In 2018, the US was considered one of the most prominent regions for beauty and personal care industry in the world with a market contribution of more than 16%.

In addition, within the cosmetics, the color cosmetics market segment is expected to become popular and will earn a revenue of nearly $15 billion by 2022, at a CAGR of more than 4% in 2018-2022 period

• Definition / Scope
• Market Overview
• Market Risks
• Top Market Opportunities
• Market Trends
• Industry Challenges
• Technology Trends
• Regulatory Trends
• Other Key Market Trends
• Market Size and Forecast
• Market Outlook
• Technology Roadmap
• Distribution Chain Analysis
• Competitive Landscape
• Competitive Factors
• Key Market Players
• Strategic Conclusion
• References

Definition / Scope

The cosmetics or beauty products industry is the only industry in the world, that is secure to the ups and downs in the market. The overall sales of the industry only slows down during a global/regional crisis and moreover, the major reason behind the sales in the industry to maintain a stable volume is because of the growing demand by both genders across the world.

Aside from these products, there are ancillary industries for cosmetics supportive products like make up brushes, beauty blenders, etc. The most popular trend in makeup today is the “blending of multiple benefits” under one beautifying product. The result of this trend, originating in South Korea, is the BB (followed by CC, DD and EE) creams.

Cosmetics can be subdivided by the areas of application. The major categories of Cosmetics:

Natural Cosmetics segment consists of beauty products for the all parts such as face, eyes and nails made completely or partially natural ingredients which includes low or minimal amounts of synthetic chemicals. It exclusively represents makeup made of natural ingredients which doesn’t include cleansing and care and professional products or services.

Face – This segment covers decorative cosmetics that primarily serve as makeup/beauty products for the face such as: foundation makeup, concealers, face powders, BB and CC creams etc. In addition, facial cleansing products, natural cosmetics and professional products and services are excluded from the category.

The Cosmetics market segment Lips contains decorative cosmetics that serve as makeup/beauty products for the lips including lipsticks, lip liner or lip gloss. Excluded are care products such as lip balms & butter which is found in skincare segment.

Eyes market segment covers beauty products for that are for enhancing the beauty of eyes including mascara, eyeliner, eye shadow and makeup for eyebrows. Excluded are care products such as eye cream, natural cosmetics or professional products and services.

The Cosmetics market segment Nails covers beauty products for the nails including polishes and top coats. Excluded are care products or services and natural cosmetics for nails.

Market Overview

The entire North American region accounts for 24% of the global cosmetics market, second only to Asia Pacific. In 2018, the US was considered one of the most prominent regions for beauty and personal care industry in the world with a market contribution of more than 16%.

In addition, within the cosmetics, the color cosmetics market segment is expected to become popular and will earn a revenue of nearly $15 billion by 2022, at a CAGR of more than 4% in 2018-2022 period.

In 2018,the facial cosmetic sales generated approximately $2.1 billion of sales in 2018 in the US.

Besides,eye makeup products such as mascara and eye liner are among the cosmetic products with the highest number of transactions per capita.

As of 2019 and beyond, premium beauty is set to drive the global growth in the cosmetics, in coming years and US is likely to remain as the largest beauty market in the world.The US cosmetics market has evidently shifted to premium products where consumers are looking for higher quality products at a variety of price points.

A number of cosmetics manufacturers/sellers are looking to capitalized on the trend by focusing on customer attitudes and making changes in the premium and mass markets.

In the US, in recent years, consumers have been spending higher levels of disposable income on cosmetics than they ever had before. Although, global financial crisis put a damper on the market for some years, where the mass-market products and DIY(Do-It-Yourselves) at home products popular. Lately, the makeup/cosmetics market has been bolstered by number of new brands popping up in the market everyday.

The present era for the American cosmetics industry is heading to thrive as more number of cosmetics brands are evolving in the landscape to meet the unique needs of the multicultural consumers of the country.

Since the early 20th century, the production of cosmetics has been controlled by a 8 major multi-national corporations and rest of the companies fall under their portfolio. The global cosmetics industry is broken down into six main categories; skin care being the largest one out of them all, accounting for 36.1% of the global market in 2016. 

However, lately multiple cosmetics brands in the US are catering more organic/natural cosmetics considering to the growing awareness of the health consequences of synthetic chemicals used in makeup products.

