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Beauty Retailing - US - September 2018

"The US beauty industry is expected to garner sales in the range of $57 billion this year. Common themes and trends across the industry include inclusivity to address America’s diversification, clean beauty (products sans suspected toxic ingredients), simplification of beauty routines, the integration of physical and digital channels, personalization in all forms and emerging technologies."

– Diana Smith, Associate Director - Retail & Apparel

This report examines the following issues:

  • Market is growing, but may be impeding its own potential
  • Heavy competition for a piece of the pie

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Market is growing, but may be impeding its own potential
            • Heavy competition for a piece of the pie
              • Figure 1: Retailers shopped primarily, June 2018
            • The opportunities
              • Define what inclusivity means
                • Capitalize on the store experience, but encourage more cross-channel shopping
                  • Figure 2: Method of shopping, by generation, June 2018
                • Go beyond free to value-add
                  • Devise strong social media and influencer strategies
                    • What it means
                    • The Market – What You Need to Know

                      • Slow gains expected
                        • Some troubled segments impede overall growth
                          • Population growing and diversifying
                            • Interest in health and wellness spills over to beauty
                            • Market Size and Forecast

                              • Inching up, one year at a time
                                • Figure 3: Total US retail sales and fan chart forecast of beauty products, at current prices, 2013-23
                                • Figure 4: Total US retail sales and forecast of beauty products, at current prices, 2013-23
                            • Market Breakdown

                                • Share leaders
                                  • Color cosmetics maintains stronghold
                                    • Fast-growing categories
                                      • Strong economy boosts smaller, discretionary categories
                                        • Facing challenges
                                          • Concerns about nail damage and a general orientation towards lower-priced products impedes growth of struggling sectors
                                            • Figure 5: Total US retail sales of beauty products, by segment, at current prices, 2016 and 2018
                                          • Vast majority of purchases occur outside of grocery and drug channels
                                            • Figure 6: Total US retail sales of beauty products, by channel, at current prices, 2016 and 2018
                                        • Market Factors

                                          • Women 35-44 represent a key target segment; men still important contributors
                                              • Figure 7: Level of involvement, by gender and age, June 2018
                                            • Country’s diversification shapes the beauty market’s future
                                              • Consumers more mindful of their health and wellness, leading to a “clean beauty” phenomenon
                                                • Clean beauty
                                                  • Figure 8: Attitudes toward product labels and ingredients, by age, June 2018
                                                • Ingestibles
                                                  • Cruelty-free claims on the rise in color cosmetics
                                                  • Key Players – What You Need to Know

                                                    • Augmented reality: are brands more interested in it than consumers?
                                                      • Direct sellers and subscription services attract niche targets
                                                        • The Amazon effect is about to get stronger
                                                          • Brands using tech to become more personalized
                                                          • What’s Trending?

                                                            • Au naturel in all forms is in, but that’s not all that women want
                                                              • Figure 9: Interest in beauty trends, by race and Hispanic origin, November 2017
                                                            • Augmented reality is what’s now and what’s next
                                                              • Figure 10: Influence of augmented reality on store selection, by generation, June 2018
                                                            • In their words: AR, yay or nay?
                                                              • Target’s on a beauty craze
                                                                • Riley Rose on the scene
                                                                • What’s Struggling?

                                                                  • Direct sales companies and subscription services not scaling audiences
                                                                    • Direct sales companies
                                                                      • Figure 11: Shopping incidence of direct sales companies, May 2017 and June 2018
                                                                      • Figure 12: Interest in direct sales companies, by generation, June 2018
                                                                    • In their words: thoughts on direct sales companies
                                                                      • Subscription services
                                                                        • Figure 13: Beauty box subscription shoppers – Any shopping (net), by generation, June 2018
                                                                        • Figure 14: Dollar Shave Club “Getting Ready” TV ad, July 2018
                                                                    • What’s Next?

