Cosmetics are a dependable e-commerce category, offering a number of benefits to manufacturers and retailers. While preferences for specific products, styles and categories can change significantly over time, there is a consistent demand for beauty products on a global level. And while shippers of cosmetics need to take special care to protect the contents of packages sent to consumers, their small size and light weight make them an attractive category for digital retail.
Let's look at some key indicators of the global e-commerce market for cosmetics and how producers and retailers can act on these trends to remain competitive and address consumer preferences.
E-commerce cosmetics: The big picture
Cosmetics are on the rise in terms of digital sales. A report from Allied Market Research projected a substantial increase in the global luxury cosmetics e-commerce market between 2019 and 2026. AMR projected worldwide spending on luxury cosmetics at $55.6 billion in 2019 and anticipated market growth to $81.24 billion by 2026. That translates to a strong compound annual growth rate (CAGR) of 5.6% across the eight-year span analyzed.
Key findings from the report that should be of special interest to retailers include:
- Makeup outperforming the entire cosmetics category, with a CAGR of 6.1%.
- Skin care dominating total market share, representing more than 40% of total anticipated sales during the eight-year period.
- Conventional – as opposed to organic – products representing the majority of overall purchases. However, organic products have the highest projected CAGR by 2026, expected to reach 7.6%. This could represent the start of a shift to more popularity of natural products.
Analysis from Grand View Research highlighted some key elements that are expected to drive the development and growth of the cosmetics market going forward. Increases in disposable income across the globe make cosmetics more accessible to a broader range of potential consumers. In terms of customer preferences, a few elements stand out. GVR expected organic and natural cosmetics to grow in popularity, in part due to increased shopper awareness of the potential harm associated with the manufacture and use of cosmetics.
Skin care will realize increased growth because other related areas, such as hair care, are more saturated in terms of product availability and the similarities between the offerings of many different companies. Anti-aging products will be popular within the skin care category, as they drive the basic value proposition of many cosmetics: making the people who use them look healthier and younger.
Understanding the US cosmetics market
The U.S. is a mature market for cosmetics, as GVR explained. A look at key statistics in this area can help retailers better understand how sweeping trends may develop in other markets with more room for growth.
Online cosmetics sales grew at a faster rate than overall e-commerce transactions by a significant margin across 2017, according to Digital Commerce 360. The 23.6% improvement in cosmetics sales was noticeably above the overall growth of all e-commerce sales at 15.6%.
It's also important to note the development of e-commerce cosmetics sales as compared to traditional brick and mortar retail performance. Statista noted online cosmetics sales grew by $1.6 billion in 2017, while there was a drop of $168 million when it came to in-person transactions. Part of this shift came from the many retail avenues available through online transactions, with concepts like beauty boxes expanding the market beyond the traditional purchase of individual cosmetics and kits sold in stores.
The impact of social media is also a critical factor. With cosmetics so heavily focused on achieving a desired appearance, the visual nature of social media sites ranging from Facebook to Instagram is a key avenue for sales. Influencers that share an image of their own cosmetics use can easily direct their followers to a simple link for purchasing, offering an immediate connection to a specific product. Instead of having to hunt down a product and potentially find it's sold out or unavailable from a given store or in a specific area, digital shoppers can get what they want quickly and without having to venture beyond their digital devices.
Looking at cross-border purchasing preferences
Shopify reported on broad trends connected to the willingness of consumers across the globe to make purchases beyond the borders of their home country. Overall, 57% of customers make cross-border purchases from online retailers, with more than half of customers in the Africa, Asia-Pacific, Europe, Latin America regions willing to consider offerings from businesses in foreign countries.
With strong domestic and international growth currently and projected for several years into the future, cosmetics are a powerful category when it comes to e-commerce. For help with managing your own e-commerce operations, including everything from international fulfillment to returns management, get in touch with the experts at Landmark Global today.