Insight by Leah

A recent survey by market-research firm Information Resources Inc.  revealed that the recent downturn has profoundly changed how consumers are spending their money – on everything from how often they wash their clothes to how many lipsticks they purchase.  This downturn has impacted consumer behavior in a way that retailers and companies could never have predicted, and many of these companies are struggling to adjust (as we commented in an earlier post on beauty companies offering more mid-priced goods and smaller size options).  To quote the WWD article: “Women will still be purchasing cosmetic products, but they’ll now buy maybe just two varieties of lipstick instead of 10,” Thom Blischok, president of consulting and innovation at IRI, said. In place of paying a professional salon, things like home pedicures are rising in vogue, “which we wouldn’t have expected two years or even 18 months ago.”

Read the complete WWD article.

Insight by Leah

Estee Lauder, P&G and even L’Oreal have all announced intentions to offer consumers lower cost items and smaller sizes of some products in order to drive sales during a down economy.  Although the strategy may provide an initial bump up for these companies, it could be a dangerous decision for two reasons – 1. Consumers who had previously purchased "luxury" line items from these companies may completely abandon the higher priced lines for a similar, lower-priced offering deciding that the lower priced one is "close enough;" 2. Lowering prices on some luxury items (for example, La Mer cream) may cheapen the value of the brand.  It’s a thin and difficult line to walk for these brands.

Read the full article.

Insight by Leah

A recent report indicated that the cosmetics industry in India alone grew 7.5% between 2006 and 2008, highlighting the increased importance of this emerging market.  Even with the economic slowdown that is affecting all global markets, the make-up industry is expected to maintain strong growth in the coming years.  Analysts point to both increased awareness of products through media outlets as well as a growing middle class in the country.  Further, experts believe that this market is still under-served, and will only continue to surge ahead.  Given L’Oreal’s recent signing of Indian actress Frieda Pinto as a global spokeswoman, there is no doubt that other companies will also attempt to reach this and other expanding markets in Asia.

Happi.com Excerpt:

The Indian cosmetic Industry has witnessed rapid growth in the last couple of years, growing at a CAGR of around 7.5% between 2006 and 2008, according to Research and Markets. With improving purchasing power and increasing fashion consciousness, the industry is expected to maintain the growth momentum (with marginal slowdown due to economic slowdown) during the forecast period (2009-2012). It is projected to grow at a CAGR of around 7% during the forecast period, according to Research and Markets. Both electronic as well as print media are playing an important role in spreading awareness about cosmetic products and developing fashion consciousness among the Indian consumers. With the introduction of satellite television and a number of television channels as well as the Internet, the Indian consumers are constantly being updated about new cosmetic products, translating into the desire to purchase them. Additionally, the flourishing Indian fashion/film industry is fuelling growth in the industry by making Indians to realize the importance of having good looks and appearances. Read the complete article on Happi.com.

Insight by Leah

Although beauty product sales are declining overall, a bright spot of news appeared – Internet sales are up.  Over the coming months, it will be interesting to see if retailers and brands shift their focus and campaigns to the Internet as it represents a viable and cost effective sales channel.  As well, it appears that consumers are increasingly using the Internet for research and review purposes, increasing the importance of beauty bloggers, Twitter and other forms of social media.  The Nhuch will continue to explore this growing sales channel and its influence.

BeautyPackaging.com article excerpt: