14 Trends Changing

The Face Of The Beauty

Industry In 2021 2021
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Table of Contents

Product Development 6

• Personalization gets more sophisticated

• Big beauty incubates its own disruptors,

ramps up acquisitions

• Inclusive beauty becomes table stakes —

and new niches create huge opportunities

• Beauty goes global … and local

Manufacturing & Distribution 28

• Synthetic beauty gains traction, riding

sustainability and supply chain tailwinds

• New sustainable packaging prototypes and

business models take off

• ‘Waterless’ beauty as the next big eco trend

Pricing 38

• Beauty brands focus on value and varied pricing

Marketing & Merchandising 42

• Beauty further integrates with the

wellness economy

• Big tech capitalizes on beauty

• Virtual try-on enables product discovery

and engagement

• Ingredient transparency trumps clean beauty

Customer Experience 60

• Unbundling the salon and spa continues

• New approaches to omnichannel for beauty take hold

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2020 was a redefining year for
beauty tech. As consumer values
and expectations shifted, big beauty
corporates and startups alike have been
forced to adapt. From “waterless” beauty
products to virtual try-on, here are the
trends and tech that will continue to
transform the sector in 2021 and beyond.

2020 was a redefining year for every industry — including beauty.

Beauty sales declined as much as 30% in the first half of the

year, according to McKinsey. Even major brands took a hit: Coty
(owner of CoverGirl and Rimmel) saw its share price drop 52% at
the end of March, while Ulta Beauty’s stock saw a 29% decline —
though both have since bounced back as the US beauty market is
expected to recover and reach pre-pandemic levels in 2021.

Covid-19 caused interest in categories like makeup — which was

already falling — to further wane as consumers had fewer social
engagements. Certain areas within beauty, such as skincare, became
an area of focus instead as people looked for ways to de-stress.

More than a year later, Covid-19 continues to shape the space, but
brands are now better equipped to deal with the seismic shift in
consumer values and expectations.

From virtual try-on features to AI-enabled skincare analysis

to “waterless” beauty products, the pandemic has accelerated
once fringe technologies. And with a further emphasis on health
and wellness, beauty brands have had to evolve from a one-
dimensional category to something more holistic and inclusive.

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Along these lines, sustainability and a focus on environmental
impact has taken on urgency at major beauty players looking to
appeal to an increasingly eco-conscious population: Some, like
L’Oréal and Estée Lauder, have announced goals to reach carbon
neutrality, while others have begun innovating in more specific
areas, like reusable packaging and refillable business models.
Synthetic beauty ingredients are also getting attention.

In 2021, the beauty industry is taking with it many learnings and

permanent shifts from the past year. And while some trends will
fizzle out, others will only expand their reach. In this report, we look
at the latest innovations across every part of the beauty space, and
highlight the top industry trends to watch in 2021 and beyond.

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Product Development

PERSONALIZATION GETS MORE SOPHISTICATED

While product personalization isn’t a new trend, beauty brands are

continuing to adopt new tech and refine their methods to create
more customized formulations for consumers — from tailor-made
lip color to individualized hair treatment.

A Forrester study found that 77% of consumers have chosen,

recommended, or paid more for a brand that provides a
personalized service or experience, while Accenture found that
75% of consumers are more likely to make a purchase when
recommendations are personalized to them, propelling the push
for brands to personalize and differentiate offerings.

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Many are addressing personalization with a variety of different
technologies and approaches, such as:

• Quizzes, which address customer-specific preferences

and customize products according to the results. Quizzes
are pervasive in the burgeoning direct-to-consumer (D2C)
personalized haircare market, which has seen companies
emerge across geographies like the US (Function of Beauty),
India (Bare Anatomy), Japan (Medulla), and more.

• Custom printing, in which companies formulate products

specifically for each user. MAC Shanghai custom 3D
prints eyeshadow palettes for customers, for example,
while Shespoke has developed software that allows it to
manufacture custom-mixed lipsticks at scale.

• At-home devices, which can measure user conditions, like

the emergence of dark spots or surrounding environmental
concerns, on a daily basis. L’Oréal’s Perso device accounts for
this data to dispense custom-formulated makeup every day.

• DNA testing kits, which allow companies to provide product

recommendations or create custom products based on users’
genes. Allél, for example, analyzes users’ genes through a
DNA test to provide targeted skincare products.

Source: Shespoke

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AI also presents a big opportunity for brands looking to further
personalize processes, especially in areas like skincare analysis.

Skincare brand Proven, for example, says it feeds consumer data into
its AI platform — which contains information on more than 100,000
products, 8M+ testimonials, 4,000+ scientific publications, etc. — to
provide the most effective ingredients for users. Atolla also uses AI
capabilities to customize facial serums for consumers by using data
collected through quizzes and tests (measuring oil, moisture, and pH
levels) that are then processed by the company’s algorithm.

Beyond quizzes, corporates have kept up by expanding to in-

home devices that can gather more granular, specific user data to
measure skin condition or deliver products more precisely.

Last year, L’Oréal launched Perso, its AI-powered device to

formulate and dispense personalized skincare, lipstick, and
foundation. The Perso app crunches data on a user’s skin
condition via an uploaded selfie, environmental conditions via
location data, and user-inputted skincare concerns to dispense
custom formulas through the device.

Source: L’Oréal

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L’Oréal-owned ModiFace also allows customers to try on makeup
virtually. The ModiFace app uses AI to scrape and analyze images
and descriptions of products from brands and social media posts to
produce a more realistic augmented reality (AR) projection on users.

Meanwhile, Johnson & Johnson has developed a host of

personalized skincare systems, ranging from skin-scanning
devices such as the Neutrogena Skin360 to 3D-printed face masks
through its Neutrogena MaskiD technology.

Genomics is also playing a bigger role in personalizing beauty

recommendations.

Companies like OmeCare’s OmeSkin, Allél, Skinshift, and others

are offering beauty-focused DNA testing kits, which can curate
product recommendations or branded, personalized products
based on users’ genomic skin traits.

Beauty brands have long pursued personalization, but have

experienced plenty of starts and stops between lack of
technological advancements, poor data collection processes,
and nascent business models, among other factors.

“There is still no [cosmetics] company that has been able to

integrate personalization into their business models,” Shiseido
president Masahiko Uotani said in an interview with the Nikkei
Asian Review.

The promise of personalization is appealing to customers looking

to avoid decision fatigue, but the granular information collected
by many brands may raise some concern — many privacy policies
of these upstart consumer beauty brands allow them to sell such
information to other companies at will.

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But the benefits of personalization, including serving those missed
in mass-market product offerings, will push brands to strike
a balance between preserving privacy and innovating for new
revenue streams. Look for brands to continue to develop hyper-
personalized offerings in order to differentiate themselves from
competitors and cater to consumers more effectively.

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BIG BEAUTY INCUBATES ITS OWN DISRUPTORS, RAMPS
UP ACQUISITIONS

The beauty industry has been awash with incubators in recent

years.

