Value, loyalty and growth potential are all under threat in the beauty sector as consumer spending patterns waver in an uncertain landscape. Beauty brands must work harder than ever to ace retention rates or risk being left behind.
The sector is being reshaped by multiple pressures, including rising US tariffs, inflation-induced market instability, price hikes, the persistent threat of recession and the proliferation of dupes reframing perceived product value. The post-pandemic boom has cooled, while competition has intensified in a saturated market. Big Beauty CEOs have raised red flags, warning investors that performance in the second half of the year will be challenging. Most recently, industry giant Elf Beauty announced a $1 price increase across its assortment, citing market turbulence.
Brands are also feeling the shift. “Consumers are under pressure, and over the past year, geopolitical uncertainty has further dented confidence,” says Emma Bates, COO of skincare brand S’able Labs. “With disposable income declining, shoppers are stretching replenishment cycles and opting for more affordable alternatives.”
With ‘recession indicators’ and ‘recession core’ trending online, and a shaky global economic outlook, beauty brands need to brace for a dip in consumer spending power.
Evan Feldstein, North America general manager of skincare tech brand Foreo, agrees: “We’ve observed a marked change in consumer behaviour. Broader economic uncertainty has driven more thoughtful, deliberate spending. Price sensitivity is here to stay.” To mitigate risk and respond to tariff turbulence, the brand has announced price increases of between 20 and 30 per cent across its portfolio.
According to research organisation The Conference Board, consumer confidence on its monthly index declined for five consecutive months before a modest uptick in May following positive trade talks between the US and China. Confidence remains down across all demographics in 2025 to date, the firm said in a statement. Continued uncertainty over on-off tariffs is not helping.
“Beauty spenders are now more price conscious,” said Oliver Chen, managing director of retail and luxury at investment banking firm Cowen, in an analyst s note. “Post-pandemic, we saw explosive growth, but that momentum is waning. Consumers are more cautious, and brands must refocus on building resilience and deeper customer relationships,” says Akash Mehta, co-founder of Ayurvedic haircare brand Fable Mane.
Out of touch
Some elements of the beauty playbook no longer hold quite the same sway. While high price points have historically suggested superior product quality, today’s discerning consumer often measures value through efficacy and ingredient transparency. Customer retention rates become harder to maintain unless brands consistently demonstrate performance, authenticity and relevance. In this new value paradigm, brands earn loyalty through substance, rather than status. “Consumers are more mindful about spending. They’re hunting for that sweet spot: effective, high-quality products at accessible prices,” says Lucy Ruehlemann, VP of clean beauty brand Saie.
That’s why the masstige category (mass-market brands with prestige-level performance) has gained significant market share. Brands such as The Ordinary and La Roche-Posay are boosting sales by blurring the lines between accessible prices and quality. Olivia Stelmaszczyk, Euromonitor’s senior beauty and fashion analyst, says this is why clinical, dermatologist-founded brands are outpacing premium-priced players. Conglomerates such as L’Oréal and Beiersdorf have reported sales growth in the category. “Consumers are prioritising proven efficacy,” says Stelmaszczyk. “Functional value is now a key determinant of what people are willing to pay.”
Dupe culture has also redefined value and loyalty. “The rise of dupes has made loyalty transactional, unless you’re offering cultural or emotional depth,” says Jun Lim, founder of fragrance brand Borntostandout. “Even the most loyal customers are now open to experimentation.” In short, value encompasses much more than price, including product performance, emotional connection and a compelling brand purpose, all jostling for impact in a crowded, cost-conscious landscape.
Rossana Doldi, managing director of haircare brand Batiste, refers to the evolving shopper as a “value hacktivist”, denoting a consumer who doesn’t just seek affordability but actively reconfigures purchasing behaviour to maximise benefit. “Shoppers are not only exploring online shopping, but are also turning to value channels as they rethink their beauty routines to find the perfect balance between efficacy and cost,” she says.
To keep pace, brands are rethinking. “You can’t fight sensitivity by cheapening your product. You must double down on what makes you different,” says Sahara Lotti, founder and CEO of eyelash brand Lashify. “That means we’re now focusing our value proposition on product innovation and educating the customer, showing them why we’re worth it.”
The influencer-led model of building loyalty and customer engagement is faltering, experts say. “Consumers are increasingly wary of overly curated influencer content and can quickly spot inauthenticity,” says Federica Levato, senior partner at global management firm Bain Co. She suggests brands prioritise community-led content and shift from monologue to dialogue communication, responding directly to feedback, encouraging user-generated content (UGC), and fostering a sense of mutual respect and belonging. “In this context, trust and engagement are earned, not assumed. Consumers want to feel seen, valued and heard.”
Redefining the proposition
To succeed in today’s market, experts suggest brands must rewrite their engagement strategies. Innovation may still be a proven engagement lever, but it should be carefully considered. “Product innovation that genuinely solves problems rather than creating new needs will be important,” says Katie Martin, executive VP and managing director of marketing agency Front Row Group. A shift from desire-led to need-driven innovation is reshaping definitions of consumer trust and redefining how pricing power and value are gained.