                                                                      • Wellness 2.0
                                                                        • Here comes Amazon…again
                                                                          • Voice-activated assistants as the new beauty advisors
                                                                            • Machine learning aids online retailers in becoming more personable
                                                                              • DNA testing takes personalization to a whole new level
                                                                              • The Consumer – What You Need to Know

                                                                                • Not all beauty buyers are women 18-34
                                                                                  • Spending on the rise
                                                                                    • Amazon has surpassed specialty beauty retailers in terms of where consumers shop
                                                                                      • Sensorial experiences tough to emulate online
                                                                                        • Social media and influencer strategies required
                                                                                        • Who’s Buying?

                                                                                          • Retailers should focus on increasing basket size or stimulating repeat purchases among light buyers
                                                                                            • Figure 15: Repertoire of beauty items purchased, June 2018
                                                                                          • Heavy buyers: adults 35-54 emerge
                                                                                            • Figure 16: Repertoire of heavy* beauty purchasers, by age and gender, 2017 versus 2018, May 2017 and June 2018
                                                                                          • Light buyers: African American consumers buying less
                                                                                            • Figure 17: Repertoire of light* beauty purchasers, by race and Hispanic origin, 2017 versus 2018, May 2017 and June 2018
                                                                                          • Two thirds actively involved in the beauty buying process
                                                                                            • Figure 18: Engagement, by repertoire of beauty items purchased, June 2018
                                                                                        • Spending

                                                                                          • On average, spending has increased 13% in past five years
                                                                                            • Figure 19: Trended mean spending by category, January 2013 – March 2018
                                                                                            • Figure 20: Trended mean fragrance spending, January 2013 – March 2018
                                                                                            • Figure 21: Amount spent on fragrances, January 2017 – March 2018
                                                                                          • Multicultural consumers outspending Whites
                                                                                            • Figure 22: Mean spending by category, by select demographics, January 2017 – March 2018
                                                                                        • Retailers Shopped

                                                                                          • Nearly eight in 10 consumers shop at five channels
                                                                                            • Figure 23: Retailers shopped, June 2018
                                                                                          • Channel shifting continues to occur
                                                                                              • Figure 24: Retailers shopped – Any shopping (net), 2017 versus 2018, May 2017 - June 2018
                                                                                            • In their words: where they shop and why
                                                                                              • Men seek the basics while women are more selective
                                                                                                • Figure 25: Retailers shopped – Any shopping (net), by gender, June 2018
                                                                                              • Where are the young women shopping?
                                                                                                • Figure 26: Retailers shopped – Any shopping (net), by females and age, June 2018
                                                                                              • Where are multicultural consumers shopping?
                                                                                                • Figure 27: Retailers shopped – Any shopping (net), by race and Hispanic origin, June 2018
                                                                                            • Spotlight on Ulta Beauty and Sephora

                                                                                              • iGen and Millennial women still love specialty stores
                                                                                                • Figure 28: Specialty beauty retailers shopped, 2017 versus 2018, May 2017 and June 2018
                                                                                              • Similar offerings and clientele
                                                                                                  • Figure 29: Specialty beauty retailers shopped, by select demographics, June 2018
                                                                                                • In their words: Ulta versus Sephora
                                                                                                  • Recent initiatives
                                                                                                    • Figure 30: Ulta Beauty “The Possibilities Are Beautiful” TV ad, September 2018
                                                                                                • Method of Shopping

                                                                                                  • Flocking to the store
                                                                                                    • Figure 31: Method of shopping, 2017 versus 2018, May 2017 and June 2018
                                                                                                    • Figure 32: Method of shopping – nets, May 2017 and June 2018
                                                                                                  • Nearly half of iGens and Millennials are multi-channel shoppers
                                                                                                    • Figure 33: Method of shopping, by generation, June 2018
                                                                                                  • In their words: store versus online?
                                                                                                  • A Deeper Look at Online Shopping

                                                                                                      • Exclusive online products can create intrigue
                                                                                                        • Figure 34: Online purchase drivers for beauty items, March 2018
                                                                                                      • Online brand personality is important to consider
                                                                                                        • Figure 35: Reasons for adding the last beauty product purchased online to an online shopping cart, by women 18-34, February 2018
                                                                                                      • Barriers such as lack of sufficient product information or reviews are easier to address
                                                                                                          • Figure 36: Reasons for not shopping for beauty products online, April 2018
                                                                                                        • In their words: what consumers will buy online
                                                                                                        • Items Purchased