Often, it can be cheaper to incubate or accelerate new companies

(that could serve as potential partners or acquisitions down the
line) instead of developing in-house brands. Furthermore, indie
brands often succeed in the areas beauty corporates don’t, namely
niche categories, targeted distribution, and social media prowess.

After seeing the success of independent players — such as

vertically integrated incubator Seed Beauty, which is behind
ColourPop, Kylie Cosmetics, and more — big beauty corporates
have followed suit with their own incubators and accelerators, with
examples including:

• Sephora Accelerate has been investing in and supporting

female founders since 2016, growing brands like organic
beauty line LXMI and premium essential oils brand Vitruvi.

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 • Beauty conglomerate L’Oréal (which set up the first beauty
startup accelerator in Africa in 2018) offers a variety of
internal initiatives to support its commitment to new brands
and technologies, such as the Open Innovation Program, the
Women in Digital program, its Technology Incubator, and the
launch of corporate venture capital fund L’Oréal BOLD.

• Target also has its own accelerator program, Target Takeoff,

to mentor emerging beauty brands. Among its alumni are
gender-neutral makeup line Fluide and Mented Cosmetics,
which makes makeup for people of color.

L’Oréal’s Seed Phytonutrients and Unilever’s Skinsei are just a few

examples of internally incubated brands.

Following 2020’s spotlight on racial justice and equity, a

newfound focus on funding diverse brands has emerged as well.
In June 2020, Glossier committed $500K in grants to 16 Black-
owned beauty businesses, while L’Oréal recently partnered with
the NAACP to grant 30 $10K grants to Black-owned beauty
businesses. Sephora Accelerate’s 2021 cohort will also only
include founders of color.

Source: Glossier

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Beyond incubators and accelerators, big beauty has been busy
with a slew of acquisitions over the past year to expand customer
acquisition channels, such as influencer marketing or better
e-commerce infrastructure, and double down on burgeoning
trends like natural beauty, including:

• L’Oréal acquired natural skincare brand Thayers in June 2020.

• Inter Parfums’ subsidiary bought a 25% stake in France-based

fragrance company Origines Parfums.

• Henkel acquired a majority stake in Invincible Brands, which

owns D2C beauty brands like HelloBody, Banana Beauty, and
Mermaid+Me.

• Following its $600M purchase of a 51% stake in Kylie Cosmetics

in 2019, Coty snapped up a 20% stake in Kim Kardashian’s
beauty business, KKW Beauty, for $200M last June.

• In February 2021, Estée Lauder upped its stake in Deciem and

plans to acquire the rest of the company within 3 years.

New opportunities are also opening up for beauty brands looking

to exit.

Beauty-focused SPACs have emerged of late, including Powered

Brands, which is looking to acquire between $800M to $1.5B of
assets to compete with legacy beauty brands, and Waldencast
Acquisition Corp., which is expected to ink deals in the $1.5B to
$3B range.

It’s never been faster to launch or grow a new brand with the
proliferation of beauty incubators and growth of e-commerce and
D2C channels. “Big companies like Estée Lauder, L’Oréal, and P&G
are really an amalgamation of lots of brands, and when they roll up
all those brands, they hit a revenue number. That revenue number
and that earnings number defines how well they do is and who
in the market buys that stock,” Luxury Brand Partners CEO Tevya
Finger told Glossy.

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Currently, beauty juggernauts are looking to indie brands to
experiment in newer markets and nascent trends. In-house
incubators offer a way for conglomerates to build relationships or
even gain equity stakes in these companies — paving the way for
future acquisitions as it becomes clear which early-stage brands
will mature and which will fizzle out.

(Clients can read more about independent and corporate-owned

beauty accelerators and incubators here.)

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INCLUSIVE BEAUTY BECOMES TABLE STAKES — AND NEW
NICHES CREATE HUGE OPPORTUNITIES

Since Fenty Beauty’s launch in 2017, “inclusive beauty” has

become an industry buzzword, encompassing new demographic
markets that are becoming increasingly important for the beauty
industry to target.

For example, major retailers like Sephora, Macy’s, and Bluemercury

have committed to the 15 Percent Pledge — a promise to commit
15% of shelf space to Black-owned businesses. Ulta Beauty also
pledged to double the number of Black-owned brands carried by
the retailer by the end of 2021, committing more than $25M to the
push for greater diversity.

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Source: Sephora

As the trend continues to gain traction, understanding the

difference between “niche” and “underserved” audiences remains
crucial, as there exist many demographics with untapped potential.

Below we outline a few of these markets, which are becoming

integral to defining the future of inclusive beauty — and that should
remain a high priority for brands looking to capitalize.

Male personal care & beauty routines

Male grooming has expanded beyond face washes, moisturizers,

and basic hygiene products to include eye creams, face masks,
sunscreen, makeup, and more over the past few decades. Many of
today’s brands, such as Stryx, Shakeup Cosmetics, and War Paint,
are employing D2C distribution and refreshed packaging to attract
a new generation of male consumers.

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Since Unilever’s $1B acquisition of Dollar Shave Club in 2016, M&A
of men’s personal care brands has spiked, with deals including:

• In late 2018, P&G bought Walker & Company Brands, the

parent company of beauty and grooming brands focused on
people of color.

• In September 2019, SC Johnson purchased men’s skincare

brand Oars + Alps for a reported $20M.

• Edgewell announced plans to buy men’s grooming brand

Cremo for $235M in August 2020.

• It was reported in October 2020 that men’s personal care

company Manscaped was exploring a sale that could value
the company at as much as $700M.

Source: Shakeup Cosmetics

D2C brands targeting men’s personal care like Bevel, Lumin,

Huron, Scotch Porter, Stryx, Hawthorne, and more have all reported
growth in 2020, according to WWD. In January 2021, Hims & Hers
— which launched as a holistic male wellness brand through its
suite of haircare, skincare, and supplement products but has since
expanded to women’s wellness — went public in a $1.6B SPAC deal.

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In Asia, men’s skincare and makeup has been a burgeoning trend
for years now, with the US catching up only fairly recently, which
some attribute to “quarantine boldness.”

South Korea has been a trendsetter in this category, with men

in South Korea accounting for a fifth of global spend on men’s
skincare in 2018 — a trend often attributed to the rise in popularity
of K-pop idols.

Furthermore, China represents one of the fastest-growing markets

for men’s beauty and grooming products. Already, the country’s
male skincare market was more than twice the size of South
Korea’s and more than three times the size of the US market as
of last year, per Euromonitor. Local D2C brands are popping up to
capitalize on the opportunity — at least 10 new China-based male
skincare brands were reportedly launched in 2020.

Source: IC

Meanwhile, global brands have already rolled out men’s cosmetics

lines. Chanel first launched Boy de Chanel in South Korea, while
Shiseido said its male makeup line saw double-digit growth amid
the pandemic, bolstered by Japanese businessmen in their 40s.