Market Risks

The cosmetics chemicals causing health side-effects has been identified by a number of recent studies. In the US, many companies have damaged the industry’s reputation and one of the infamous example is WEN hair-care products.

The company’s hair care line was endorsed by however, by 2016 more than 21,000 complaints had been made against the company close to 1400 with adverse event reports such as that of itchy scalps, rashes and suffering from hair loss, hair breakage and balding.

The FDA is still investigating but has no authority to recall the product unless the manufacturer voluntarily agrees to do so. In addition, Between 2014-2016, the FDA received, on average, 396 cosmetic-related complaints per year, but there were big increases in 2015 and 2016, mostly due to WEN which was responsible for the majority of complaints.

According to a research by UC Berkeley, in the US, an average teenage girl uses 14 personal-care products a day. In addition, the research documented changes in teens’ urine test after ceasing to use their personal care products. After three days, urine tests showed significant decreases in several artificial chemicals, including parabens.

Top Market Opportunities

The present day revolution has been defined by many next-generation technologies aiming to integrate both digital and physical spheres. The way consumers shop for products has radically changed and particularly, cosmetics have experienced a huge transformation. Keeping these factors into consideration, some of the opportunities available in the industry for the firms are as follows:

Rising demand: The 90% of the earnings in the luxury beauty products in the US is accounted by makeup category. In the US, cosmetics are, in fact, a product used on a daily basis, with 2 in 5 women aged between 18 to 64 have been identified of putting on five or more makeup products everyday according to the estimates.

Online Channel: The online channel is taking over. 45% of the consumers in US buy cosmetics products online. Two of the top cosmetic retailers such as Ulta and Sephora are continuously leveraging digital channels, bridging the gap between physical and digital channels and increasing their sales. Thus, it is a very good opportunity for cosmetic brands to increase their sales by catering to the particular demographic through enhancing their online presence and marketing tactics.

User generated content: This influences the consumer behavior in the industry. It has emerged lately with other marketing opportunities such as celebrities and influencers in social media platforms who advocate cosmetic brands. A large number of people i.e. 66% make cosmetic purchases using YouTube, as it provides them with more information and enhances product visibility, allowing them to better see how products look when used.

Thus, cosmetic brands need to allow their consumers to have more informed decisions which allows them to make responsible purchases. Also digital platforms and user generated content builds trust upon brands as they are guided by genuine feedback which in turn increases loyalty.

Visual shopping: Visual content has gained more and more relevance in the cosmetic industry, always highly influenced by looks and design. These technologies range from tools to assist customers and educate them throughout their shopping journey to innovative gamified experiences that increase engagement.

As consumers today are increasingly attracted to virtual and digital experiences, cosmetics companies must leverage on building relationship with retailers that are more technology savvy and understand the needs of customers of today.

Technological blend: The combination of personalization and new technologies is what the companies are betting on at present. For instance, Covergirl (sister brand of Max Factor), decided to create their Custom Blend App that uses facial recognition and AI solutions to mix different shades of foundations to specifically match the customer’s skin tone.

Shiseido and L’Oréal came out with similar ideas. For example, the latter uses augmented reality in their app to let customers virtually try different makeup products. Thus, startup companies willing to thrive in the landscape must initially focus on digital experiences and retail game tech.

Market Trends

Natural beauty products: Despite of the slowdown of the entire industry revenues in the 2008-2009 recession, at present, the sales have regained value. But, the market is mostly driven by an increased preference of consumers for vegan, organic and natural beauty products to mitigate harmful effects of pollution, sun, dust, and harmful ingredients which are usually a part of cosmetic products.

In fact, as of 2018, the US represents the biggest market for organic personal care items, a preference that has manifested into demand for organic cosmetics products. An up and coming market in this region is that of ethnic cosmetic products matching skin tones of African and Asian and South Asian skin tones as America is the country of diversity which is further expected to drive growth of the industry sales.

High disposable income: This is one of the major a reason for a high penetration and prominent market share of luxury brands like Dior, Guerlain, Clarins, Clinique, Lancome, Kiehl’s, Estee Lauder, Shiseido, etc. in the US. In relation to total population figures, per person revenues of $51.76 were generated in 2019.

Previously, as distribution of these brands were carried out through mall outlets, however recently e-commerce has aided as an emerging competitor to direct sales for all mass and premium brands. The US customers are increasingly looking for value for money products which are natural and beneficial for the skin, provide benefits of high priced premium products, at a lower than premium cost.

