Sep 17 2020
Given the hands-on nature of cosmetics retailing, health concerns and potential contagion risks brought on by the COVID-19 pandemic have led to the government mandated temporary closure of all specialty cosmetics stores. As a result, the Cosmetic and Toiletry Retailing industry’s revenue declined by 5.9% in 2019-20.
Trends arising from the COVID-19 lockdown include:
- Housebound consumers opting to shop online in compliance with physical distancing and trading restrictions.
- Consumers maintaining some of their pre-COVID-19 routines, including skincare rituals, to restore a sense of normalcy.
- Several retailers launching online websites or enhancing their ecommerce presence to retain demand.
Despite negative consumer sentiment and a decline in discretionary income, strong opportunities have emerged for cosmetic and beauty product businesses in the aftermath of constrained activity in the Hairdressing and Beauty Services industry.
The rise of DIY skincare
The closures of beauty and personal care service establishments have forced consumers to adopt DIY skincare routines as part of at-home self-care trends. Sales of exfoliators, vitamin C serums and facial masks rose during lockdown periods, in correlation with consumers’ attempts at replicating their regular visits to beauty therapists. The COVID-19 outbreak has also fast-tracked the uptake of new beauty tools, including LED masks and facial rollers. Revenue for the Cosmetic and Toiletry Retailing industry is expected to rise by 3.3% in 2020-21.
Face masks have become a necessity for many Australians, which has led to rising instances of associated skin complications. For example, maskne is a type of breakout caused by the prolonged wear of masks. Due to the inability to book an appointment with a skin specialist, consumers have relied on online research to assemble a personalised skincare regimen, elevating online sales of skincare products.
According to the ABS, total turnover for pharmaceutical, cosmetic and toiletry goods retailing rose by 7.7% in July 2020, following a 1.3% decline in June. In June, the re-opening of beauty salons across most of Australia contributed to the decline in household expenditure on consumer goods. In contrast, consumer spending shifted back towards services, driven by a stampede of bookings for beauty consultations and services. However, retail spending on pharmaceutical, cosmetic and toiletry goods recovered in July 2020, with Victoria alone recording an increase of 7.7%. The reintroduction of trading restrictions across the state prompted Melbournians back to online retailers, as they seek to splurge on skincare products.
The COVID-19 outbreak has highlighted the potential contagion risks of instore product testers. Over the next five years, cosmetics retailers are more likely to adopt new technologies, such as augmented and virtual reality apps, alongside other artificial intelligence advancements, that will allow consumers to digitally try on different shades of foundation, eyeshadow, lipsticks and other products on their face. The number of traditional cosmetic and toiletry retailers is projected to decline over the period, with several firms likely to operate as pure-play online retailers instead. This decline is anticipated to be reflected in a greater participation in the Online Perfume and Cosmetic Sales industry, where enterprise numbers are forecast to increase at an annualised 3.0% over the five years through 2025-26.
IBISWorld reports used to develop this release: