The U.S. beauty industry, inclusive of mass and prestige brands, has experienced consistent double-digit dollar growth over the past year. But prestige beauty is the standout.
Prestige beauty consumers have proven their resilience time and again. For the second consecutive year, prestige beauty’s growth in units sold outperformed the mass market and every other general merchandise and CPG industry tracked by Circana. In other words, consumers are not only spending more, but they are also buying more prestige beauty products, during a time when they are being more selective in their purchases overall. Several dynamics have contributed to prestige beauty’s ability to defy expectations, and we anticipate these factors will continue to generate growth in 2024.
Prestige beauty products have become the little luxuries in which consumers can invest to treat themselves. This mentality has proven to be a key driver of the strong performance happening across beauty categories, especially areas of the market that are experiencing premiumization. Key dynamics fueling this performance include who is shopping, how often they shop, and where they are shopping.
Higher income consumers remain the largest consumer group purchasing prestige beauty products – representing 50% of the shopper base – and they continue to increase their spending, offsetting the pull back from consumers among households earning below $100K per year. The higher income consumers are also less affected by inflationary pressures and less likely to cut back on their beauty spending.
Another factor keeping the beauty industry afloat is the shorter replenishment cycles of its products compared to most other industries. This cadence is particularly true for categories like skincare and hair, which have higher daily usage frequencies. Adding to this behavior is the fact that in skincare, especially, there is a new cohort that is rapidly making their mark and will likely drive growth for years to come: Gen Alpha. Prestige beauty products, and specifically skincare, topped the holiday lists of many young consumers in 2023 and their enthusiasm should continue into 2024 and beyond.
Last but certainly not least is the power of physical retail. Brick-and-mortar stores are important to the success of the beauty industry. In fact, the in-store experience is prestige beauty’s point of difference, compared to the mass market. For prestige beauty, the store is not only a destination, but an experience, allowing consumers to touch and feel the products and interact with others. We don’t expect this popularity to wane anytime soon, and as a result we anticipate the brick-and-mortar channel to outperform e-commerce in 2024. Given that the brick-and-mortar channel accounts for a larger portion of overall sales, in both the mass and prestige markets, physical retail will be a significant growth driver across most beauty categories this year.
The beauty industry outlook remains strong in 2024, which is extraordinary given the phenomenal growth it has experienced for the past two years. We anticipate this success will continue for both the mass and prestige markets, although we expect prestige will continue to outpace mass over the next 12 months.
Regardless of which side of the business, consumers are very engaged with beauty products – not only in a physical sense, to enhance their appearance, but also to meet their inner, emotional needs. Beauty brings joy, which is a universal aspiration. My call to action for brands and retailers is to ensure you harness this high engagement to drive growth into 2024 and beyond.
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