Convenience: Fast and cheap delivery and ease of access to brands seen as luxury have become increasingly important aspect to the cosmetics industry. Exclusivity is giving way to convenience; 81% of beauty shoppers use digital prior to or during their shopping journey, with the majority citing “ease” as the key driver.

In beauty, convenience embraces aspects like easy to navigate stores and intuitive website layout, ease of trialling the product and getting the right advice or recommendation quickly, allowing simplified decision making in same channel. Thus, the increasing number of brands presence in online sphere has also led to rising interest among consumers and boost in online sales of products.

The market shift to make up Make up has become the fastest growing beauty category since 2012, leaving even the skincare category behind. One of the major driver is the importance of digital image and community sharing among consumers regarding the cosmetic products.

As makeup is most importantly about colour: its growth has been driven not only by smartphone technologies that allow colours to be virtually tested and shared, but also by difficult to predict sub-category and trend booms including brows, contouring, and cushion foundations.

Thus, brands that are able to embrace the needs across sub-categories and originate ideas to better cater customers have demonstrated highest growth. The next wave of growth may well be seen in the ‘hybrids’ category that integrates skincare and make up products to deliver outlook of makeup but the long-term pharmaceutical benefits of skincare.

Sustainability Pressures: The increasing focus on environmental sustainability from number of brands and customers has led to need for resource efficiency and encouraged the cosmetics manufacturers to look more closely at addressing the environmental and social impact.

As a result a number of cosmetics brands not only consider this as a part of their CSR but has also become their strategy to thrive in the industry in near future. As of recently, the requirements has also shifted to green formulations and more eco-friendly packages.

At the same time, many beauty companies are leading the field in monitoring their water, energy and resource use, as well as considering their operational efficiency.

In cosmetics, encouragement of environmentally-responsibility has been largely reported and also need to phase out some ingredients used in the products. Lately, the spotlight has been on microbeads, with many countries and companies banning their use in cosmetics and personal care products.

Because microbeads take a long time to degrade and are predominately washed down the drain, they end up in rivers, lakes and oceans and cause serious harm to marine life.US has initiated microbead ban, the ban is also guaranteed to accelerate the search for ‘natural’ alternatives.

Similarly, greenwashing accusations have been made to many industries, including the cosmetics sector. It refers to the practice of making an unproven or misleading claim about the environmental benefits of a product. The trends towards ‘natural’ and ‘safe’ ingredients have resulted in an organic beauty boom.

They have also resulted in a steady rise in reports of firms engaging in greenwashing. For instance, products touted as natural can contain up to 30% of synthetic ingredients. Thus, companies that are utilizing marketing messages to mislead customers to regard their product as environmentally friendly may be led to litigation with the rise of regulation in the industry.

Industry Challenges

Sales trend towards natural category: In the US, the sales of traditional retail outlets and sales of cosmetics as a whole actually declined just shy of 1% in 2018. Similarly, the sales of natural/organic products or those claiming to be natural have declined 1.2% on the year, underperforming the category as a whole.

The trend shows the shift in consumer’s expectations from the products they buy. The brands simply cannot cite that they are natural, they need to genuinely prove it through evidence. With the increasing number of research studies that are proving the use of artificial chemicals can cause various health related risks and by citing their names, consumers are becoming more informative.

For instance, in 2018 the products that have chemicals such as parabens were less preferred by consumers and their sales were identified to fall.

Thus, the absence of harmful ingredients such as parabens is one proven way for brands to achieve higher sales. However for that to happen they need to search for an alternative ingredient which could be difficult to acquire and could be expensive too.

As with many other sectors across FMCG, natural beauty is increasingly about what’s not in the product. In fact, 53% consumers in the US cite the absence of undesirable ingredients as more important to the inclusion of beneficial ones.

The consumer trend to turn towards natural ingredients has put pressure upon large cosmetics companies to include more edible ingredients across all categories not just face.

The consumers have become more conscious and informed about artificial makeup and harmful ingredients. For many consumers, synthetic compounds like propylparaben and butylparaben are hard to pronounce and hard to view as a safe ingredient. Many categories still derive a significant share of sales from products with parabens and likely many other undesirable ingredients.

However, a number of companies are shifting to paraben-free. Until 2018, facial cosmetics have gone from just 43% paraben-free to 54% which is good for the industry and the consumers but for the companies that are still using harmful ingredients in their product are likely to soon face serious repercussions from the new regulations and also reduced demand from consumers.