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Gender-neutral beauty products

Gender-neutral makeup lines are the next step in inclusive

beauty, as younger generations erode traditional gender norms
and stigmas. More than half of Gen Zers believe that gender is
nonbinary and encompasses a spectrum instead.

As a result, brands are rolling out beauty products that aren’t

targeted at one specific gender. Skincare brands from Aesop
to Ursa Major to Non Gender Specific have ditched gendered
marketing, opting to package and sell unisex products that focus
on specific skin concerns or conditions instead. In makeup,
examples include Fenty and Milk Makeup, as well as indie startups
like Fluide and Jecca Blac.

Source: Fluide

Already, corporates are taking note. Clean, gender-neutral

fragrance company Phlur was acquired by Los Angeles-based
beauty incubator The Center in February 2021.

Incumbent brands including MAC Cosmetics, Tom Ford, Gucci,

and Marc Jacobs have all launched gender-neutral lines across
makeup, fragrance, and clothing as well.

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“As a culture, we are realizing that gender is no longer a fixed
concept,” said Sam Cheow, senior vice president of corporate
innovation and product development at the Estée Lauder
Companies, in an interview with Harper’s Bazaar.

People of color

Though there’s been a lot of buzz around more effectively targeting

people of color in the beauty sector, there’s still much to be done.

Beyond Fenty, a number of inclusion-focused brands like

Mented Cosmetics, Urban Skin Rx, and Live Tinted have forged
partnerships with larger retailers like Ulta Beauty, Target, and CVS
to roll out their products nationally.

Source: Mented Cosmetics

Existing corporations have focused on growing brands founded by

people of color to target disparities in traditional beauty products
and cater to underserved markets. Black consumers account
for $1.3T in buying power; the Black haircare industry reportedly
represents a $2.5B market.

To tap into this massive market, among others, grants and

accelerators for founders of color have emerged over the past
year, including Glossier’s and L’Oréal’s grants to Black-owned
businesses and Sephora’s recent accelerator cohort, which
included only founders of color.

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“Because a founder is of color does not mean that their business
has to be focused only on people of color,” Keenan Beasley, the
founder and CEO of beauty incubator Supply Factory Brands, told
Glossy. “Our design target for our Sunday II Sunday brand is the
multicultural woman, but products are still great for all women,
which is where we started at.”

Lack of representation reaches beyond foundation shades and

marketing. Black dermatologists make up just 3% of the field in
the US, which has marked effects on beauty product development.
Darker skin reacts differently to skin conditions like acne, eczema,
and keloids, and is more susceptible to hyperpigmentation due
to higher amounts of melanin. But many products are tested on
lighter skin tones, ignoring efficacy for people with different skin
tones entirely.

In November 2020, Unilever-owned Vaseline launched the

Equitable Skincare for All program in conjunction with actress
Regina King and startup Hued to offer more training for
dermatologists and resources for people of color.

Ultimately, brands that can cater to these demographics without

oversimplifying the nuanced dynamics of their communities will be
more likely to succeed in the increasingly saturated beauty market.

Beauty across generational cohorts

Major opportunity exists in meeting the needs of cohorts beyond

the young adult (ages 18 to 35) segment.

A few brands are working to cater to older consumers, such as

Gen Xers or baby boomers. In particular, perimenopausal concerns
have seen increasing attention in skincare, for example:

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 • AbsoluteJOI is a skincare brand that makes products for
women of color. Its founder Anne Beal has said that its core
customer group is women in their 40s and up, and that the
skincare company boasts a return customer rate of 30%.

• Pause Well-Aging focuses on menopausal skincare products

that address perimenopausal concerns such as hot flashes,
night sweats, and skin elasticity.

• Arfa’s (now Chord) State Of brand also markets products that

target menopausal concerns, from cooling spray to hand and
joint cream.

• Ilia Beauty launched a marketing campaign in September

2020 that featured women between the ages of 20 and 70.

Source: State Of

Beauty brands are also looking to babies and children for untapped
opportunities, with examples like:

• Jessica Alba’s The Honest Company, which got its start in baby
care, recently went public, raising more than $412M in its debut.

• Amyris brand Pipette, which was launched in 2019, expanded

into Target in February 2021.

• Baby care brand Mini Bloom was launched in December 2020.

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Luxury skincare brands such as Pai Skincare, Dr. Barbara Sturm,
and others have expanded into baby and children’s skincare
products.

Source: Dr. Barbara Sturm

Gen Z-focused brands such as UK-based Plenaire and Bubble

have also been on the rise. Meanwhile, incumbent brands like
Chanel, YSL, and others are revamping their product launch and
marketing strategies to attract younger shoppers.

Social media has become a critical way for teenagers to find the
trendiest products in line with their clean beauty needs and beyond
— “edutainment” for beauty and skincare products.

TikTok, in particular, is a massive opportunity for brands, driving

viral sales and reshaping consumer preferences.

CeraVe, e.l.f. Cosmetics, and The Ordinary have moved up in

the rankings, becoming some of the top skincare brands for
teens over the past year, largely thanks to influencers on the
platform. Meanwhile, Peace Out Skincare saw sales for its pore
strips quadruple in just 24 hours after it was endorsed by TikTok
“skinfluencer” Hyram Yarbro, while another teenager’s viral video
drove nearly $850K in sales for The Ordinary.

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Source: Hyram Yarbro

TikTok influencers Nel Twins also launched their own cosmetics

line in April 2020, while the D’Amelio family has worked with
Morphe Cosmetics to roll out a variety of makeup products.

Of course, to get into the hands of teens, parents must also be

convinced that these products meet a real need and are safe for
regular use.

Ingredient transparency and nontoxic options will be crucial for this

category to see sustained growth. According to DECA, 80% of female
teens said they were willing to spend more for “clean” beauty.

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BEAUTY GOES GLOBAL … AND LOCAL

K-beauty hit the United States in 2011 when Sephora began carrying
Korean skincare brand Dr. Jart+. Since then, Western shoppers
have clamored for Korean beauty products, with items like sheet
masks and snail cream becoming commonplace in beauty stores.
Cosmetics exports from Korea surged 15% in 2020, thanks to
growing demand from the US and other Asian countries, per the
Korea Customs Service and the Korea Cosmetic Association.

But the beauty boom isn’t limited to K-beauty; other markets

are garnering attention for their own heritage-inspired products.
Beauty markets across the globe are developing brands for internal
consumption while also exporting them globally.

This includes Asian beauty markets like China, which is a hotbed

for virtual beauty thanks to its advanced mobile technologies and
tech giants. In recent years, homegrown beauty brands such as
Perfect Diary, Florasis, and Judydoll have emerged to address
native demand in the second-largest market for makeup. A number
of factors have propelled their growth: shifting perspectives
in favor of domestic brands, the ability to leverage cultural
connections, and rapid manufacturing, among others. Some
brands are able to launch new product lines in just 3 months.

