Category fundamentals intact, we expect a sharp recovery in demand

We analysed data from UBS Evidence Lab's survey of >4,000 female consumers in the US, UK, France and Brazil (>Access Dataset) to assess how COVID-19 pandemic has impacted consumption drivers and channel preferences, and how the recovery of the beauty industry might shape up in the near future. We find that (1) demand for beauty remains resilient as consumers added steps to their Skincare routine and spend more time on social media; (2) e-commerce will continue to recruit consumers but ‘omni’ channel strategy is key to success; (3) big brand's equity has strengthened, but big beauty companies need to innovate to meet changing demands.

Consumers are more attentive to quality, somewhat less sensitive to price

We have analysed purchase influencers across the different beauty categories, and conclude that consumers have become more mindful of product quality, as this metric increased in importance over “value for money”. Interestingly, medical reviews and “natural/ethical” characteristics of a brand printed the highest increase y/y, which aligns with elevated demand for dermatological solutions/active cosmetics.

Innovation, not brand size, is the key factor to success

Prior experience with a brand and the 'brand name' are among the top 3 influencers of purchasing decisions, and % of respondents who value a brand name increased y/y. Generally, large brands have superior alignment with consumer needs on the top drivers of brand selection, but lag smaller ones on price and natural/ethically/locally produced metrics. Given the desire to 'try new things' is the top reason for switching brands, we see continuous adaptation via innovation, increased personalization and greater focus on natural/ ethical as key to the future success of large brands.

Online will continue to grow but offline presence remains extremely important

Not surprisingly, e-commerce was the top purchase channel in 2020, with more consumers finding the experience convenient. While online channels showed the highest purchase intention in the near future (see Fig. 2 below), we believe brick & mortar will remain critical as consumers still cite in-store promotions and advertising as a top awareness source and as they prefer to discover new products offline.