A Cosmetics Surge: Pretty or Not?

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By: Arianne Cohen

Beauty is in the eye of the beholder. Unless, that is, we’re talking about online cosmetics, whose sales numbers have quietly become a significant indicator not only for the retail sector but also for the broader economy.

As of earlier this year, online cosmetics sales were up almost 9 percent, more than triple the average of all of the other online-shopping sectors. But while that made one sector happy, economists saw a familiar and not-so-great trend: During  the slump of 2008-09, cosmetics sales similarly rose while other sectors stagnated—proof, as it turned out, that consumers were cutting back overall but still splurging on low-priced items. “People still wanted to treat themselves every so often—it’s a way to feel great without spending a bundle,” says John Long, North America retail sector leader at Korn Ferry. He views this development as a potential sign of waning consumer confidence, and a possible bellwether for a challenging economy.

Economists have long pointed to another sector—automobile sales—as the most meaningful indicator of consumer sentiment about the economy. During downturns, consumers’ appetite for big-ticket spending typically plummets. But cosmetics apparently serves a different, albeit complementary niche: The consumer driving a decade-old car still wants to splurge, and purchasing a shimmery new eye shadow or shiny gloss allows them to do that on the cheap.

A peek into the habits of cosmetics buyers offers some insight. Beauty products, like toothpaste and other toiletries, are unique in that shoppers consider them to be essential. They belong to a distinctive category of generally affordable items that shoppers want and need—and can easily order online. Since consumers know they’re going to buy eyeliner, they can easily rationalize a jump from a $28 tube to a $48 tube. Indeed, online fragrances are up 27 percent year-over-year. Lipstick sales are up 27.7 percent, with the most expensive of lipsticks up 18.1 percent, according to Adobe Analytics figures.

Asian beauty companies have developed technology that allows women to access all sorts of brands online and see how various colors and tones will look on their faces. The US lags, with most cosmetics still being sold out of drugstores and department stores. But US beauty retailers and brands are putting effort into teaching consumers how to shop online for creams and potions: If you visit a beauty counter, you may be directed to an app that will help you choose shades. Experts see the boost in online shopping as a different but challenging sign. “It’s a reflection of the very troubled beauty industry in physical space,” says retail expert Paco Underhill, author of Why We Buy: The Science of Shopping.

All eyes are on where online cosmetics sales move next. In the meantime, know that mauve, plum, and purple are “in” this season. All three have already doubled last year’s sales.

Photo Credits: George Peters/Getty Images