25
“For instance, they understand what works best for Asian skin.
They are also quick to pick up the current beauty trends that
Chinese consumers are drawn to, and are fast in launching
products that leverage those trends,” Nanyang Technological
University associate professor Elison Lim said in an interview
with Insider.

Source: Florasis

C-beauty brands have also leveraged partnerships to gain traction

beyond local markets. Perfect Diary dropped an eyeshadow
collaboration with the Metropolitan Museum of Art in 2019
and signed Australian singer Troye Sivan as an ambassador. In
November 2020, Perfect Diary’s parent company, Yatsen, debuted
in a $617M IPO on the NYSE. Zeesea similarly released eyeshadow
palettes in collaboration with the British Museum, while Millet
Pepper has focused on global expansion via selling on Amazon or
through influencer marketing in Europe.

Other major beauty markets include:

• Indonesia, which has the largest Muslim population in

the world, offers a booming halal beauty market. Makeup
and skincare brands like Base, Esqa, and Rosé All Day are
examples of Indonesia-based halal-certified brands focusing
on this market.

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 • Brazil represents one of the fastest-growing global markets
for beauty and personal care. For example, D2C cosmetics
brand Sallve recently raised $21M at a valuation of $116M.

• India-based Nykaa has raised more than $94M and is

reportedly planning to go public at a valuation of $3B. The
beauty market in India is projected to surpass $20B by 2025,
thanks to a spike in consumers’ disposable income and
broader exposure to makeup overall.

• Big beauty corporates are also attempting to penetrate

new markets, especially in South Asia and Africa. L’Oréal is
doubling down on the South Asia Pacific, the Middle East,
and North Africa — regions which will account for the bulk of
L’Oréal’s new business over the next decade, per the company.

Ultimately, targeting new continents — or even country-specific

markets — requires hyperlocalization, especially as the global
beauty markets further develop and new heritage-inspired trends
take off.

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Manufacturing & Distribution

SYNTHETIC BEAUTY GAINS TRACTION, RIDING

SUSTAINABILITY AND SUPPLY CHAIN TAILWINDS

Biotechnologies are increasingly impacting the production of

beauty ingredients. Consumers are continuing to realize that not
all synthetic ingredients are detrimental, and that biosynthetic
ingredients offer a viable, more sustainable alternative.

On the business front, using ingredients that are mined or farmed

introduces potential supply chain volatility, given the quantity of
vendors, farms, and fisheries that have to be involved in supplying
ingredients, while synthetic ingredients are made in more
controlled environments that can offer consistency.

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Furthermore, the process of growing ingredients in a lab reduces
the “devastating impacts of farming, fishing, extraction, or the
involvement of intermediaries which can drive up the price and
carbon footprint of raw materials extracted from the earth in
lengthy, global supply chains,” said sustainability consultant and
All Earthlings founder Sarah Jay in an interview with Coveteur.

Several brands are experimenting with biosynthetic ingredients:

• Ginkgo BioWorks, which recently announced it will go public

in a $17.5B SPAC deal, has genetically engineered yeast
fermentation to produce rose oil with new and unique scents
without relying on expensive rose petals.

• Biotech “ingredients-as-a-service” company Geltor offers

vegan collagen technologies crafted for skincare ingredient
applications.

• Startup C16 Biosciences uses a brewing process to produce

a sustainable alternative for palm oil instead of relying on
traditional agricultural processes, which have been scrutinized
for their damage to the environment and links to labor abuses.

• Vegan skincare brand Biossance creates its own eco-friendly

squalene, an ingredient typically taken from shark livers.

Source: Geltor

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AI also presents a big opportunity for brands looking to
further Beauty conglomerates have been active in developing
biotechnology partnerships as well.

Johnson & Johnson, maker of brands like Neutrogena and

Aveeno, is investing in new engineered preservatives that could be
used in items like haircare or body care products. The company
invested in Curie Co, a startup that makes biomaterials to replace
preservatives in everyday beauty and personal care products,
through its JLABS incubator. L’Oréal signed a licensing deal
with biotech bacteria company Micreos, while Estée Lauder
inked a joint development deal to explore lab-based materials in
skincare. In March 2021, beauty conglomerate Coty partnered with
LanzaTech to leverage the biotech company’s sustainable ethanol
in its fragrances.

Lab-grown ingredients can serve as a differentiator for brands in

the broadening landscape of natural, sustainable clean beauty.
Furthermore, biosynthetic ingredients can mean cost savings for
companies down the line, including reduced transport costs, lower
supply chain risk, and decreased emissions.

The challenge remains in scaling up production. Given rapid

expansion plans and high demand, companies should keep an eye
on quality control — new plants can encounter hiccups that may
compromise the final product. At the rate the planet’s resources
are being depleted, the shift to lab-grown ingredients may arise
out of necessity.

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NEW SUSTAINABLE PACKAGING PROTOTYPES AND
BUSINESS MODELS TAKE OFF

Sustainability is a hot topic across virtually every sector, but it’s

become a particularly important conversation within CPG, an
industry with replenishable products historically featuring single-
use packaging.

The beauty and personal care industry generates nearly 120B

packaging units every year, and nearly 91% of these fossil fuel-
based bottles, wrappers, and other plastic waste are never
recycled, accumulating in the ocean and landfills.

Consumers — especially millennials and Gen Zers — are leading

the shift away from single-use plastic. Up to 70% of surveyed US
consumers said they would pay more for sustainable packaging,
per McKinsey. This shift is accelerating as government regulation
in the EU and select US states pushes CPG companies toward
adopting more sustainable alternatives.

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The EU, for example, has a goal of becoming carbon neutral by
2050, and the European Green Deal aims to shift to completely
reusable or recyclable packaging by 2030. Nine states, including
California, New York, and Maine, have enacted statewide plastic
bag reduction laws or bans.

Beauty conglomerates and indie brands alike have tapped into

this trend: L’Oréal, Estée Lauder, and Unilever have all pledged to
reduce single-use packaging, while brands like Pai Skincare and
HiBar are reducing virgin plastic use or moving away from plastic
entirely. Synthetic biotech company Amyris recently acquired a
majority stake in sustainable cosmetics brand EcoFabulous — the
seventh clean beauty brand in its portfolio.

As pledging to reduce single-use plastic becomes fundamental, the

shift toward sustainable packaging is spurring new business models.

Refill models are being embraced across different beauty verticals.

Myro and By Humankind allow users to refill deodorant, while Kjaer
Weis and Asa Beauty allow consumers to restock makeup.

Source: Myro

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In-store refills have yet to pick up — especially after the Covid-19
pandemic — though there is opportunity here. The Body Shop
launched its refill stations globally in March 2021, allowing
consumers to refill shower gels, hand soaps, shampoos, and
conditioners in stores. Chile-based Algramo, which expanded to New
York in August 2020, also offers opportunities for refilling household
products, though beauty and personal care is likely a future
opportunity thanks to its partnerships with Unilever and Nestlé.

