Fashion & Fashion: Beauty
I 2022,The beauty market—defined as skin care, fragrance, cosmetics, and hair care—generates an estimated $430 billion in revenue. Beauty is on the rise in all categories these days. It has proven its resilience amid the global economic crisis and volatile macroeconomic environment. Beauty is now an industry that many, from high-profile financiers to A-list celebrities, want to be a part of — and rightfully so. After a steady recovery since the peak of the COVID-19 pandemic, the beauty market is expected to reach approximately $580 billion by 2027, growing 6% annually (Figure 1). This is in line with or slightly higher than other consumer segments such as apparel, footwear, eyewear, pet care, and food and beverage.
done by the author
This post is a collaboration between Imran Amed, representing the Business of Fashion andAchimberg,Sarah Hudson,Christy Creech Weaverand Megan Lesko Pacchia, representing McKinsey's Consumer Packaged Goods and Retail practice.
The beauty industry is a dynamic segment ripe for disruption, reinventing itself around a growing number of products, channels and markets before the end of the century. Consumers, especially younger generations, will drive this shift as their own definitions of beauty change as they become more aware of everything from the importance of sustainability and the role of influencers and key opinion leaders to the importance of self-care Perceptions are evolving on all fronts. Overall, beauty is expected to be characterized by "premiumization," with levels of premium beauty expected to grow by 8% per annum between 2022 and 2027 (versus mass growth rate of 5%), especially perfumes and cosmetics.
At the same time, we expect competition to intensify as many independent brands that have successfully entered the market over the past decade seek to scale up and new challengers emerge. Increased competition will also force established brands and retailers to make changes. In keeping with market trend-driven dynamics, McKinsey’s 2023 survey of consumers in China, France, Germany, Italy, the UK and the US revealed that 42% of respondents said they enjoyed trying new brands. At the same time, consumers are increasingly choosing between different price categories and say both online and offline stores influence their shopping behaviour. Their preference for omnichannel shopping is expected to continue to drive the shift to online and the shift of independent brands to brick-and-mortar stores.
Beauty e-commerce nearly quadrupled between 2015 and 2022, and now has a share of over 20% and is well ahead. By comparison: the share of e-commerce in 2022 will be about 30% in apparel and footwear, and about 65% in toys and games.
A number of factors have contributed to the growth of beauty e-commerce: the expansion of beauty products from online giants such as Amazon in the US and Tmall in China; increased digital sophistication from player direct to consumer; the steady growth in importance of online for omnichannel retailers; and a surge in social selling, including live-streaming, in Asia. E-commerce is expected to remain the fastest-growing sales channel between 2022 and 2027, with an annual growth rate of 12%, but growth in traditional channels (including specialty stores, grocery stores, and pharmacies) is expected to accelerate after the pandemic, with some The reason is consumers' preference for omnichannel and their constant desire to find and try products in stores (Appendix 2). Department stores are expected to continue to lose market share globally.
Structural and competitive dynamics are changing
Given the changing winds of potential growth, where to play becomes as important as how to win. The changing dynamics will make the largely homogeneous global strategies of recent decades less effective and will require brands to reassess their global strategies and introduce more nuance and customization.
Geographic diversity is more important than ever. For example, until recently brands were able to concentrate their footprints on the industry's two top countries: China and the US. Both countries will continue to be powerful forces in the industry, with China's beauty market expected to reach $96 billion and North America's $114 billion by 2027 (Figure 3).
But in both markets, growth of individual brands will be more difficult, not least because of intense local and foreign competition. Meanwhile, other countries and regions, including the Middle East and India, are also about to step into the spotlight, with clear potential in specific categories and price ranges. The likely outcome is that many brands will adapt their geographic strategies to this new world order, which will require a variety of local strategies.
