Dive Brief:
- Despite recent economic turbulence, the beauty industry continues apace and is on a path to grow sales 6% annually through 2027, according to a report on the state of the business from McKinsey & Company and The Business of Fashion.
- Global retail beauty sales are expected to grow from $427 billion in 2022 to about $583 billion by 2027, according to the report. North America and China, with estimated sales in four years of $115 billion and $96 billion respectively, will remain drivers of the industry.
- E-commerce beauty sales should account for 26% of the total worldwide market by 2027, representing a steady increase that spiked during the pandemic and continues to rise.
Dive Insight:
Between 2015 and 2022, global e-commerce beauty sales grew at a compound annual growth rate of 20%, leaping from just 8% of the market to 21% last year. E-commerce sales now exceed those of specialty retail which, in 2022, was 20% of the overall industry.
Online sales of beauty products in the U.S. are projected to reach $45 billion by 2027, according to the report. China’s e-commerce sales are anticipated to be even higher, increasing to $55 billion over the next four years, at which point almost 60% of all beauty sales will be digital.
While many sectors of the economy have stuttered during the past two years, the beauty industry has continued to prosper both domestically and internationally. DTC brands have proliferated and some, like Glossier, have expanded their reach by opening their own brick-and-mortar stores and signing wholesale partnerships with the likes of Sephora.
But the crowded space has also made it difficult to thrive. Glossier underwent multiple rounds of layoffs last year, beauty subscription box brand Birchbox struggled to fill orders and pay vendors ahead of its sale to Retention Brands this year, Morphe owner Forma Brands filed for bankruptcy in January and more recently, beauty brand Wldkat announced it was going out of business.
Despite the challenges for brands, the beauty market will continue to grow and bring in new players over the next few years, according to the report. While the U.S. and China maintain their positions as leaders, emerging markets in India, The Middle East and Africa are expected to see dramatic growth.
India, with half its 1.4 billion population being under the age of 30, is on pace to see beauty sales increase to $21 billion by 2027, according to the report. The Middle East and Africa should see sales of about $47 billion by the same year.
The definition of beauty will also expand. The report indicates a “steady march into wellness,” which is already a $1.5 trillion industry. Beauty and wellness will become more connected, and the report projects a compound annual growth rate of 10% for the wellness industry.
“Wellness is an opportunity more broadly across all beauty categories,” said Larissa Jensen, Circana beauty industry adviser, in an email. “While physical wellness remains important, consumers are focusing on their mental wellness more than ever before. This is a shift that began in 2020 and has only accelerated since, contributing peripherally to the sales of beauty products.”