Technology Trends

31% of the consumers in the cosmetics industry in the US are influenced by how digitally advanced or smart the products sold in the industry are. The rate is also highest among the CPG industries.

Rise of social media channels: 58% of the US consumers spend time sharing posts and images on internet with their friends. As a result one makeup brand called Fenty Beauty is leveraging on to the trend of high social media penetration and in all ways attracting its consumers through various platforms.

The brand uses iridescent color schemes, inspired by social media’s “unicorn” and “mermaid” themes. In addition, it encourages sharing image of the product online. The brand has 1.3 million posts on Instagram and also has high quality packaging that appeals people.

Some of the social media platforms such as Instagram and pintrest allow brands to tag their own posts, tagging up to five products per image. When clicked, tags display the price of the item and take the user to the checkout on the brand’s site.

Voice Recognition and AR- Some of the top players in this space are Google Home hub, Amazon Echo and Loreal. The Loreal’s Beauty Gifter AI and YouCam augmented reality app are letting users try on makeup virtually, book makeover services through AI enabled messenger.

Also, google home hub lets user interact with the device to display makeup tutorial videos on youtube and search the product they are looking for at the ease of voice instruction. Google home-hub is also displayed in Speciality retail stores such as Sephora that allows visitors to try on makeup with the help of voice recognition.

In addition companies such as LMVH has come up with multiple applications such as Pocket contouring, Color IQ dedicated at matching foundation and countering makeup guide through augmented reality of virtually trying on makeup before making purchases.

Some of the recent digital innovation launches/initiatives in the US cosmetics industry include:

• The Neutrogena Skin360 app and SkinScanner smartphone tool: It provides “next-gen” skincare through its magnification tool that magnifies skin up to 30 times to assess size and depth of fine lines and pores, while a sensor measures moisture levels. The app scores pores, lines, and wrinkles, and gives an overall Skin360.
• L’Oréal’s UV Sense is the first battery-free wearable electronic UV sensor that measures individual sun exposure, storing up to three months of data, it uses near-field communication (NFC) to translate and transmit data to a mobile app that details UV exposure
• 2016’s HiMirror was the world’s first “smart mirror,” able to diagnose skin conditions, and is followed by HiMirror Mini, new in 2018, claimed to be the world’s smartest vanity mirror
• L’Oréal’s purchase of Modiface in March 2018 signals a bright future for digital beauty
• SkinGenie launched in January 2018, leveraging DNA and artificial intelligence is the ultimate future of cosmetics industry. The app analyzes DNA and lifestyle with AI to “recommend the best products” . It uses an exclusive algorithm to explore predispositions to more than 30 skin traits identified from over 6,500 genetic variations.

Regulatory Trends

The largest cosmetics companies that operate around the world, produce millions of products and earn humongous revenues every year. But little to none of those products, that go from manufacturing facilities directly onto store shelves and ultimately to the customers, receive a strict government review.

However, lately, lawmakers are seeking to tighten the regulatory framework for the billion dollar cosmetics industry after rising concern over a range of negative feedbacks on products, along with the possibility that some of the chemical contents within their products could lead to life-threatening risks.

As a result, for the first time, as of 2018, FDA has announced plans to launch a survey of safety practices and manufacturing standards targeting about 900 cosmetics companies in the industry and taking a more detailed approach at the sector. The scrutiny of the sector in the country was long overdue which is finally being regulated.

The only government oversight of cosmetics companies comes under the Federal Food, Drug and Cosmetic Act, passed in 1938. The act is concentrated mainly on regulating adulterated or misbranded products, or products that are falsely packaged.

However, more recently, the concerns are over labeling products as natural or organic does not qualify as misbranding. The act also doesn’t require FDA to recall potentially dangerous items or monitor the ingredients used in products.

Another regulating body is the Personal Care Products Council (PCPC), a cosmetic industry advocacy group that represents 600 companies engaged in the manufacture, distribution and supply of cosmetics products. It has been present for more than 100 years and funds its own self-regulatory body. The organization is self-policing which cannot be accounted entirely for keeping cosmetics safe.

The initiatives are being taken on regional levels too. For instance, Hawaii recently passed legislation that banned companies from selling cosmetics products on the island that included oxybenzone and octinoxate, however, health concerns were not the reason: the state was concerned about harmful effect on its marine environment and coral reefs to which the chemical has been associated.

