-Paul Agon said in July the US makeup market contributed to the conglomerate’s disappointing second-quarter sales. Ulta Beauty’s stock plunged by 30 percent last month after the company warned its sales growth would slow after five years of rapid expansion. LVMH does not release sales for Sephora, but Chief Financial Officer Jean-Jacques Guiony in July flagged a “difficult environment” for makeup in the US.
In a conference call with analysts last month, Ulta Chief Executive Mary Dillon blamed brands’ focus on “newness and innovation” rather than training customers to adopt “new rituals” that drive repeat sales. Examples from the last decade include contouring and brow styling, which turned brands like Anastasia Beverly Hills into big sellers.
“Big macro trends like time, pressure and stress are impacting the way people are willing to spend time in a category we once thought everyone used to immerse themselves in. It’s becoming more rote…” Liebmann said.
Makeup may also be falling victim to broader changes in consumers’ shopping habits. People with jam-packed schedules have less time to browse makeup aisles, said Wendy Liebmann, chief executive of WSL Retail Strategy. A recent survey by the consulting firm found 26 percent of women spend less time shopping for beauty products than they used to, compared to 18 percent who are spending more time.
“Big macro trends like time, pressure and stress are impacting the way people are willing to spend time in a category we once thought everyone used to immerse themselves in. It’s becoming more rote,” Liebmann said, pointing out that Millennials in particular, and mostly those with families, are spending less time shopping for cosmetics than the total population.
Plus, many women are wearing less makeup, even as influencers tout ever-more elaborate looks on Instagram and YouTube.
“The full coverage and the crazy eye look — that’s all over social media,” said Sarah Jindal, a senior global beauty analyst at Mintel. “But day-to-day, walking down the street, how many people do you see that actually look like that, that are wearing that full face of makeup, full-coverage foundation and lashes? Nobody. Nobody is actually doing that in real life.”
Instead, consumers are spending more on skincare, she said. Many women are gravitating toward lighter textures, swapping out their foundation for tinted moisturisers, and heading to the dermatologist or spa for lasers or peels.
And when consumers do want makeup, they can increasingly find what they need at lower price points. Ingredients and technologies initially developed by high-end brands are now seen in products found at the local drugstore or supermarket. There’s often little difference between items costing $5 or $50, and a growing number of shoppers are aware of that fact, Jindal said.
“Stuff starts at the top and it eventually makes its way down,” she said. “Maybelline’s killing it with their eyebrow products. [Consumers are saying,] ‘I don’t need Anastasia [Beverly Hills] necessarily, I can go to the drugstore and buy it.’”
Prestige brands can’t count on Instagram to drive sales, either. Many used influencer campaigns and advertising to amass millions of followers, who would then run out to Sephora or Ulta to buy the newest products. But it’s become harder to stand out now that nearly all major brands have huge followings, said David Silverman, senior director, corporates at Fitch Ratings.
“One could argue that the first-mover advantage led to its own tutorial on how second and third movers could copy the process,” Silverman said.
The founder of one prestige makeup brand who declined to be named, said there are simply too many brands competing for the same customers. The “hundreds” of new entrants that have emerged in the past several years — many of these influencer and celebrity lines — are generating customer fatigue. Consumers are growing more sceptical of influencers, and celebrities can no longer count on fans for unwavering support of their products. Jaclyn Hill’s anticipated lipstick launch was met with negative feedback from followers who received damaged product. The onslaught of vocal, unhappy customers eventually lead the influencer to post a makeup-free, 14-minute long YouTube explanation, followed by a six-week hiatus from vlogging. This week, online viewers expressed concern when Millie Bobbie Brown wore perfectly intact eye makeup throughout a tutorial that was supposed to show her nighttime skincare routine.
“Everybody started paying attention to makeup … Every consumer started buying more [and] you start buying and having so much makeup that you have supply for a lifetime,” the founder said. “The big brands realised they pay so much money to these influencers and at lunch they’ll promote us and at dinner, they’ll promote Marc Jacobs Beauty.”