Unlocking the power of AI and AR: How technology is reshaping the beauty market

In today's rapidly evolving cosmetics and personal care industry, the integration of artificial intelligence (AI) and augmented reality (AR) technologies is reshaping the way brands engage with consumers. According to a recent report by McKinsey, the global beauty industry is expected to see AI-driven tools influence up to 70% of customer interactions by 2027. Meanwhile, a survey by Research and Markets projects that the global market for AI in the beauty industry will reach $13.4 billion by 2030, growing at a compound annual growth rate (CAGR) of 20.6% from 2023 to 2030.

As these technologies become increasingly central to the industry, companies must stay ahead of key trends to maintain a competitive edge. In this CosmeticsDesign Q&A, Alice Chang, CEO and founder of Perfect Corp., delves into the findings of the company's latest report, "The Most Influential AI Trends in Beauty and Fashion." Chang offers insights into how AI and AR are driving personalization, sustainability, and consumer engagement, and discusses the challenges and opportunities brands face in adapting to these transformative technologies.

CDU: Can you provide an overview of the key trends identified in Perfect Corp’s report and their potential impact on the cosmetics and personal care industry?

Alice Chang (AC)​: Our trend report, "The Most Influential AI Trends in Beauty and Fashion," identifies several key AI trends that are shaping the beauty and fashion industries.

At a high-level, our report surveyed a group of industry leaders to identify the major AI trends influencing beauty and fashion retail. The report explores the ways AI-powered virtual try-on experiences, conversational AI agents, and analysis tools will take customer service to new heights.

These tools are significantly increasing consumer confidence in online purchasing decisions, as the technology provides a more interactive and personalized way to discover beauty and fashion. AI is allowing consumers to find  the best products for their needs through immersive experiences powered by precise AI technology.

Additionally, AI-powered shopping assistants, such as Perfect Corp.’s innovative PerfectGPT technology, will be the next advancement to help brands engage with consumers. These tools will provide real-time support and personalized advice to improve the customer experience, bringing a new level of engagement that delights customers. 

Our trend report also finds that AI is helping to drive sustainability forward in the cosmetics and retail industry. Across industries, AI technology allows brands and retailers to minimize product waste.

Particularly in the beauty and fashion space, AI allows brands to offer virtual try-on and virtual product sampling, eliminating the need for physical product samples, and greatly reducing the waste created during the sampling process. AI also provides shoppers with the ability to test products and find their perfect shade match, ultimately reducing the waste created from product returns

CDU: The report highlights a growing emphasis on personalized beauty solutions. How do you see this trend influencing the way cosmetics and personal care brands approach product development?

AC​: Personalized beauty solutions are transforming how beauty and skin care brands approach product development. The focus on personalization is driving more targeted research into how different ingredients affect various skin types and concerns, leading to more effective products. 

Feedback from customers also helps brands refine their offerings, ensuring that products remain relevant and effective for a wide range of customer needs. We’re seeing more brands using AI to analyze data, collect customer feedback, identify usage patterns to target specific preferences and develop products based on individual profiles—such as foundations that match specific skin tones or skin care products tailored to unique skin concerns. 

The trend towards personalized beauty is pushing brands to become more consumer-centric, while embracing technology and data-driven approaches to product development. This shift not only meets the growing demand for tailored solutions but also fosters a deeper connection between brands and their customers, leading to more effective products and engaging experiences. 

CDU: According to the report, there is an increased consumer demand for sustainable and eco-friendly products. What are the report’s recommendations for brands looking to meet this demand effectively?

AC​: Consumer demand for sustainable and eco-friendly products and brands continues to increase, and to meet this demand, there are several key strategies brands should implement to help pave the way for a more sustainable cosmetics and retail industry.

From a product standpoint, brands should prioritize the use of sustainably sourced, natural, and organic ingredients that are sourced from suppliers who adhere to ethical practices. Brands can also meet this demand by developing products with their entire lifecycle in mind—encouraging recycling or reuse of packaging, and considering take-back programs to close the loop. 

Technology should also play an important role. Using AI and AR to optimize supply chains and reduce waste from product samples and returns is another way brands can track and manage their environmental impact more effectively. For example, our technology helped our partner KAO reduce plastic waste by 56 tons each year as a result of using our hair color virtual try-on.  

