Millennials, Hispanics and Online Sales Are Fueling Growth in $25 Billion Dollar Cosmetics and Skincare Market, TABS Analytics Annual Study Finds

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Walmart reasserts its presence in Beauty; YouTube, Beauty Blogs, Facebook and Instagram are top influencers

Higher Brand Awareness is Helping Mass Market

“Millennial and Hispanic women are the clear drivers in the beauty market and account for almost 60 percent of all sales,” said Dr. Kurt Jetta, CEO and founder of TABS Analytics.

Millennial and Hispanic women are the heaviest buyers of cosmetics and skincare products in this $25 billion dollar market, TABS Analytics reported today in its Third Annual Beauty Study. Millennial women (ages 18-34) accounted for about 33 percent of the user base for cosmetics and skincare and almost 50 percent of heavy buyers of both categories (defined by the number product types of each category purchased). Over the last three years, there has been a sharp rise in the amount of cosmetics purchased by Hispanic women and they now account for 15 percent of all category buyers, 24 percent of all heavy buyers of cosmetics, and 20 percent of heavy skincare buyers. The skew in purchasing toward high income purchasers continued, but the study showed a dip in purchasing after $99,000 per year in earnings.

“Millennial and Hispanic women are the clear drivers in the beauty market and account for almost 60 percent of all sales,” said Dr. Kurt Jetta, CEO and founder of TABS Analytics. “The beauty and consumer packaged goods industries need to take note of these buyers, including the changes in the brands they are buying and how they are being influenced.”

TABS Analytics’ Third Annual Beauty Study was developed to determine what types of beauty products consumers are buying, where those products are purchased, and what social media channels are influencing beauty consumers. One thousand geographically and demographically dispersed female consumers between the ages of 18 and 75 were surveyed for this study in October 2016. The study analyzed the importance of the various shopping channels, including department stores, specialty cosmetic and beauty stores, drug stores and grocery stores. The study also compares Internet and in-home purchases with those of traditional mass-market retailers.

Here are some key findings from the study:

  •     YouTube, beauty bloggers, Facebook, and Instagram are top influencers for heavy beauty buyers. The TABS study found that social media was important to 52 percent of heavy buyers of cosmetics in making purchase decisions. This represented a 22 percent jump from 2015 and an 11 percent increase annually over the past 3 years. YouTube drove much of this growth and was the most popular social media popular channel with 35 percent of heavy buyers reporting it was an influential channel for them.

Beauty blogs held steady as being important to 29 percent of all heavy buyers. Facebook tied with Instagram in having the second biggest increase in influence among all buyers, and jumped from 17 percent in 2015 to 25 percent in 2016 among heavy buyers. Instagram increased in importance with heavy buyers from 19 percent in 2015 to 22 percent in 2016. One third of consumers also reported that online reviews influence their choices.

  •     Winners in 2016 tended to be in mass market, with Walmart reasserting its market leading position in Beauty sales. Walmart led all retailers across channels with 17 percent of all sector purchases. Walmart’s results demonstrate that it can be a strong force in cosmetics sales, especially after bringing in mass niche brands to its assortment mix during 2016. Dollar store growth was driven by the channel’s strength in the multi-cultural niche. The big non-mass market winner was the specialty beauty chain Sephora, which increased growth compared to last year primarily because of the increase in the number of stores, both with stand-alone stores and with Sephora within J.C. Penney format stores.
  •     Target, CVS, Macy’s and Nordstrom slip. Although Target finished second in the mass market channel behind Walmart with 9 percent of all purchases, it declined from 10 percent in 2015. Department stores’ share of purchases slid compared to 2015. Both Macy’s and Nordstrom’s cosmetics shares of purchases were down. This decline reported in the survey is consistent with soft sales reported by these specific retailers in their report filings.
  •     Online sales bounced back. Online sales reversed their decline from last year and now represent 9 percent of all beauty transactions, and over 10 percent of dollar sales, amounting to approximately $2.5 billion annually. Amazon dominates sales in the channel, outselling cosmetics websites by more than a 2-to-1 ratio.
  •     Almost fifty percent of retail dollars are in the non-mass market channels, but share is down slightly from 2015. The 2016 decline in share of purchases reported by the TABS study is primarily because of the growth of the mass market channel, driven by Walmart. Specialty beauty stores are responsible for 16 percent of all purchases. Surprisingly, Ulta was flat in 2016 with a 5.5 percent share of purchases after seeing strong growth in 2015. Last year’s 2015 TABS Analytics Study was an early predictor of Ulta quarterly reports showing very strong growth in same store sales.
  •     Newer brands are gaining in awareness and picking up growth. Although the top brands including Cover Girl, Maybelline, L’Oréal, Revlon, Neutrogena and Clinique maintained their predominance in key awareness, penetration and favorability metrics, a number of newer niche brands are breaking through in consumer popularity. NYX, e.l.f., Milani, Jordana, Black Radiance, Urban Decay and Boots all had double digit growth in awareness compared to last year.
  •     Category dynamics for skincare are very similar to cosmetics. However, skincare tends to skew more towards mass market compared to cosmetics, with a larger number of mass market brands showing high awareness. Otherwise, the demographic, attitudinal and behavioral characteristics for skincare are consistent with cosmetics.
  •     Offering good deals is the top factor in driving consumer outlet preference. Over 50 percent of consumers surveyed consistently state that promotional incentives and deals are important to them and that they like to shop at stores with “good deals.”
  •     The beauty advisor model is becoming obsolete. In-store beauty advisors are not a driver of preference. The TABS Survey shows that only 15 percent of consumers rated beauty advisors as important in the 2016 survey, down 5 percentage points from 20 percent in 2015.

“The beauty category has maintained healthy growth in 2016, but that growth decelerated somewhat from our last study,” commented Dr. Jetta. “If these studies tell us anything, it is that there is still an insatiable demand for these younger users to directly engage with the products in terms of active research and trial of new products as well as new brands. Unlike most categories where we tend to see a shakeout of smaller brands, the pie of brands seems to be getting much bigger in beauty.”

About TABS Analytics
Operating since 1998, TABS Analytics, formerly TABS Group, based in Shelton, Conn., is a technology-enabled analytics firm. Its mission is to simplify and improve the way analytics are conducted in the consumer products industry. TABS offers cloud-based software analytics and applications solutions, including TABS Insight® and TABS Total Insights™, for CPG manufacturers that integrate, harmonize, and analyze sales and marketing data. Additional services include TABS CatMan Advantage™, an outsourced category management solution, TABS WorldView™, a global business intelligence tool, and TABS Promo Insight™, a cloud-based software and consulting service that helps companies measure, plan and optimize trade spending. For more information please call 203-446-8837, email robertbaldwin (at) tabsanalytics (dot) com or visit http://www.tabsanalytics.com

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