Across all regions, products and services at the top of the price pyramid will be another growth opportunity: the market for true luxury and ultra-luxury beauty has the potential to double from about $20 billion today to about $40 billion in 2027.
five disturbing themes
The next few years will be a dynamic period for the beauty industry, full of opportunities and new challenges. High profitability with EBITDA margins of up to 30% will continue to attract new founders and investors into the space. With limited space in beauty palettes, successful brands will adapt to the changing rules of the game and offer a uniquely differentiated value proposition in a saturated market and an increasingly sophisticated consumer. The main dynamics include the following:
- Redraw the growth graph.Slow growth in China, combined with increased local competition, means that China will no longer be the industry's general growth engine. Therefore, with strong growth, the US market will become more important, especially in the coming years. This market will become a competitive battleground for established brands and a potential greenfield for new entrants. The Middle East is expected to provide a boost to growth over the same period, while India is expected to be a new hotspot in the longer term.
- An increase in well-being.Combined opportunity value for global brands, retailers and investors Nearly $2 trillion. Health-inspired products such as skincare and cosmetics with probiotic and Ayurvedic ingredients, edible supplements and beauty products such as LED face masks have captured the attention of consumers as they navigate their post-pandemic routines Increased focus on self-care and focus. The convergence of health and beauty will only become more pronounced in the coming years, in line with the wellness industry's projected CAGR of 10% through 2027. For many, this trend will represent an untapped opportunity, with a first-mover advantage for high-performing players.
- The impact of Generation Z.Gen Z researches brands as part of their quest for value. Nearly half of Gen Z respondents in our survey reported doing extensive research on product ingredients and their benefits before purchasing, similar to Millennials (compared to only three percent of Gen X and Baby Boomers). one-third). In addition to product effectiveness and transparency, Gen Zers demand credibility from brands. In addition to their focus on sustainability, diversity and inclusion, Gen Zers value brands with authentic and accessible images and stories that go beyond the product and welcome consumers into the wider community. By using beauty products and services to feel good and express their authentic selves, rather than conforming to specific cultural ideals, this group challenges not only norms around what defines physical beauty, but also around gender and product categories.
- There is a need to scale up.While many new and independent brands have benefited from lowering barriers to entry over the past decade, growth after first successfully achieving meaningful scale remains out of reach for many. Of the 46 brands launched in or after 2005 with global retail sales between $50 million and $200 million in 2017, only five will exceed $250 million in global retail sales five years later in 2022. Only two companies have global retail sales of more than $750 million. To scale successfully, brands must focus on omni-channel expansion and internationalization. Category expansion appears to be most effective when the brand has grown to a certain size and expansion strengthens and protects the brand's unique value proposition.
- The recalibration of mergers and acquisitions.With growing interest in the beauty industry from various players ranging from 'strategic' to private equity funds, M&A will continue to play a significant role in the industry. As we've seen in recent years, both conglomerates and financial investors will be looking to invest in deals for high-potential brands. But closing a deal will not be the same as when the cost of capital was lower. In the short term, large deals may be rare in response to market volatility. In addition, the criteria for M&A will shift from focusing on high-growth, independent “now brands” to brands with innovative product lines and a proven ability to deliver profitable, sustainable and long-term growth.
The next few years will provide all the right ingredients for continued growth in the beauty industry – from a flexible channel mix to consumers eager to discover new products. Beauty leaders and challengers will have ample opportunity to thrive as they develop and execute tailored strategies that reflect the changing world of beauty.
Download the full report on which this article is based, Fashion & Fashion: Beauty (PDF–10 MB).
Achimbergis a senior partner in McKinsey's Frankfurt office,Sarah Hudsonis a partner in the London office,Christy Creech Weaveris a senior partner in the Chicago office,Megan Lesco Pakiais a partner in the New Jersey office, andImran AhmedFounder, Editor-in-Chief and Managing Director of Business of Fashion and an alumnus of McKinsey's London office.
The authors would like to thank Anita Balchandani, Dimpy Jindal, Natalia Lepasch, Amaury Saint Olive, Alexis Wolfer, Alex Workman, and Andreas Zampouridis for their contributions to this article.