CDU: The report mentions advancements in AR and AI technologies. Can you elaborate on how these technologies are transforming consumer engagement and product experiences in the cosmetics industry?

AC​: There’s no doubt that advancements in AR and AI are revolutionizing consumer engagement and product experiences in the cosmetics industry. These technologies create more interactive, informative, and enjoyable shopping experiences, thus fostering deeper connections between consumers and brands.

AR and AI technology allows consumers to virtually try-on makeup using their smartphones or in-store devices, providing a hyper-realistic preview of how products like concealer or eye shadow will look on their skin without the need for physical samples. By allowing consumers to see how different shades and formulations suit their skin tone and type before buying, it takes the guesswork out of selecting the right product—empowering consumers to make more informed purchasing decisions.

For skin care specifically, AI can analyze different skin conditions and concerns to recommend customized products and routines. AI-powered virtual consultants or assistants can also provide personalized advice and guide consumers through their shopping journey based on their specific requirements. 

CDU: There is a significant rise in online beauty consultations and virtual try-ons according to the report. How should brands adjust their digital strategies to capitalize on this trend?

AC​: Virtual try-on has become an essential component of the consumer journey in beauty. The technology allows brands and retailers to provide personalized and immersive experiences at scale, while empowering brands to significantly boost customer engagement and sales. 

Not all VTO tech is built the same. To most effectively implement it, brands should look into solutions that provide accurate and realistic previews of how products will look on different skin tones and types, are accessible across various platforms including mobile apps and websites, and offer intuitive interfaces and seamless integration into all touchpoints of the shopping journey—this includes easy access to virtual try-on features from product pages, checkout flows, and customer service channels. 

CDU: The report highlights the importance of multi-channel strategies. How should brands and suppliers adjust their distribution, marketing strategies, and customer engagement to take advantage of this trend? 

AC​: Brands should use a holistic approach when leveraging multi-channel strategies to improve distribution, marketing, and customer engagement, which not only enhances customer satisfaction, but drives growth and strengthens brand loyalty. This can be done in a few ways. 

First, they should develop a robust omnichannel strategy that integrates online and offline channels—including ecommerce platforms, social media, brick and mortar stores, and third-party marketplaces—to ensure a consistent brand experience across all channels. To reach a broader audience, brands can leverage immersive technology.

Engagement can be significantly improved through providing a seamless experience across channels. Interactive features like virtual try-on, AI-powered live chats, and social media polls can engage customers and enhance their experience. What’s more, the data from these various touch points can help brands tailor recommendations based on past purchases, browsing behavior, and preferences across different channels. 

CDU: What are the primary challenges brands or retailers might face in adapting to the trends identified in the report, such as the integration of AI and AR technologies, and how can they overcome these challenges?

AC​: One of the biggest challenges brands or retailers might face when looking to implement AI and AR technologies is the financial investment—but as long as they’re doing their research and finding the tech that’s going to best serve their customers, the ROI will far exceed the money spent. 

Brands that make this investment often see exponential growth in sales and engagement. In fact, major beauty brands like Avon have seen a 320% increase in conversion rate, a 94% increase in average number of products viewed, and a 33% increase in average order value since implementing virtual try-on technology into their websites. 

CDU: How do you foresee the role of emerging technologies, as discussed in the report, transforming the cosmetics and personal care industry in the next few years?

AC​: In the next few years, as AI and generative AI technologies continue to advance and become more transformative, we’re going to see more and more cosmetics and personal care brands adopt emerging technologies like AI and AR, especially for virtual try-on capabilities.

Almost every major beauty brand and retailer today—from Estée Lauder and Elf to Walmart and Sephora—has implemented this technology within their websites and mobile apps. Especially as e-commerce continues to grow, we’re going to see more brands follow suit to maintain a competitive edge and provide shoppers with personalized experiences.

Generative AI will also play a greater role in the industry, specifically in the form of conversational AI assistants, such as Perfect Corp.’s groundbreaking PerfectGPT AI Assistant Framework. Through natural language processing and machine learning, these tools can understand customer preferences and provide tailored recommendations in ways that were not possible in the past.

These solutions will take customer service interactions and personalization to exciting new frontiers, powering product discovery, customized advice, and consumer engagement like never before