Impact of COVID-19 on Cosmetic Industry

The dawn of 2020 which shook the world from its core, disrupted economic and health ecosystems and took the world far behind where it was supposed to be.  Many industrial and commercial sectors have been affected by the most dangerous pandemic of the decade and one such industry is cosmetic industry.  

 The cosmetic industry worldwide seems to be continuously developing now more than ever with the advent of the internet companies. The industry is dominated by small number of MNC’s but is spread among a wide range of different businesses. The industry is home to the profits of big conglomerates which employees over 3 million people directly or indirectly and generates an estimated turnover of 170 billion $. Europe, which is the leading market of the industry is also the worst hit among other continents and thus the industry is facing a heavy haphazard. Various MNC’s and small scale businesses related to the industry had a drastic impact on the business front.  

According to a 2019 Mintel’s Covid-19 Survey, 38% of women used prestige premium products for skincare in 2019 and now it is expected to have a reverse effect and decline in premium sector. The sales number have impacted this year for many cosmetic manufacturing companies with the revenue of face, lips, eyes, nails and natural cosmetics fall by a CAGR of 2.5% when compared to 2019. Personal care conglomerates P&G reported that its net sales and earning dipped due to the impact on its prestige brand SK-II. The pandemic followed by lockdown left the people with limited cash in hand which forced them to limit their expenses which had a heavy blow to the make-up industry with L’Oreal Group’s luxury division shrunk by 9.3%. Disruptions of supply chain and lack of raw materials limited the supply to the places where the demand was on high. Most brick-and-mortar and airport sales outlets closure also impacted the major markets. The manufacturers and distributers of products such as color cosmetics and mascara, skincare and cleaners not only was curbed for export to nations, but also lost the demand in local European markets. Finally, imbalance of supply and demand equilibrium forced the companies to cut-off employment which thus resulted in increased poverty rate and decline in consumption of most goods and services.

 The disruptions of the pandemic also affected the mindset of every individual where they got inclined towards the protectionist attitude which had a very adverse change on consumer behavior. The unpredictable nature of pandemic made them to save wherever possible and to block all the trivial expenses. This behavior will stand for a long period of time as they will require few months to at least match their daily lifestyle and comfort. Thus, expenditure on cosmetics constitutes to be a problem even in the long run. Mintel’s research showed that 37% of the respondents even said that their financial status is in jeopardy which will also play a huge role in expenditure on cosmetics. Looking from an analyst point of view, the conglomerates would require 9-12 months to exploit the consumer acumen and bring the business back to track.

At the same time, it would not be possible to shut the operations and thus the management of the companies took some steps to ensure the synchronous working with the pandemic. Though prestige cosmetics had a dip in sales, the daily use cosmetic sales were maintained by the companies by using the online platform as the key. Both P&G and L’Oreal have experienced sharp growth in its e-commerce business, which grew about 35% and 52.6% respectively. Many companies credited its rebound to China because of its strong e-commerce setup. The resilience of e-commerce poses an opportunity for luxury brands to reach the places where the demand is high. Prestige brands are trying to adjust product strategy to meet consumers needs and make innovation in online shopping experiences such as use of AI and VR. Additionally, brands are also seeking new and innovative ways to communicate such as offering online beauty advisor services and live streaming

It is wisely said that “defining goals is the first step in turning invisible into visible”. Chances of growth of the industry is bleak in the short-term but with proper set of objectives can turn the condition. A glimpse into the future will see all the movements of cosmetic industry such as falling to the ground trying to stand still, hiccupping sometimes to emerge and grow but finally would dance victoriously by serving the needs and demands of its people with prosperity.

 Reference

1. https://www.statista.com/topics/3137/cosmetics-industry/

2.https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is-changing-amid-covid-19

3.https://www.researchgate.net/publication/339988093_Overview_Data_Collection_and_Analysis_Methods_in_Impact_Coronavirus_Disease_COVID-19

 By,

Devarti kandalkar