Recycling models are also being adopted, such as those by early

pioneers of the process MAC Cosmetics and Lush, both of which
allow consumers to return empty product containers (to be
recycled) for free items. Newer initiatives include:

• In April 2021, Lush launched its Bring It Back program in the

UK and Ireland, allowing customers to return any Lush plastic
packaging to be recycled for a small discount.

• In 2019, recycling co TerraCycle launched Loop, where

customers pay a refundable deposit for shipped containers
that are to be cleaned, refilled, and reused after return. The
company has partnered with several retailers including Ulta,
Nordstrom, Tesco, and Sainsbury’s.

• Sephora has been testing a pilot recycling program in Utah

and Colorado since 2019; no expansion plans have been
announced.

Biodegradable packing is another avenue of interest that has seen

traction, pioneered by industries like food and beverage. Neutrogena,
for example, put out compostable wipes. Other alternatives include
paper and fiber-based packaging being developed by early-stage
companies like Paboco, Paper Water Bottle, and Ecologic. L’Oréal
leveraged Ecologic bottles in the launch of its sustainable personal
care line, Seed Phytonutrients, including paper shampoo bottles that
don’t break down in the shower.

33
Source: Paboco

Some beauty brands are exploring more creative solutions,

using materials like mushrooms, wood pulp, or agar.

Despite burgeoning interest, companies can face barriers in

scaling up production. Watch for the beauty and personal care
category to follow the food and beverage industry, as
companies in the space have adopted biodegradable and
recycled plastics more broadly.

34
‘WATERLESS’ BEAUTY AS THE NEXT BIG ECO TREND

A typical bottle of shampoo consists of 90% water, and shipping

bulky, water-based products leads to substantial transportation
costs, increased emissions, and more packaging. Removing water
from product design and shipping is a key emerging theme across
beauty brands’ efforts to improve operational sustainability.

A wave of startups and corporates are developing innovative

material solutions to concentrate the active ingredients in shampoo,
hand soaps, and more. These companies formulate and package
products to improve convenience and user experience, which eases
consumers into using more sustainable products without changing
their routines to accommodate, for instance, scoopable shower gels
or chewable toothpastes.

Emerging startups and recent corporate developments here include:

• L’Oréal-owned Garnier launched shampoo bars in November

2020. Alongside eschewing plastic containers altogether, the
bars can reportedly reduce the environmental impact by 25%
compared to liquid shampoos.

35
 • Seed-stage startup Susteau (formerly OWA Haircare)
inked a deal with Sephora to launch its waterless haircare
products online and in stores for the retailer. These kinds
of concentrates blend with the water already being used in
the shower or sink. Susteau has applied for a patent for its
powderless shampoo.

• Carbon-neutral brand Everist designs waterless haircare

concentrates and was founded by former executives at
companies like L’Oréal and Revlon. Everist raised a seed round
in January 2021.

• By Humankind, which claims it has reached carbon neutrality,

has developed a wide range of water-saving products, from
toothpaste and mouthwash in tablet form to shampoo bars.

Source: Susteau via Beauty Independent

Expect to see more major retailers stocking these options in an

effort to bring sustainable products under the roof. However,
the ultimate impact of these products will depend on how much
consumers are willing to change their routines to adapt to these
new formats, which may not be as convenient as traditional
water-based products. (For more, read our brief on How Material
Innovation Will Improve Sustainability In Beauty & Personal Care.)

36
Some companies are also introducing waterless or water-reduced
initiatives to salons. Glosslab, for instance, has developed a waterless
manicure that it offers to clients in its own salons on a membership
basis. The company raised a $4M seed round in May 2021.

Meanwhile, L’Oréal, in partnership with tech startup Gjosa,

developed a device called the Water Saver that reduces the amount
of water required at rinsing stations in salons. L’Oréal is looking to
bring it to 10,000 salons in coming years and says it can save up
to 80% of water used in rinsings. L’Oréal acquired a minority stake
in Gjosa in March 2021.

Source: L’Oréal

It’s becoming critical for beauty brands to incorporate

sustainability into their business model and operations, and water-
saving techniques are crucial to the process. Beauty and CPG
incumbents should look to use investments, M&A, or partnerships
to bring these tech innovations in-house to help achieve broader
sustainability goals.

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Pricing

BEAUTY BRANDS FOCUS ON VALUE AND VARIED PRICING

During recessions and economic downturns like the Covid-19

crisis, beauty tends to be a resilient category due to what’s known
as the “lipstick effect” — consumers’ tendency to see beauty as an
affordable, small luxury during uncertain economic times.

In 2020, retailer Revolve, for one, saw “more deliberate purchasing

behavior by consumers during the Covid-19 pandemic as well as
a Covid-19-driven shift … to product categories with lower price
points and lower return rates, such as beauty, and away from
occasion wear.”

38
While some consumers saw an increase in their disposable income
during the pandemic, for many shoppers, the economic uncertainty
of the pandemic has driven a renewed focus on products that carry
more value at cheaper price points. Amid this shift, beauty has
largely held its place in shoppers’ lives, attracting spending even
when other product categories have taken a hit.

A February 2021 PowerReviews survey found that consumers are

now 40% more willing to try new beauty products than before the
pandemic, and 59% report spending the same or more on beauty as
they did prior to Covid-19. For many, the conditions of the pandemic
drove them toward product categories like skincare (and away from
those like makeup) that play a central role in at-home routines.

“The beauty category, while not recession-

proof, has fared better than many other
discretionary categories in economic
downturns, reflecting the relatively low price
point and the connection with the product ...
Engagement with the beauty category remains
strong, despite the uncertainty many guests are
experiencing today.”
— ULTA CEO MARY DILLON, Q1’20 EARNINGS CALL

Beauty brands are continuing to connect with consumers by

employing varied pricing strategies that appeal to wider swaths
of shoppers.

39
Companies like Deciem are using transparent pricing models
and established, science-backed ingredients that are cheaper to
manufacture — ultimately driving the price of products down. In 2020,
Deciem nearly doubled sales to $460M, primarily through its skincare
brand, The Ordinary, which has developed a strong cult following.

Source: Racked

Estée Lauder purchased a majority stake in Deciem at a $2.2B

valuation in February 2021. In doing so, the incumbent is
diversifying its product portfolio and catering to new segments
of shoppers — whether they are seeking more affordable product
lines, like The Ordinary, or more expensive ones, such as La Mer
skincare, also owned by Estée Lauder.

In China, Perfect Diary has become one of the country’s most

talked-about beauty brands since launching in 2016, competing
with well-known global players like L’Oréal and Estée Lauder, even
while offering its products at a mass-market price point.

14 Trends Changing The Face Of The Beauty Industry In 2021 40

Perfect Diary uses the same production factories as large,
reputable luxury brands like YSL and Dior. Perfect Diary remains
focused on targeting lower-tier cities, where customers may be
less accustomed to the beauty market and more open to trying out
new brands.

For brands, targeting multiple price points and diversifying

product portfolios could help them weather periods of economic
uncertainty. L’Oréal, for instance, has credited its diverse pricing
strategy for enabling it to “absorb even severe market conditions
like in 2020.”

Coming out of the pandemic, as economic recovery looks different

for consumers with different wallets, there is opportunity at
multiple price points. Beauty brands and conglomerates will
increasingly use varied pricing strategies to appeal to a broader
range of shoppers, with the goal of remaining essential to their
routines.

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Marketing & Merchandising

BEAUTY FURTHER INTEGRATES WITH THE WELLNESS

ECONOMY

The surge of consumers focusing on self-care amid the pandemic

has only accelerated the emergence of wellness as a holistic trend
extending to traditional beauty areas like skincare.

Ingestible beauty, supplements, and vitamins

Ingestible beauty is one wellness area gaining traction. Already

popular in Asia, the trend of food, supplements, or drinks promising
beauty benefits has continued to pick up steam. This “inside-
out” approach emphasizes preventing issues that other beauty
products may only be able to cover up. Companies in the space
often promote a “feeling good is looking good” ethos.

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While beauty supplements aren’t a new concept, an increasing
number of startups are targeting the market with products that
promise beauty benefits such as weight loss, clearer skin, and
stronger hair.

Investors have backed companies in this space such as skincare

supplement startup Moon Juice, beauty-focused vitamin provider
HUM Nutrition, and Nutrafol, a company offering supplements
for thicker hair growth which has raised $36M from investors
including Unilever.

Source: Nutrafol

CPG incumbents are also making moves. Nestlé, for instance,

acquired a majority stake in skincare startup Vital Proteins last
year. The company offers collagen — a protein that helps form skin
— in products like powders and snacks.

New formats for ingestible beauty are also emerging, including

companies offering daily skincare shots (Akiva), collagen-infused
drinks (SkinTe, Pop & Bottle), and even meal kits (Sakara Life,
Urban Remedy).

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Going forward, expect a greater focus on the connection between
gut health and beauty as the microbiome gains momentum as a
wellness topic. Beauty Chef, a startup that has raised $6.8M, is
already marketing its products by linking beauty to gut health.

Health remains a priority for companies going after the beauty

market

As more consumers link beauty to general well-being, some

healthcare companies are positioning their products to grab a
slice of the beauty market — while leaning on their science-based
authority.

For example, Hims & Hers offers telehealth consultations and

prescriptions for a broad array of health issues ranging from
infections to mental health, but its services also extend to anti-
aging creams and haircare products. Similarly, India-based
CureSkin provides dermatological assessments alongside broader
health advice on diet and lifestyle.

Source: Hims & Hers

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Conversely, some brands are looking to offer consumers an
alternative to doctor visits for certain issues. Topicals and Musely,
for example, are targeting skin conditions like eczema that would
normally require a trip to see a specialist to get a prescription.

One emerging trend reflecting this convergence of health and

beauty is the “skinification” of makeup, which refers to traditional
beauty products like foundation and concealer which also promise
healthier skin. Companies targeting this space include early-stage
startups Ilia Beauty, Saie, and Revolution Beauty.

As the space becomes more crowded, watch for companies

to differentiate themselves with pairings of “inner” and “outer”
products, such as ingestibles and topical creams, marketed around
beauty benefits. Haircare startup Prose, for instance, recently
launched a subscription service for supplements which it says can
prevent hair loss and promote healthier scalps.

Scents for stress and beyond

Another emerging beauty-wellness area to monitor is “functional

fragrances” — scents purported to have effects like reducing
stress. These are already being offered by companies like Neom
Organics and Aeroscena.

Looking ahead, expect functional fragrances to be incorporated

into more beauty products and categories, including experiential
beauty offerings such as spas and wellness hotels. For instance,
Aeroscena, which backs its scents with clinical research and also
focuses on healthcare applications, has seen its fragrances used
throughout select MGM Resorts in their wellness-focused Stay
Well suites.

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Despite their momentum, companies tying beauty to overall well-
being face challenges around perceptions of effectiveness and
trust. Though brands commonly cite clinical studies alongside
their products, consumers may become skeptical if they don’t
notice a difference in a real-world scenario, especially for products
positioned as having a direct impact on health. Companies going
after the space will have to calibrate their messaging carefully —
and prioritize transparency — to successfully engage customers
while managing expectations.

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BIG TECH CAPITALIZES ON BEAUTY

Tech is playing a bigger and bigger role in the beauty industry.

Tech companies’ extensive reach — which can include search data,

smart home devices, AI capabilities, e-commerce platforms, and
more — offer compelling opportunities to cash in on the beauty
market. For example:

• Amazon runs a dedicated beauty supply store which sells

salon products and equipment to businesses. It even opened
a brick-and-mortar hair salon to showcase its tech.

• Google works with brands to use its search data to better

understand beauty shoppers’ preferences.

• Livestreaming beauty shopping is taking off on platforms like

Facebook-owned Instagram and Alibaba’s e-commerce site.

Below, we look at where big tech and beauty are colliding.

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Big tech offers online beauty retail channels

Amazon has made major strides in expanding its beauty retail

channel. It launched a private label beauty brand called Belei
in 2019 and recently invested in India-based D2C beauty site
MyGlamm.

Source: Amazon

In addition to its traditional e-commerce site, it also sells beauty

products on its Amazon Fresh and Whole Foods online grocery
platforms — a distribution channel that received a major boost during
the pandemic and presents an opportunity for Amazon to cross-sell
beauty products alongside consumers’ regular food orders.

Meanwhile, Facebook-owned Instagram has become a strong

retail force within the beauty industry.

The platform has played a major role in creating digitally native

brands across all consumer categories and is particularly well
suited to beauty — an industry that is inherently visual, based on
peer recommendations, and has a relatively low barrier to entry.

48
In 2019, the company launched in-app checkout for shoppable
posts and has since rolled out features such as augmented reality
shopping, in-app reminders for new product drops, and even
shoppable videos — expanding its e-commerce role for beauty
products being promoted by brands and influencers.

Big tech-enabled livestreaming is gaining traction among beauty

influencers

Instagram is not the only company using video to sell beauty

products. Livestreaming, which refers to livestreamed shopping
trips where viewers can purchase the items being featured, is
offering a new way to engage younger audiences and boost sales.
The approach is already popular in Asia, but it has started to make
inroads in markets like the US.

China-based tech giant Alibaba offers livestreaming and AR

features which it has used to attract luxury beauty brands to its
e-commerce platform.

Much of the beauty livestreaming activity in Asia has been driven

by high-profile influencers — known as KOLs (key opinion leaders)
— like “Lipstick King” Jiaqi Li, who reaches millions of viewers
every month. However, more sophisticated approaches are starting
to emerge, such as that taken by early-stage startup Zamface,
which offers a platform to help viewers find a livestreamer with
similar facial features to them.