Congress has also been taking a look at new regulation of the cosmetics industry, though competing proposals have been floated which are follows:

In May 2017, California Democratic Sen. Dianne Feinstein and Maine Republican Sen. Susan Collins introduced the bipartisan Personal Care Products Safety Act.

In October, Utah Republican Sen. Orrin Hatch introduced the competing FDA Cosmetic Safety and Modernization Act. 

Both bills include mandatory reporting, registration of cosmetic facilities and ingredient review from the FDA. It also allows FDA to order mandatory recalls and conduct further investigations on cosmetic products having five contaminants: methylene glycol (a form of formaldehyde and a recognized carcinogen), propylparaben, lead acetate, diazolidinyl urea and quaternium-15.

The first bill i.e. Feinstein-Collins also proposes to the largest cosmetics manufacturers that they collectively provide a fund of $20 million to FDA so that it can collect resources to keep consumers safe.

In addition, the legislation has been endorsed not only by the Environmental Watch Group and the American Cancer Society but a number of large cosmetic and consumer products brands, including L’Oréal, Johnson & Johnson, Procter and Gamble and Unilever. 

Other Key Market Trends

Beauty à la carte: Recenlty, a new trend has evolved in the cosmetics market also known as single-ingredient concept trend. This provides opportunity for consumers to customize their beauty routines by layering or mixing multiple products.

The staple ingredients include: retinol, vitamin C, or hyaluronic acid, which are known to yield results. Thus, these products are relatively cheaper to their counterparts as they have less ingredients in them which reduces the producing costs.

Brands providing these customized products are Skin Inc, Curology, and Kiehl’s Apothecary Preparations, while some new entrants include Y’OUR, established in early 2018 among others.

Beauty embraces cannabis: Hemp has recently entered the cosmetics arena in the US, but is increasingly attracting consumers interest because of its anti-oxidant properties. For instance, one of the mainstream retailer of US, Sephora has already added brands like High Beauty to its offerings, while established players like Origins, Herbivore, Lord Jones, and Milk Makeup have all recently introduced products that feature cannabis. 2019 is expected to bring in more cannabis based product launches.

Beauty goes greener: The emphasis on the natural ingredients to be used in the products is on continuous rise. A number of brands are becoming aware and responsible which is leading to this wellness trend. Also, millennials add in the credit as they are constantly informed about products than their older generations and also require products that differentiate rather than greenwash.

The e-commerce channel also remains crucial for clean beauty products; however, specialty retailers such as Sephora and the Detox Market find success by establishing standards for clean and natural skin care, making the process easier for consumers. The year 2019 will see a rise in small beauty retailers carrying indie brands.

Beauty emphasizes diversity:It is a defining force in the cosmetics industry and has become more embraced by brands and retailers. Barneys just added an inclusive skin care line, Epara Skincare,that is going to be debuted in the US in 2019 after its success in 2018.

As the intense political climate in the US is driving more equality and representation from different communities in the market, more gender-neutral and color-neutral brands are likely to be accessible to consumers in coming years.

Market Size and Forecast

Revenue in the Cosmetics segment amounts to US$17.03 billion in 2018. The market is expected to grow at a CAGR of 3.5% in (2019-2023) period. In addition, in global comparison, most revenue is generated in US. In relation to total population figures, per person revenues of $51.76 were generated in 2019.

• First, the Skincare category within the cosmetics accounted $5.6 billion of total sales in 2018, and natural brands was the top contributor to growth. Natural skincare accounted for $1.6 billion or more than 23% since 2017. The fastest-growing segments within facial skincare were lip treatments, toners/clarifiers, and all other face (which includes products like facial sprays and alphabet creams, among others). 
• Secondly, makeup sales reached $8.1 billion in 2018, and although it experienced slight growth, the potential to grow in following years seems enormous as the number of consumers using makeup in the US reached 67% in 2018 – an increase of 6% since 2016. Among the fastest growing areas were: makeup setting spray/powder and false eyelashes. ‘Small’ aspect remains a big opportunity in makeup, with travel size products growing faster than all others, up 29% since 2017.
• Next, fragrance sales totaled $4.3 billion, driven by juices, which grew by 8%. Artisanal fragrance was the fastest growing aspect of the market. In addition, diffusers are also growing faster than home scents.

Market Outlook

The state of cosmetics industry in US is characterized by disruption. Prestige beauty sales boomed even as the industry went under rapid change. New retail concepts and technologies are changing the way beauty products are created, marketed, purchased and used. 

Market size of categories:

• The revenue in the Natural Cosmetics segment amounted to US$1.31 billion in 2018. The market is expected to grow at a CAGR of 7.1% in (2019-2023) period. In relation to total population figures, per person revenues of $3.99 are generated in the US, in 2018.
• Revenue in the Face segment amounts to was recorded at approximately $5.9 billion in 2018. The market is expected to grow at a CAGR of 4.6% during (2019-2023) period. In global comparison, most revenue is generated in US. In relation to total population figures, per person revenues of US$18.18 are generated in 2018.
• Revenue in the Lips segment amounts to was recorded at $3.3 billion in 2018. The market is expected to grow annually by 4% in (2019-2023) period. In global comparison, most revenue is generated in US. In relation to total population figures, per person revenues of US$10.28 are generated in 2018.
• Revenue in the Eyes segment amounts to $4.7 billion in 2018. The market is expected to grow at CAGR of 1.2% in (2019-2023) period. In global comparison, most revenue is generated in US followed by, in relation to total population figures, per person revenues of US$14.57 are generated in 2018.
• Revenue in the Nails segment amounts to $1.5 billion in 2018. The market is expected to grow annually by CAGE of 1.8% in (2019-2023) period. In relation to total population figures, per person revenues of US$4.74 are generated in 2018.
• Looking forward, as the market landscape of the US cosmetics industry has become crowded, the brands and retailers in the industry must not only be aware about the scenario but also identify untouched space and tap on to the opportunity to capture more customers and make their offerings differentiated.
• Finally, due to the high adaptability of the industry, the growth is expected to continue through 2019, however, some economic uncertainties could definitely slowdown the pace. Some of the trends that are likely to evolve are brand transparency, companies focused on creating more sustainable products, as well as the evolution of experiential retail backed by digital transformation and pop-up concepts stores concept.

Technology Roadmap

One trend that is rising even in the cosmetic industry is-‘personalization’. Some cosmetics selling companies are going through major digital transformation to cater more personalized and seamless experiences to their customers.

There are countless factors that determine how cosmetics look on consumers, given everyone’s different face shape, skin tone, and complexion. Thus, personalization has become very important factor of the companies involved in the industry

To solve that problem of identifying the best product choice, cosmetics brands are investing in technology to help facilitate personalization. 

• More and more of them have Virtual assistants or chatbots that give advice and augmented reality enabled fitting rooms. The pioneer of digital transformation in Cosmetics is Sephora followed by L’Oreal that acquired ModiFace in March 2019, and it has been been involved in incorporating AR into several beauty brands’ apps, including Sephora.
• In addition, departmental stores are also enabling more personalized experiences for cosmetics customers, as well. For instance, Target’s new Beauty Studio incorporates AR fitting room that operates inside physical store, as well as on its website and mobile app. Saks Fifth Avenue is also expanding its beauty department to include in-store spa services and concierges who can guide customers through the potentially overwhelming department, which sells 122 different cosmetic brands.
• In North America, a number of cosmetics companies/retailers cited marketing technology as most difficult followed by digital marketing as the most convenient and effective tool to better market the products. Moreover lately, many companies are increasing sales of their products/services through omnichannel. For instance, Sephora has also broken down its silos by combining its digital and in-store teams in 2018 fall. That makes it easier to access customer profiles and their transactions both online/offline giving an opportunity to create meaningful experiences across all channels.

Distribution Chain Analysis

Despite a relatively low share of all cosmetics sales, online is the only sales channel that is growing fast in the industry. Online sales are being boosted by the rise of ‘social commerce’, trends such as influencer and celebrity marketing, AI messenger chatbots, voice recognition among others.

The industry is watching closely the performance of Amazon’s partnerships with both local and multinational brands through its Beauty Channel with its promise of super-fast delivery.

In the US, within the bricks and mortar distribution segment there has also been a shift away from the traditional department store channel to faster growing multi specialty retailers. As department stores have been characterized by stagnant growth and low penetration of digitally-led customer engagement at stores, their sales have continued to decline.

As a result a number of store closure is one trend that is evident in the US. However, specialty retailers the most likely drivers of high street retail growth – the sales of LVMH’s Sephora have more than doubled since 2006, while sales at Ulta have quadrupled.