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According to the latest statistics, the global beauty industry market size is set to be worth $571.1 billion in 2023. This will mark an 8% increase year-over-year, the fastest annual growth rate in at least 13 years.What are the beauty trends in 2023? ›
In 2023, expect a shift towards bold shades,” says Tinu. “Rather than an all-over hue, I predict that brights will be used to outline and accent nails, taking a basic manicure to the next level, with sharp edges and negative space,” she says. "Shades to look out for will include blue, purple, yellow and orange."What is the new beauty technology in 2023? ›
At CES 2023, L'Oréal unveiled two new technology prototypes that expand access to beauty expression: HAPTA, a handheld, ultra-precise computerized makeup applicator designed to advance the beauty needs of people with limited hand and arm mobility; and L'Oréal Brow Magic, an at-home electronic eyebrow makeup applicator ...What is the trend in Gen Z skincare 2023? ›
“Beauty from within,” another trend to watch in 2023, encourages cosmetics and personal beauty care product consumers like Gen Z to increase their awareness of “how the skin microbiome and nutrition all can enhance the benefits of these topical applications, as internal health is reflected by our skin,” said Dr.What is the future of beauty industry? ›
The beauty industry has experienced pandemic-related changes in the past few years, but current market research projects that revenue in the beauty and personal care industry will top $101 billion by 2027. As the concept of beauty continues to evolve, the industry has been quick to react to the demands of consumers.Is the beauty market growing? ›
Report Overview. The global cosmetics market size was valued at USD 262.21 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 4.2% from 2023 to 2030.What is the most popular beauty treatment 2023? ›
- Buccal Fat Removal.
- Skin Cycling.
- Multi-Tasking Products.
- Three-Dimensional Filler.
- Quick Contouring.
- Combination Therapy Treatments.
- Holistic Approaches.
BLOOM - Spring/Summer 2023
Vivid tones of turquoise, purple, cerise, and peach complement gentle pastels.
About in-cosmetics Global 2023
in-cosmetics Global is the meeting place driving innovation and development through the entire cosmetics sector worldwide. The next edition of the multicity annual trade show is scheduled for 28th – 30th March 2023 in Fira Barcelona Grad Via.
Facial skin care (64%), hair care (58%) and makeup categories (54%) contained the most cited novel products tried for the first time in 2022, with fragrance (29%), body skin care (27%), nail care (24%), tools and devices (21%) following.
The most popular emerging beauty trend on TikTok in 2023 thus far is coquette beauty. This trend revolves around quintessential rosy cheeks, pink hues, red lips and doe eyes, finished off with a thick eyeliner that would rival the likes of Lana Del Rey.What does Gen Z want in skincare? ›
Gen Z wants a beauty industry that is more authentic, inclusive, personalized, purposeful, affordable and experiential, according to a Gen Z Planet report. A new report indicates that a dramatic shift in the beauty industry is being brought about by Generation Z.Which generation spends the most on skincare? ›
Gen Z is the generation that spends more money on skin care, often buying through online channels.What is missing in the beauty industry? ›
Chemical ridden products, vague ingredient labels, and hidden chemicals are three of the major problems with the beauty industry. All these problems stem from one major source: lack of regulation. Lack of regulation enables companies to put unsafe chemicals in products and vaguely label chemicals as “fragrances”.What is the new technology in the beauty industry? ›
Beauty brands are now leveraging the latest advancements in artificial intelligence and machine learning (AI/ML), augmented reality and virtual reality (AR/VR), data and analytics, cloud computing, and the internet of things (IoT). AI is incorporated in various aspects of the skincare industry.What is the current state of the beauty industry? ›
The beauty industry generates over $100 billion in revenue worldwide. The men's personal care market is projected to hit $276.9 billion by 2030. Skincare is projected to generate up to $177 billion by 2025. Beauty companies spent an estimated $7.7 billion on advertising in 2022.How big is the beauty market in 2023? ›
Revenue in the Beauty & Personal Care market amounts to US$571.10bn in 2023. The market is expected to grow annually by 3.80% (CAGR 2023-2027). The market's largest segment is the segment Personal Care with a market volume of US$253.30bn in 2023.Why is the beauty industry so successful? ›
The beauty industry is experiencing rapid growth, and the demand for beauty services and products is increasing. The industry has a broad audience and is a promising area for entrepreneurship. Women sacrifice a large amount of money for their beauty, and the beauty business has a good potential for making money.Why is beauty industry important? ›
Beauty is so much more than 'pretty nails'; the beauty industry helps clients with very real appearance medicine issues every day, and the continued closures are disrupting treatments that make significant improvements to their daily lives.What is fashion forecasting 2023? ›
So what can we expect in 2023? According to buyers, the fashion crowd will be split into two groups: those who embrace the sheer looks that swept the spring/summer 2023 runways, and those who take the understated route via maxi hemlines and sleek tailoring.