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Livestreamer Jiaqi Li promoting beauty products on Alibaba’s platform. Source: Alizila

Voice assistants will help bring beauty into the smart home

Voice assistants like Amazon’s Alexa and Apple’s Siri present

partnership opportunities for big tech and beauty.

Amazon, Apple, and Google all offer voice-enabled smart speakers

and have designs on deeply integrating their virtual assistants
into peoples’ home lives. At the same time, beauty companies are
looking to master voice-based shopping to ensure their brands
remain top of mind for consumers.

Sephora, for instance, partnered with Google to offer its own

Google Assistant app that allows users to order products, access
skincare advice, and view Sephora’s YouTube videos.

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Source: Sephora

With smart home concepts continuing to gain traction, beauty

brands will have to consider how voice technology — and
partnerships with big tech — could be used to address shopper
pain points, from personalized recommendations to conveniently
booking reservations. (For more on the future of the smart home,
clients can check out this report.)

Beauty hasn’t historically been a key focus area for big tech, but
these giants will inevitably continue to extend their influence in
the sector.

As the beauty industry becomes more tech-enabled, opportunities

for big tech companies to monetize their data, platforms, and
devices will only increase — but, even as partnerships abound,
they may eventually find themselves competing more directly with
increasingly tech-savvy beauty incumbents.

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VIRTUAL TRY-ON ENABLES PRODUCT DISCOVERY AND
ENGAGEMENT

Virtual try-on tech leverages augmented reality to allow shoppers

to test how different beauty products will look — without needing to
reach for the makeup remover wipes afterward.

While the technology has existed for some years, the Covid-19
pandemic has solidified virtual try-on’s place in the beauty industry,
as customers seek personalized recommendations they can try on
safely, often while shopping online from their own homes.

In beauty retail, virtual try-on tech serves a dual purpose: combining

both augmented reality and computer vision, it allows shoppers to
virtually test out different looks, while simultaneously collecting
behavioral data for brands. Notably, virtual try-on can also help
brands personalize the beauty shopping experience, enhancing
product discovery and making tailored recommendations about
foundation shades, skincare products, and more.

52
Beauty brands from L’Oréal to Smashbox to Benefit Cosmetics offer
virtual try-on via tech by ModiFace (acquired by L’Oréal in 2018),
while social media platforms like Facebook and Youtube have
integrated virtual cosmetics try-on into ads and influencer videos.

In December 2020, Google launched an AR-powered cosmetics try-

on tool in Google Search, partnering with brands like L’Oréal, Estée
Lauder, MAC Cosmetics, and more to let users try on searched-for
makeup products using front-facing mobile phone cameras.

Alongside ModiFace, Perfect Corp is a leader in the space, and its

tech is used by myriad beauty and tech platforms.

Since first establishing itself as a go-to provider of AR for beauty

tech in 2017, the Taiwan-based beauty company has expanded its
virtual try-on offering, leveraging 3D face AR technology to let users
virtually test an array of makeup products. Its AI Skin Diagnostic
tool leverages AI-powered algorithms to analyze a user’s skin
across dimensions including wrinkles, redness, oiliness, texture, and
more to make personalized skincare product recommendations.

Source: Perfect Corp

Recently, the virtual try-on space has seen a flurry of activity,

including:

• IT Cosmetics partnered with Skin Match Technology to deliver

Skin Match’s AI-powered foundation shade recommendation
tech to its customers in March 2021.

53
 • Biotechnology company Amyris acquired Beauty Labs,
developer of AI-powered apps for beauty brands looking to
offer intelligent, personalized recommendations and virtual
try-on, in April 2021.

Beyond skincare and makeup, hair and nail color also present use
cases for virtual try-on tech. Hair color has seen a notable boost
in the past year as lockdowns have prompted new forms of self-
expression, per Sally Beauty Chief Merchandising Officer Pam
Kohn. Hair color brand Madison Reed, which grew sales by 130%
and nearly doubled its customer base in 2020, offers live virtual
try-on on its website for customers to explore different shades.

Source: Madison Reed

Meanwhile, tools like Essie’s ModiFace-powered “On Hand” tool

and Anastasia Beverly Hills’ The Brow App offer applications in nail
polish try-on and brow shaping.

As people have spent more time working and socializing virtually,

video filters could prove to be another expanding use case for
virtual makeup. In 2020, L’Oréal rolled out Signature Faces, a line
of “virtual makeup products.” The line provides makeup filters
supported on a range of platforms, including Zoom, Instagram,
Snapchat, and more.

54
Source: L’Oréal

Virtual try-on cannot completely replace the in-store experience

of interacting with a sales rep and experiencing the weight and
texture of physical products. But its place in the beauty world is
more secure than ever.

All at once, the Covid-19 pandemic has shifted shopping and

socializing online and sparked desire for self-expression and self-
care; virtual try-on technology has improved; and partnerships
have made the tech more widespread than ever. Ultimately, AR is
no longer a gimmick, but a proven technology integral to beauty
shoppers’ experiences, both online and in the store.

Going forward, expect to see beauty brands and tech giants alike
turn to virtual try-on to gather shopper data and make more
personalized product recommendations.

55
INGREDIENT TRANSPARENCY TRUMPS CLEAN BEAUTY

Customers are increasingly demanding greater insight into what

their products are made of, and ingredient transparency has
become a top priority not only for beauty and personal care
brands but also for CPG and retail companies more broadly.
Corporates like Unilever, P&G, and Target have all tapped into this
trend through acquisitions, accelerators, internal brand incubation,
and more.

In recent years, one of the biggest ways ingredient transparency

has manifested is through the “clean beauty” movement, which
focuses on natural and organic products. However, a lack of US
regulation regarding terms like “natural” and “clean” has led to
some confusion about their meaning. At the same time, consumers
are increasingly realizing that not all “natural” ingredients are good
for you — and not all synthetics are bad.

As a result, brands are shifting focus away from highlighting

natural ingredients and toward transparency and educating
consumers on the ingredients they include — or leave out.

56
For example, in April 2021, private equity giant Carlyle Group took
a majority stake in cosmetics company Beautycounter in a deal
valued at $1B. The Colorado-based beauty brand emphasizes
ingredient transparency and restricts over 1,800 ingredients in its
formulations (compared to the 30 restricted by US regulations).

As the emphasis on ingredient education grows, brands are

also shifting toward ingredients backed by scientific methods or
endorsed by doctors and clinical professionals to prove safety and
efficacy. Some beauty brands are even carrying out clinical studies
to test out their products: Juice Beauty and ZO Skin Health both
feature real patients’ results from clinical laboratory studies on
their websites.