Competitive Landscape

In the US, the brand landscape online is entirely different from that in the physical stores. The business models by which the companies are operating range from direct-to-consumer pure-play brands and subscription (many of which are increasingly investing in their own store brand-like offerings), which do not exist offline.

Also, the balance of power between large beauty brands and smaller ones looks completely different online than they do in a brick-and-mortar environment. For instance, in the US, while the top 20 cosmetics brands capture 90% of the dollars going to brick-and-mortar retailers, those same companies capture just 14% share online.

One of the major activity in online cosmetics landscape is facilitating new product and brand discovery, which is mostly done by brands through social networks. For instance, one trend on rise is term called influencer marketing where the companies garner more influence on the path-to-purchase through influential individuals or celebrities.

The next battleground for many mobile and social platforms is also harnessing the data that tells them what their audiences might be interested in and connecting that with the ability to buy right on the platform.

Some of the cosmetics companies are also conjoining the point of sale and point of discovery which leads to a short path to purchase.

Competitive Factors

In the US, digital channels such as mobile, website, social media platforms have lowered the barriers to entry into the prestige beauty market, with the inevitable result that new brand challengers have proliferated. The foundational replacement of pure brand power with online influencer power has encouraged more brand switching.

The industry landscape has evolved due to the rise of subscription box and growth of specialty retailers. Over the past few years, niche and ‘indie’ brands such as NYX, Charlotte Tilbury or Glossier have been the most important drivers of prestige beauty growth in the country, encouraging more M&A from global beauty brand companies.

These giant companies look to acquire entry level successful players to expand into new line of product and provide a diversified products to customers.

This is the age of beauty ‘retailtainment’ – customers now expect peer tutorials, gamification through in store digital technology and connecting channels to serve customers better. For example, LVMH’s Sephora with its ‘Color IQ’ system, and own brand retailers such as KIKO Milano), make over mobile apps (such as the L’Oreal Makeup Genius allowing users to apply ‘looks’ virtually and using machine learning technology to improve product recommendations over time.

The concept of customization is also demonstrating a strong come back: although customized skincare and make up is not new with Estée Lauder’s Prescriptives, with the emergence of applications for routine personalization such as the L’Oreal sun exposure monitor patch and the Kerastase smart hairbrush, as well as tech enabled skin analysis products.

Significantly Estée Lauder has rebooted the Prescriptives brand as a premium online service; at a lower price point brands like MatchCo and Melange are offering on demand customization.

Key Market Players

The 10 best makeup brands in the world are likely to maintain their leadership in the global cosmetic market and generate higher revenues. However, from the targeted regions like the US with many driving factors such as: constant innovations, growing number of mergers and acquisitions among others:

• Coty

Coty is known as one of the best brands in color cosmetics, fragrances, and professional hair care and styling. With the merger of P&G beauty line, Coty has been able to strengthen its portfolio of much-recognized cosmetic brands making it one of the best makeup brands in the US.

Coty is now arranged by division: Coty Professional Beauty, Coty Luxury, and Coty Consumer Beauty. Within each of these divisions, the firm is focusing on a mix of categories, brands, and channels.

• Estee Lauder

Since being founded in 1946, Estee Lauder has risen to immense prominence in the global beauty market, most importantly in the US market. In 2016, Estee Lauder was one of the largest beauty manufacturers with more than $11.4 billion dollars in revenue.

Although the makeup market is highly competitive with new brands entering the space every few months, it is a sign of Estee Lauder’s power that they still hold the major share of the US makeup products market, making it one of the best makeup brands in the US.

• L’Oréal

L’Oréal is one among the 8 giant companies that hold power in the beauty industry. The Paris-based conglomerate responds to the diverse needs of customers around the world and has developed some of the best makeup products. Some of its notable brands include, skin-care, and makeup brands, like Kérastase, Lancôme, and La Roche-Posay. Further, L’Oréal’s big-ticket acquisitions like NYX Cosmetics is has led to its growth in US market

• LVMH

LVMH (Louis Vuitton Moët Hennessy) is one of the world’s largest luxury goods company, with brands that are epitomes for the good life and everything attractive. LVMH makes cosmetics (Nude, Fresh, and Benefit), perfumes (Guerlain, Christian Dior, and Givenchy) and also sells bags and watches. LVMH’s retail division Sephora cosmetics stores are very popular in the US.