The pivot is summed up by Mac Cosmetics’s recent relaunch of its Studio Fix Powder Foundation. “While the reformulation introduced trending elements like a soft-focus finish and a broader shade range, it was fundamentally a response to changing consumer expectations around inclusivity and performance,” says Suzanne Scott, associate global beauty director at PR and consulting firm Seen Group. “There’s always an appetite for newness, but heritage brands must remind loyalists why they fell in love in the first place, while giving new consumers a reason to connect with timeless icons.”
When brands introduce products, they must straddle the line between hype and performance. “Consumers are still spending, but they’re actively seeking what’s next: cutting-edge solutions that feel fresh, effective and future facing,” says Feldstein. Foreo’s recent launch of its hair removal Peach 2 IPL device moved nearly 10,000 units and generated close to $2 million in a single day during a QVC live-shopping event, he says. “That level of traction shows there’s strong enthusiasm for innovation for us, but only when it’s backed by performance and trust.”
Mario Badescu is also leaning into functional innovation, bridging clinic-quality results with at-home ease for an upcoming launch. “Our new skin tools are developed in collaboration with our professional skin clinics,” says Megan Picurro, the brand’s global marketing director. “People are more educated than ever, and they’ll buy into solutions that work and tie back to credible expertise.”
As price sensitivity grows, emotional brand equity — anchored in authenticity, craft and cultural relevance, according to Bain’s Levato — is emerging as a competitive advantage. “When people ‘love’ a brand, they’re more likely to remain loyal even as prices rise, because they’re not just buying a product, they’re buying a feeling, a signal, a piece of identity,” says Dr Olga Logunova, research associate at King’s College London.
To strengthen that emotional tether, Scott recommends focusing less on fleeting trends and more on brand heritage. “Protecting legacy SKUs, adding value through initiatives like loyalty schemes, gift-with-purchase offers and pop-ups helps foster long-term loyalty,” she says. Brands such as Borntostandout, Fable Mane and Annemarie Börlind are each doubling down on their gift-with-purchase strategies to drive conversion, reinforce value and connect beyond the transaction. “These rewarding, community-first moments aren’t about selling, they’re about belonging,” adds Lim of Borntostandout.
Phygital (aka when physical-meets-digital) strategies are now vital to delivery. Logunova highlights the impact of Lululemon’s in-store wellness events and digital exclusives. “When consumers can engage online and offline in intuitive, meaningful ways, it amplifies brand relevance and conversion,” she says. Logunova advocates for immersive tech that bridges online discovery with in-store confirmation: “Whether through virtual consultations, augmented reality tools, or in-store QR integrations, the aim is to make discovery intuitive and rewarding. When executed well, phygital strategies don’t just drive sales, they reinforce brand relevance and enhance customer satisfaction in a world where value is judged by both price and experience.”
Amy Kapolnek, founder of The Fwrd Group, a growth consulting firm, emphasises that customers want to truly experience a brand. Conversion drivers, she says, include “online content that educates and excites, paired with personalised tech optimisations or in-person experiences that let them touch, feel and try the brand”.
Levato says loyalty programmes are also facing a transition, as points-based loyalty gives way to more nuanced, value-led ecosystems. “Loyalty programmes are evolving from transactional schemes to emotional engines of engagement,” she explains. The most effective offers include personalised perks, early access, exclusive content and even education or wellness benefits, rewarding users for attention and alignment, not just purchases. Picurro says Mario Badescu has intentionally moved away from deep discounting, preferring to reward customers through access. “Our strategy focuses on early drops, tailored offers and allowing our community to test and review upcoming launches,” she says.
While ‘community’ has become a buzzy industry term, experts say retention and loyalty success require brands to open and maintain a dialogue with customers to help stand out and retain engagement. For Kapolnek, “Community isn’t a channel, it’s a feedback loop.” The strongest brands treat it as a co-creative process, listening actively through DMs, reviews, surveys and even return data. “People are so tired of being marketed to,” she notes. “What they want is personal alignment and authenticity.”
Influencers still have their place, says Scott. “They drive both awareness and sales; however, the greater shift is that influencers and creators with fewer than 100,000 followers feel more authentic to consumers. The sense of engagement is higher, and the sense of trust and community is also significant.”
Creators with small and mid-sized followings have much higher engagement rates, new data shows. Brands are already shifting their strategies.
It’s a shift many influencer marketing and data platforms, such as Lefty and Traackr, have observed unfolding in the creator economy. Both firms note that striking the right balance within a multi-tiered influencer structure is essential to avoid oversaturation and influencer fatigue. According to Scott, brands aiming for conversions should engage smaller creators, while those focused on brand awareness should leverage big-number influencers.
Levato says successful retention stories collectively “blend personalised digital experiences, innovative and functional product offerings, meaningful community engagement and loyalty programmes that reflect real customer value”. “Retention isn’t just a strategy — it is a growth strategy. The brands that will thrive aren’t just acquiring, they’re actively keeping,” says Kapolnek. “And that’s what builds sustainable, engaging and scalable momentum.”
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