The top trends in luxury retail include the growth of e-commerce and digitalization, sustainability and ethical consumerism, experiential and personalized shopping, emphasis on luxury streetwear and collaborations, and the increasing importance of engaging with Generation Z and millennial consumers.What are the spa trends in 2023? ›
Amongst the key spa trends 2023 were sound baths, which utilises sound to activate the parasympathetic nervous system to reduce stress and anxiety (as defined by Stylist). These sessions often make use of Tibetan singing bowls, rain sticks, chimes, gongs and tuning forks to bath users in sound.Is skincare becoming more popular? ›
Skincare, as a market segment, is growing faster than any other part of the beauty industry. Sales of skincare products grew by 13% last year in the United States, while makeup grew by only 1% in the same period. Online beauty retailers grew 24% in that time, with skincare leading the way.What is the new color of 2023? ›
Viva Magenta is Pantone's 2023 Color of the Year, and you can see it in real life, from the Netherlands to Vietnam.What products will boom in 2023? ›
- Clothing. The clothing industry is a big business, valued at $12 billion USD. ...
- Skin care and beauty. ...
- Shoes. ...
- Cleaning products. ...
- Items for pets. ...
- Coffee products. ...
- Toys. ...
- Subscription orders.
In 2023, default rates in retail are expected to stay relatively low, according to Fitch Ratings, but it's likely to be another year where retail's strong get stronger and the weak suffer for it. Some sectors could be better off than others.What brands are coming to Sephora 2023? ›
Sephora on Tuesday announced the 2023 cohort of its Accelerate brand incubator program. The program focuses on startup founders of color. The company selected seven beauty brands: Moodeaux, Brown Girl Jane, Range Beauty, Glosshood, Seaspire Skincare, Oui the People and Of Other Worlds.What is the Korean makeup trend for 2023? ›
Following up on the popularity of the caramel lip from the previous year, caramel blush will be a major trend in Korean cosmetics in 2023. To add a natural sun-kissed glow to your appearance without going overboard, this nude tone is ideal. Achieve this effect with a matte bronze or light brown blush.What makeup company is going out of business? ›
This week, Revlon filed for bankruptcy protection, its financial statements awash in red ink. The makeup that shoppers now flock to buy looks different. In the past several years, lines from big names like Rihanna and Kylie Jenner have emerged and reached fans directly.What are the top 5 beauty cosmetics? ›
- The Body Shop.
- Estée Lauder.
- Yves Rocher.
- Fenty Beauty.
Skincare, haircare, make-up, perfumes, toiletries and deodorants, and oral cosmetics are the main product categories of the cosmetics market. Skincare was the leading category in 2022, accounting for about 41 percent of the global market.Is TikTok coming back in 2023? ›
Here's a quick summary of the latest updates so far (as of April 20, 2023): TikTok's status is still up in the air. Public opinion remains split when it comes to a potential ban. Many politicians are divided on the issue of introducing new privacy laws.Will TikTok be around in 2023? ›
TikTok, the wildly popular social media platform, has kicked off 2023 with a stack of exciting news that is sure to delight its millions of users around the world.Is TikTok safe 2023? ›
In terms of privacy and security, it is not different from other social media like Facebook or Instagram. Since TikTok Security measures are quite comprehensive, using the app is secure for your device, and even payment methods are primarily protected.What attracts Gen Z to brands? ›
- Promote user-generated content.