Source: Juice Beauty

Some companies are simply revamping their labels to highlight

clinical results. In February 2021, biotech beauty company Codex
Beauty Labs announced a new labeling strategy to include clinical
efficacy data on packaging for all its skincare products. The easy-
to-read efficacy testing panel highlights the difference products
have made in studies looking at metrics like hydration, firmness,
oiliness, and more.

57
An efficacy facts panel from a product label. Source: Codex Beauty

In addition to relying on doctors’ endorsements and scientific

studies to prove their products’ efficacy, beauty stakeholders —
from brands to dermatologists to makeup artists — are relying
on social media platforms to educate users. TikTok especially is
gaining traction as a beauty product education and exploration
platform, boosting sales when products go viral. One of The
Ordinary’s peeling solutions racked up over 50,000 sales in the
span of two weeks following a viral video featuring the serum.

58
However, ingredient transparency doesn’t only mean making it
clear what ingredients are included, then educating users on how
effective they are — it also means providing details on the ways
those ingredients are sourced and moved.

Though ingredient sourcing has historically been a trade secret for

beauty companies, supply chain transparency could help improve
the beauty production value chain and also help brands distinguish
themselves as ingredient transparency becomes more widespread.

Going forward, the beauty industry will continue moving beyond

empty buzzwords like “clean” and “natural” and instead get
down to the nitty-gritty of specific ingredients and their effects.
Education will continue to be key as brands lean into transparency
around both natural and synthetic ingredients to prove their
safety and efficacy. Ultimately, the ingredient transparency trend
will likely go more mass market and global across all consumer
products.

59
Customer Experience

UNBUNDLING THE SALON AND SPA CONTINUES

In the midst of the Covid-19 pandemic, spa and salon

appointments have looked quite different — if they are available at
all. But thanks to new on-demand technologies, beauty services
are no longer tied to traditional locations. Now, consumers can
bring the spa directly to their homes.

These technologies have caught the eyes of top beauty investors.

Companies that provide business-to-business (B2B) booking and
on-demand platforms for salon and spa services account for 12%
and 11% of deals in the industry, respectively. These platforms
typically include tools for booking and managing appointments,
showcasing their work, and accepting payments.

60
Demand for these services is not limited by geography. For
example, Glamera, which offers on-demand spa and makeup
services, is based in Egypt. Urban — which connects users
with skincare professionals, nail specialists, and more — is
headquartered in England. Both companies raised funding in
Q3’20. Meanwhile, unicorn Zenoti, which raised $160M in Series D
funding earlier this year, provides services management software
for salons in over 50 countries.

Source: Zenoti

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Customers can book a wide variety of services that would typically
require going to a specific location. For example, companies like
Heyday, FaceGym, and Skin Laundry offer on-demand facials.
Others, including Glamsquad, send stylists directly to people’s
homes or offices.

Nail care is also increasingly coming out of the salon and into the
home. For example, California-based ManiMe uses 3D scanning
and printing technology to create customized press-on nails that
are shipped to the customer. Meanwhile, Coral is creating a fully
automated device that provides at-home manicures.

Source: ManiMe

Other companies in the space are developing devices for spa

services at home, for example:

• Tria Beauty offers products for laser hair removal and light-
based skin treatments that users can administer themselves.

• Foreo sells devices for at-home facial massages, blue light

acne treatment, and microcurrent facial firming.

• LightStim offers products that use multiple light wavelengths

to treat acne and minimize wrinkles.

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Source: Tria Beauty

But the movement isn’t limited to cosmetic services — it’s also

expanding to wellness. Urban offers on-demand outdoor fitness,
osteopathy, and physiotherapy services in addition to massages
and nail care. Soothe connects customers with on-demand
massage therapists who offer deep tissue, sports, and prenatal
massages, among others.

As the pandemic subsides, customers are undoubtedly excited

to return to their favorite spas and salons. However, because of
their flexibility, convenience, and opportunities for personalization,
at-home spa services likely aren’t going away. Also look for on-
demand wellness services to become more frequent offerings
in the office as employee well-being becomes a top priority for
bringing people back to the office following Covid-19.

63
NEW APPROACHES TO OMNICHANNEL FOR BEAUTY TAKE
HOLD

Like many other categories, the pandemic has accelerated the

beauty industry’s shift to e-commerce as brick-and-mortar
locations have had to close. In the US, personal care and beauty
online sales totaled a whopping $62.6B last year, up from $53.1B
in 2019.

Even as restrictions lift, the shift to e-commerce is unlikely to

reverse. However, that doesn’t mean that the in-store experience
is a thing of the past. Instead, beauty retailers are connecting the
customer journey across their online and offline stores to create
seamless omnichannel experiences.

Japan’s Shiseido exemplifies the omnichannel approach. The

beauty company opened its flagship store in July 2020 and
launched a new virtual store on its website at the same time.
The goal was to create multiple channels that provide equally
satisfying shopping experiences by addressing customer needs
and preferences — including the desire to limit human contact
amid the pandemic and the growing preference for online shopping.

64
Source: Shiseido

In the physical Shiseido flagship store, customers wear connected

wristbands that scan product signs and add items to digital carts.
At checkout, customers scan their wristbands and receive their
items immediately. They can view receipts on their smartphones
after leaving the store.

Source: Shiseido

Customers can also use technology throughout the store to get

product information, digitally test items like skincare products,
and find personalized recommendations by taking quizzes.

65
The virtual Shiseido store uses virtual reality (VR) technology
to let customers browse the first, second, and basement levels
of the flagship location. The website provides the same product
information and customization options as the physical store.

Source: Bergamo

Similarly, cosmetics brand Kiko Milano opened a concept store in

Italy in 2016 featuring in-store technology from Mercaux. iPads
are positioned throughout the store to provide product information
and let customers digitally test makeup items. Virtual try-on is
also available on the Kiko Milano website.

Another important factor in a successful omnichannel experience

is the ability for store associates to connect with customers online.
Clean beauty brand Credo teamed up with virtual shopping app
Hero in 2019 to provide online shoppers with the same customer
service — such as product knowledge and recommendations —
they would find in the store. The partnership was named Best In-
Store Technology Innovation in the beauty industry by Glossy.

66
Quality online customer service can help shoppers feel more
comfortable buying new products online. And new in-store pickup
options connect the online and offline shopping experiences. Many
beauty brands — including Ulta Beauty, Bluemercury, and Sephora
— have begun offering curbside pickup to limit germ spread
during the pandemic. The service also works well for customers
purchasing products they already know and love. With the added
convenience and the short wait times — some brands have orders
ready in as little as 30 minutes — expect the option to be available
long after Covid-19 subsides.

Customer journeys that combine the online world with the offline
are here to stay. The role of the physical store is still important, but
its focus has shifted to experiential retail. Expect to see livestream
shopping becoming more popular in the US after already taking
off in China. Ultimately, the beauty brands and retailers that will
come out on top will be the ones that create a unified view of the
consumer’s online and offline behavior.

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Additional reading

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