What is behind the spending boom in the ‘health and beauty’ sector? To find out, we delve into data from Barclays Consumer Spend research on the latest industry trends – from the ever-growing demand for ‘dupes’ to the power of social media influencers.
New research from Barclays reveals that the health and beauty sector is booming. A shift in consumer priorities and the impact of social media trends seem to be contributing to an increase in spending on cosmetic products.
Barclays data from July and August 2024 confirms that, while overall retail shopping has faced its challenges since August 2023, the health and beauty industry has been thriving, with consumer spending in this space up by 7.3% year-on-year in August 2024.
Lockdowns and the move to remote work during the pandemic resulted in a culture shift that transformed the beauty market – driving e-commerce, reducing the use of cosmetics, increasing consumer focus on wellbeing and demonstrating the importance of online brand presence. But in recent years, there has been further evolution. Shoppers appear to be redefining the 'essential' product category – the same basket that houses groceries and childcare – with almost half (46%) of consumers reporting that they now consider health and beauty products to be essential.
“Our data shows that social media has proven to play a key role in influencing online purchases, a further demonstration of the rising commercial importance of these platforms."
Karen Johnson, Head of Retail Barclays UK
In part, the rising cost of living seems to have shifted consumers’ spending priorities, increasing focus on self-care and wellness over the past three years. Pharmaceuticals, hair care products, body care products and fragrances have been particularly resilient, with a high percentage of consumers (68%, 66%, 62% and 54%, respectively) indicating that they have either increased or not changed their spending on these products.
Many shoppers also appear to prioritise spending on beauty over other types of products, such as clothing and accessories. 23% said they have been cutting back on clothing and accessories purchases so that they can spend more on health and beauty products – a trend evidenced by the 1.7% decrease in clothing spend identified last month from Barclays consumer spending data.
“Despite rising living costs and subdued growth across the rest of the retail sector, the UK’s beauty spending highlights a growing emphasis on self-care,” explains Karen Johnson, Head of Retail at Barclays. “It’s encouraging to see that overall beauty spending has been in growth year-on-year, with August showing the highest level of growth in the past 18 months.”
Dupes, spend decisions and de-influencing
The impact of the ‘lipstick effect’ on beauty spending – when consumers are willing to spend on more affordable premium goods rather than ‘big-ticket’ items during difficult economic periods – has been well documented. Indeed, management consulting firm McKinsey anticipates that the top-tier 'true luxury' (which encompasses skincare company La Mer and fragrance company Byredo) and 'ultraluxury' (which includes brands like Guerlain and La Prairie) global beauty market could increase from approximately $20 billion in 2023 to around $40 billion by 2027.
But while 18% of consumers surveyed indicated that they preferred to spend money on an original premium product, Barclays research demonstrates an ever-growing demand for ‘dupes’ – affordable products that mirror more expensive versions in quality, formula, and/or appearance. Almost one-third of consumers surveyed (32%) said that they are buying cheaper alternatives of items such as fragrances, makeup and beauty products to save money due to the rising cost of living.
“The UK’s beauty spending highlights a growing emphasis on self-care, despite rising living costs and subdued growth across the rest of the retail sector.”
Karen Johnson, Head of Retail, Barclays UK
Beauty Pie, a direct-to-consumer beauty brand that offers discounted luxury products for members, is seeing its online memberships continue to grow. They add that the economic climate is driving purchases, as “members are looking for higher quality and affordable products from the comfort of their home, making the beauty shopping experience more convenient and accessible than traditional retail businesses”, Sophie Jenkins, Global Marketing Director at Beauty Pie, explains. The company’s focus on high quality products at a lower price-point is also contributing to their growth. Jenkins adds: “Given the recent economic impact on consumers, it’s important we remain a brand that our customers know will not compromise on quality. Typical beauty industry markups are ten times what the product costs to make, we believe our customers deserve better.”
Social media is playing a continually evolving role in shaping several consumer spending habits across the sector. It has never been easier to find similar products at a lower-cost – a search for ‘dupes’ on TikTok generates hundreds of thousands of viral videos from users sharing their tips on finding more budget-friendly alternatives. Shopping directly from social media platforms is also on the up: according to a Barclays survey, 27% of respondents have bought beauty and skincare products and 17% have purchased fragrances on platforms such as Facebook and Instagram. This online content clearly resonates with shoppers who have an interest in the sector – survey respondents cited an interest in seeing real people using products, discovering new trends and browsing for affordable luxuries as top factors in their use of social media.
Social platforms are even shaping consumer decisions about what they should avoid buying –since January alone, the number of surveyed people watching ‘de-influencing’ videos has climbed by nearly 50%, from 11% to 17%.
“Our data shows that social media has proven to play a key role in influencing online purchases, a further demonstration of the rising commercial importance of these platforms,” says Johnson. “The health and beauty sector exemplifies continuous growth, likely driven by social media, particularly among younger generations.”
Reacting to purchasing patterns
The latest consumer research clearly shows that spending on health and beauty is evolving – and changing priorities are reshaping the industry. Brands will need to be agile and develop strategies that match shifts in shopper behaviour by making the most of online platforms, understanding new markets, offering shoppers a mix of purchasing pathways and catering to the needs of key demographics.
Businesses in the health and beauty sector are likely to be anticipating large increases in sales as the end of the year approaches, with Black Friday and Christmas shopping on the horizon. These industry insights may resonate with retailers in other sectors looking to adapt to new consumer needs and behaviours – from how social media can impact sales to generational spending trends and the influences of the economic climate on spending priorities. “The key to a resilient retail model is examining these trends to better understand future purchasing behaviours,” says Johnson.
Barclays spend insights
Benefitting from access to nearly 40% of the UK’s credit and debit card transactions, Barclays has a wealth of insights into UK consumer spending. From the wealth of data available to us, we have a clear overview of the trends in consumer behaviour – and are in a strong position to make predictions about what the future holds in store.
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