- Partner with influencers.
- Take a stance on social issues.
- Show authenticity and integrity.
- Use short and snappy video content.
- Add up-and-coming platforms to your strategy.
- Leverage the power of email marketing.
- Build a community around your brand.
According to Euromonitor's Voice of the Consumer: Beauty Survey, fielded June-July 2022, Gen Z respondents overindex other cohorts when perceiving beauty as inner confidence (46%), being comfortable in their own skin (45%) and embracing yourself (37%).Why are Gen Z obsessed with aesthetic? ›
Hickly: Gen Z is obsessed with aesthetic culture because we are a generation that struggles a lot with identity and belonging to certain “aesthetics” gives a sense of belonging.What generation buys the most luxury? ›
Younger generations (Y, Z, and Alpha) will become the biggest luxury buyers by far, representing 80 percent of global purchases by 2030. Bain estimates that the market for personal luxury goods surged 22 percent in 2022 to roughly $381 billion.What age is the target market for skincare? ›
As an example, in the United States, the top three markets for natural skin care sales growth are young professionals, new mothers, and women 65+…and each of THOSE areas is just the tip of the target market iceberg.What's the most popular generation? ›
Millennials were the largest generation group in the U.S. in 2022, with an estimated population of 72.24 million. Born between 1981 and 1996, Millennials recently surpassed Baby Boomers as the biggest group, and they will continue to be a major part of the population for many years.
The revenue of the U.S. cosmetic industry is estimated to amount to about 49 billion U.S. dollars in 2022.How much is the beauty industry worth? ›
The beauty industry generates over $100 billion in revenue worldwide. The men's personal care market is projected to hit $276.9 billion by 2030.How much is the beauty care industry worth? ›
Beauty & Personal Care - United States
The market's largest segment is the segment Personal Care with a market volume of US$42.18bn in 2023.
The market for beauty tech- driven purchases in the United States is estimated to have generated a revenue of approximately 1.35 billion U.S. dollars in 2021.Which beauty brand has highest net worth? ›
Rihanna's Fenty Beauty takes the top spot as the current wealthiest celebrity beauty brand, followed by Priyanka Chopra's hair care brand. Priyanka Chopra had launched her hair care brand last year.What is the largest beauty company in the world? ›
L'Oréal is the no. 1 beauty company in the cosmetics industry, with its annual beauty product sales of over USD 29.4 billion. The company sells products in all cosmetic categories, including makeup, skincare, haircare, sun care, fragrances, and hygiene products.How large is the US beauty industry? ›
The market size, measured by revenue, of the Cosmetic & Beauty Products Manufacturing industry was $49.7bn in 2022. What was the growth rate of the Cosmetic & Beauty Products Manufacturing industry in the US in 2022?Who is the target market for the beauty industry? ›
In terms of age, the beauty industry targets a wide range of age groups. The younger generation, especially millennials and Gen Z, have been particularly influential in driving trends and shaping the industry.What industry is beauty care? ›
The cosmetic industry describes the industry that manufactures and distributes cosmetic products. These include colour cosmetics, like foundation and mascara, skincare such as moisturisers and cleansers, haircare such as shampoos, conditioners and hair colours, and toiletries such as bubble bath and soap.How big is the clean beauty market? ›
The global clean beauty market was valued at US$7.22 billion in 2022. The market value is expected to reach US$14.36 billion by 2028.
On average, Americans spend between $244 and $313 on cosmetics every month.Who runs the beauty industry? ›
These seven megacompanies — Estée Lauder Companies, L'Oréal, Unilever, Procter & Gamble, Shiseido, Johnson & Johnson, and Coty — employ thousands of people around the world and make billions of dollars in revenue every year. They also control advertising and the way we all think about beauty.