Adapting to a shifting market: Strategies for luxury beauty stakeholders

According to a recent Mintel report, "wealthy consumers comprise a large base of the luxury market, but a younger, less affluent and more diverse generation is emerging, requiring brands to be agile," detailed Brittany Steiger, Senior Analyst, US Retail and eCommerce Reports at Mintel. With "44% of the general population reporting that they don't have a reason to buy luxury products/services," according to the report, beauty brands in the luxury sector, and the cosmetics and personal care product manufacturers and suppliers behind them, need to remain flexible and adaptable to evolving consumer purchasing habits and how beauty buyers are demanding luxury beauty product options.

We spoke to Diane Kim, Global Brand President of bareMinerals, BUXOM, and Laura Mercier for her insights into how cosmetics and personal care manufacturers, suppliers, and brands can adapt to the changing needs of luxury beauty buyers and remain profitable in the current US market.

Understanding the current luxury beauty market

"It's an extremely competitive environment for manufacturers and suppliers" today, Kim began. For cosmetics and personal care product manufacturers and suppliers, she described, the current luxury beauty market share is a "situation in which they have to strike the right balance of managing costs and inventory while addressing consumers who indicate that they intend to splurge on beauty – yet still seek high-quality products at a sharp price point."

She explained that industry stakeholders in this space face challenges, including "economic turbulence, geopolitical instability, and inflation." However, despite these challenges, "beauty remains a resilient industry with strong opportunities, even within the luxury beauty sector for skin care, fragrance, color cosmetics, and hair care," said Kim. She illustrated, "McKinsey has estimated that luxury beauty has the potential to grow to nearly $40 billion by 2027, 20 percent annually over the next four years."

Considering that "some consumer segments more than others, for example, Gen Z and Gen X, have indicated an intent to spend more on beauty, especially high-quality beauty products," she explained, there are strong indicators that "luxury beauty brands will have to justify certain price points, which can often happen relative to ingredients and product performance."

As an example, Kim shared further, "in the case of Laura Mercier Real Flawless Weightless Perfecting Foundation which retails for $52 USD, it achieved viral status on TikTok as the first viral makeup product of 2024 in part due to how it blurs the line between makeup and skin to reveal a healthier-looking complexion."

Dupe culture and the luxury beauty buyer

One aspect of the ongoing industry discussion surrounding luxury beauty trends is the rise of dupe culture, where brands like e.l.f. Beauty, MCoBeauty, and Maybelline have released more affordable versions of cosmetics and personal care products that look, feel, or produce results similar to their more expensive counterparts.

Regarding the trend and its impact on luxury beauty, Kim stated that "the luxury beauty market presents an opportunity for brands where dupe culture may not be as applicable," adding that "consumers desiring exclusivity and quality aren't necessarily the same shoppers desiring dupes for luxury or trending beauty products." As a result, "there will always be a demand for authenticity."

She shared that these consumers "seek highly efficacious skin care with quality ingredients" and also "desire special and limited-edition products that are exclusive and unique to a brand, as well as bespoke experiences which are frankly challenging to duplicate for this sort of shopper." Therefore, "luxury beauty brands that can appeal to this sort of shopper with highly efficacious products, limited edition items, and unique experiences will lead the way in shaping consumer perceptions and attitudes," said Kim.

The future of luxury beauty

"The increasingly competitive luxury beauty market will require brands to focus even more on sharpening their brand equity to forge emotional connections with consumers and drive cultural conversation," Kim advised. "This may include strategic partnerships with relevant brands, tastemakers, or influencers who will capture consumer attention and engage within popular culture," she added.

As an example of luxury beauty innovation, Kim described how "for the last two seasons of New York Fashion Week, Laura Mercier collaborated with luxury women's ready-to-wear and accessories designer Altuzarra to bring Laura Mercier's iconic Flawless Face – and French approach to effortless beauty – to the runway." This partnership demonstrates how the brand was able to bring "together two French American icons who share similar sensibilities, to create something original for its beauty and fashion fans."

Today, the luxury beauty market is at a pivotal juncture, driven by evolving consumer preferences and economic challenges, and brands must navigate a landscape where younger, more diverse consumers are emerging alongside traditional affluent buyers. By remaining flexible and adaptable, strategic partnerships and innovative marketing strategies like Laura Mercier's will be essential in maintaining brand equity and forging emotional connections with consumers.

By embracing these strategies, cosmetics and personal care product manufacturers, suppliers, and brands can continue to lead and shape the future of the luxury beauty space.