• New Avon

Avon is one of the oldest cosmetic brands in the US which manufactures and sells a wide range of products and cosmetics under brand names such as Avon True Color, Skin So Soft, ANEW, and Espira. This social selling beauty company utilizes direct selling, with sales representatives across Canada, the United States, and Puerto Rico. New Avon is a separate brand from Avon Products, Inc., which operates in the rest of the world.

• Ulta Beauty

Ulta Beauty, a salon chain and specialty beauty retailer carrying over 500 brands surpassed its competitors in the past two years to become one of the nation’s largest cosmetic retailer. The chain has consistently achieved strong sales growth, opening more than 200 new stores, even when other retailers are closing doors amid the significant rise of online shopping. Ulta’s engaging in-store experience is the major contributor to the company’s revenue boost in the past few years.

• Revlon

Revlon is one of the leaders in the US mass-market cosmetics business. Aside from its beauty tools and makeup brands, like Almay, the company manufactures and sells Mitchum antiperspirants and deodorants, Revlon ColorSilk hair color, Ultima II and Gatineau skincare products, and Charlie and Jean Naté fragrances. Revlon launched a new prestige cosmetic brand this year – Flesh, which features over 40 shades of foundation, in stick packaging.

• Glossier

Glossier is one of the best makeup brands in the USA which went against the proverbial grain of the cosmetic business. The company has been clear in its approach to snub beauty industry’s fictitious glamour story and marketing a sense of sincerity and belonging. The company spawned in 2014 through the exceptional popularity of Weiss’s beauty blog ‘Into the Gloss’ and since then, it has been a millennial-favorite brand across the US.

• Shiseido

Shiseido is one of the very few Japanese non-technology brands that has achieved a top position in the global beauty, cosmetic and fashion landscape. Shiseido utilized acquisitions as a primary medium to gain a foothold in the growing cosmetics markets of the US and Europe. Another reason for Shiseido’s success has been its ability to span markets from the value segments to the premium segment by creating distinct brand identities for its product lines.

• Chanel

Chanel, a cosmetic and perfume company which began several years ago with a little fragrance called No5 has grown into one of the world leading and high-end makeup brands. Chanel has a wide range of makeup products with seasonal launches and exclusive collections that come thick and fast.The skin care treatment and color cosmetics line of Chanel includes over 400 products today.

Strategic Conclusion

To win in the future, brands will need to throw out their old playbooks. Consumers are as focused on the transparency of the company and their practices as they are on what goes into the products they make.

The beauty brands—really all brands—that will be successful, will be authentic and true, flexible enough to be relevant to a wider array of consumers, and harness the digital tools and platforms to achieve this at scale.

References

1. https://www.mordorintelligence.com/industry-reports/united-states-cosmetics-products-market-industry
2. https://www.statista.com/outlook/70010500/109/natural-cosmetics/united-states
3. https://www.statista.com/outlook/70010100/109/face/united-states
4. https://www.statista.com/outlook/70010200/109/lips/united-states
5. https://www.statista.com/outlook/70010300/109/eyes/united-states
6. https://blog.technavio.com/blog/best-makeup-brands-in-the-usa
7. https://www.statista.com/outlook/70010000/109/cosmetics/united-states
8. https://www.cnbc.com/2018/08/01/fda-begins-first-inquiry-of-lightly-regulated-cosmetics-industry.html
9. https://catchoom.com/blog/the-cosmetic-industry-bets-on-retail-tech/?cn-reloaded=1
10. https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/international-business-support/deloitte-cn-ibs-france-beauty-market-en-2017.pdf
11. https://www.hps-pigging.com/sustainability-challenges-facing-the-cosmetics-and-personal-care-industry/
12. https://www.nielsen.com/content/dam/nielsenglobal/de/images/WP-CH/Nielsen_2018_the-future-of-beauty-report.pdf
13. https://www.aaaa.org/wp-content/uploads/2018/10/GlobalData-Digital-innovation-in-cosmetics-Future-of-beauty-2018-10.pdf
14. https://klinegroup.com/megatrends-predicted-to-rule-the-beauty-industry-in-2019/
15. https://www.statista.com/outlook/70010000/109/cosmetics/united-states
16. https://www.chainstoreage.com/finance-0/beauty-industry-in-a-state-of-disruption/
17. https://www.clickz.com/beauty-retailers-digital-transformation/215549/