This article is part of our Vogue Business membership package. To enjoy unlimited access to our weekly Beauty Edit newsletter, which contains Member-only reporting and analysis, the Beauty Trend Tracker and Leadership Advice, sign up for Vogue Business membership here.
Beauty is creeping upmarket. Average prices for commonly-used skincare and makeup products have risen, and more customers swear by premium and luxury beauty brands. Products popular on social media and “holy grails” often come at an eye-popping price — Giorgio Armani’s Luminous Silk foundation, a favourite of both makeup artists and TikTokers, costs $69 a bottle. Even the humble lip balm has gotten the luxe treatment: Summer Friday’s trending lip butter balm is $24 per tube.
With more beauty brands skewing towards luxury, there’s an opportunity for budget and drugstore brands to claim their ground. Many customers are priced out of the prestige sector — it’s why dupes are so popular in the beauty sphere — and cost of living and inflation have forced customers to cut back discretionary spending. In tandem with the premiumisation of beauty, mass-market brands are finding an opportunity to fight back.
The consensus across the latest round of earnings calls is that the aspirational luxury consumer is taking a step back. How are brands and retailers adapting — and what will this mean for the US market?
Publicly-traded Elf Cosmetics reported a 76 percent increase in net sales to $216.3 million, the company’s 18th consecutive quarter of growth. Products start as cheap as $3 for a brow gel. L’Oréal’s consumer products division — comprising drugstore brands Maybelline, L’Oréal Paris, Garnier, Nyx and Essie – reported sales growth of 8.3 percent in their full-year 2022 report – their best growth in 20 years, as well as reporting 14.8 percent growth in makeup. At Milani Cosmetics, which sells most products for under $15, sales are up more than 28 per cent year-on-year to roughly $200 million, according to the company.
“The emotional ties [consumers have] to beauty products make it more difficult for [them] to reduce spending,” Maria Salcedo, senior vice president of marketing for multi-brand retailer Ulta Beauty previously told Vogue Business. The challenge for mass-market brands is to position themselves with all the qualifiers consumers look for — quality, social buzz and trend-led looks — with much smaller margins.
Differentiation at a discount
According to its chief marketing officer and international general manager Jeremy Lowenstein, Milani wins on quality and inclusivity. “We work with the best suppliers in the industry to deliver the same quality that you would buy at a Sephora or Bergdorf Goodman,” he says. “We just take away some of the unnecessary pieces, like some of the superfluous packaging.” Lowenstein adds that the brand has offered a wide shade range since its launch, including 45 shades of Conceal + Perfect 2-in-1 foundation ($11.99), and that a large percentage of products are manufactured in Italy, alongside many luxury brands.
Convincing consumers of quality, especially when a product is packaged in flimsier packaging, is difficult — and that’s even more so in the US, where drugstores don’t carry product testers.
“Creating an exciting, luxury-like experience starts well before a customer is standing before your display,” says Lowenstein. “It’s across our investment in social media, where our products are heavily featured on TikTok and Instagram, and it’s also in the wide range of shades we offer, not just for complexion, but also in blushes, for example.” Catering to a wider range of skin tones and offering versatile products sets Milani apart, but he also says it has benefitted from more category blurring. “There’s much more overlap in people’s shopping habits now. They’ll buy some products from a high-end retailer, but also stock up at the supermarket,” he adds.
If a brand can’t compete on luxury experiences, they might be able to give the next best thing: a close-enough experience. So-called dupes have exploded in popularity. The meaning of dupes has evolved from being a slight pejorative to describe a copycat of a more expensive product, even down to the look of the packaging, to being a badge of honour for both the brand making it, and the consumer who identifies it as a close replica of a luxury brand. “It’s become a whole niche of content,” explains Lisa Payne, head of beauty at trends agency Stylus. “People go viral just making dupe content, and brands will even proudly trade on being dupe brands,” she adds. Anytime a prestige product goes viral, there’s an opportunity for mass-market brands to play in the space with near-enough equivalent, says Payne.
Milani’s Fruit Fetish Lip Oils are compared on social media to Dior’s, at a price of £11 to Dior’s £32. “I celebrate the dupe concept,” says Lowenstein, adding that he doesn’t feel the need to market any products as such because “the consumer is doing it for us”.
Budget brands are also playing in spaces previously dominated by luxury brands, such as clean or vegan beauty, says Marissa Lepor, director at The Sage Group, an investment bank that specialises in branded consumer goods. “In the past, these factors were primarily unique to luxury and prestige brands, whereas now, mass-market brands are investing into brand and product development at similar levels,” says Lepor, noting Rimmel’s Kind Free range as an example.
Building the wow factor
L’Oréal-owned Maybelline was behind one of the summer’s buzziest ad campaigns in London. Except it wasn’t actually real: the campaign used CGI to affix enormous lashes on buses and create visuals of the London Underground Tube trains colliding with mascara wands, all to promote the brand’s Sky High mascara. L’Oréal estimates it had over 100 million views of the campaign in the first week alone.
Stylus’s Payne compares the campaign with the influencer trips that premium brands favour. “Consumers have really started to push back against excessive, luxury brand trips for the most-followed influencers,” she says. “It feels out of touch and unrelatable.” She adds that many consumers now look for what Stylus calls ‘glimmers’. “A glimmer is a small moment of joy in your everyday life,” says Payne. If a brand is able to create a fun, unexpected moment that everyone can view or enjoy, it’s likely to resonate more.
Elf Cosmetics has also been investing in playful campaigns. In December 2022, it partnered with The Weather Channel and the singer-songwriter Meghan Trainor for a special “Radiance Report” announcing that the Halo Glow Liquid Filter — which retails at £14 and had a 75,000-strong wait list — was back in stock. A further partnership with the UK’s Channel 4 television network to create a branded series called “Ready or Not”, hosted by influencer Adeola Patronne, rolled out in July, with shoppable links alongside the content. The brand also debuted a Super Bowl ad this year starring actor Jennifer Coolidge. “Coolidge was an unexpected choice for a brand that’s so Gen Z focused, but that’s what made it so fun and memorable,” says Payne.
The Sage Group’s Lepor notes that mass-market brands historically didn’t attempt to compete with prestige players on narrative and flashiness in their campaigns. “Today, the level of investment in storytelling is prevalent across price points,” she says, adding that social media has caused more blurring of the lines than ever before.
(Discount) retail therapy
Deals and special offers are on the rise, even for more premium brands. Investment bank TD Cowen commented in a recent analyst note on the beauty industry that “promotional activity has been concentrated in legacy brands”, describing them as somewhat overstocked and facing competitive pressure. Management consultancy KPMG co-authored a report with the British Retail Consortium (BRC) that found a “big rise” in promotions from retailers across all sectors in the UK, which has been hard hit by fuel prices and stubbornly high inflation.
Payne says there’s a certain thrill to getting a bargain consumers enjoy, regardless of their wealth. “There’s a certain cool currency to getting a good deal. There’s an adrenaline rush when you’re complimented on your lipstick, and you can say that you bought it on the cheap,” says Payne. She points to the growing presence of beauty stores at discount shopping complexes like the UK’s Bicester Village such as Clarins, Elemis and Estée Lauder’s outpost, The Cosmetics Company Store. Indies like Krave Beauty have found success in selling prototype products at discounted rates.
The Sage Group’s Lepor adds that high-low experimentation will likely continue. “Curating one’s beauty routine across mass to luxury reflects knowledge of the sector, as well as their unique personal care needs,” she says. “Mixing a drugstore cleanser with a luxury moisturiser evokes a sense of confidence.”
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