                                                                                                          • High purchasing rates for grooming staples
                                                                                                            • Figure 37: Items purchased, June 2018
                                                                                                          • It’s not all about women 18-34
                                                                                                            • Figure 38: Items purchased, by female and age, June 2018
                                                                                                          • Online shopping rates fairly consistent for most categories
                                                                                                            • Figure 39: Online versus in-store shopping habits for beauty products, February 2018
                                                                                                        • Shopping Behaviors: Routine versus Variety

                                                                                                          • Majority of beauty buyers comfortable in their routines…
                                                                                                            • Figure 40: Routine behavior, by repertoire of beauty items purchased, June 2018
                                                                                                          • …but open to exploring options
                                                                                                            • Figure 41: Experimentation level, by gender and age, June 2018
                                                                                                          • Loyalty programs can create an emotional connection with customers
                                                                                                            • Figure 42: Loyalty program engagement, by female age, June 2018
                                                                                                        • Influencers

                                                                                                          • Instagram is the place to be
                                                                                                              • Figure 43: Social media influence, by generation, June 2018
                                                                                                            • Using social media to engage customers
                                                                                                              • Are sales associates losing their credibility to other influencers?
                                                                                                                • Figure 44: Social media influence, by generation, June 2018
                                                                                                              • In their words: the role of the sales associate
                                                                                                                • Personal stylists another (secondary) source of influence
                                                                                                                  • Figure 45: Influence of personal stylists, July 2018
                                                                                                              • Interest in Retail Offerings

                                                                                                                • Women want more than free stuff
                                                                                                                  • Figure 46: Interest in retail offerings, July 2018
                                                                                                                • Samples and unique products could reach two thirds of shoppers
                                                                                                                  • Figure 47: TURF Analysis – Interest in retail offerings, June 2018
                                                                                                                • In-store beauty services gaining universal appeal
                                                                                                                  • Figure 48: Interest in select retail services, by female age, June 2018
                                                                                                                • Multicultural consumers prefer a personalized approach
                                                                                                                  • Figure 49: Interest in select retail services, by race and Hispanic origin, June 2018
                                                                                                                • In their words: if they owned their own store
                                                                                                                • Appendix – Data Sources and Abbreviations

                                                                                                                  • Data sources
                                                                                                                    • Sales data
                                                                                                                      • Fan chart forecast
                                                                                                                        • Consumer survey data
                                                                                                                          • Consumer qualitative research
                                                                                                                            • TURF methodology
                                                                                                                              • Abbreviations and terms
                                                                                                                                • Abbreviations
                                                                                                                                  • Terms
                                                                                                                                  • Appendix – The Market

                                                                                                                                      • Figure 50: Total US retail sales and forecast of beauty retailing, at inflation-adjusted prices, 2013-23
                                                                                                                                      • Figure 51: Total US retail sales of beauty products, by channel, at current prices, 2016 and 2018
                                                                                                                                      • Figure 52: US supermarket sales of beauty products, at current prices, 2013-18
                                                                                                                                      • Figure 53: US drugstore sales of beauty products, at current prices, 2013-18
                                                                                                                                      • Figure 54: US sales of beauty products through other retail channels, at current prices, 2013-18
                                                                                                                                      • Figure 55: Female population by age, 2013-23
                                                                                                                                      • Figure 56: Male population by age, 2013-23
                                                                                                                                      • Figure 57: Population by race and Hispanic origin, 2013-23
                                                                                                                                      • Figure 58: Consumer Sentiment Index, January 2007- July 2018
                                                                                                                                      • Figure 59: Disposable Personal Income change from previous period, January 2007-June 2018
                                                                                                                                  • Appendix – The Consumer

                                                                                                                                      • Figure 60: Trended purchase incidence of personal care products, January 2013 – March 2018
                                                                                                                                      • Figure 61: Trended purchase incidence of fragrances, January 2013 – March 2018
                                                                                                                                      • Figure 62: Trended spending on personal care products, 2014 versus 2018, January 2013 – March 2018
                                                                                                                                      • Figure 63: Trended spending on fragrances, 2014 versus 2018, January 2013 – March 2018
                                                                                                                                      • Figure 64: Amount spent by category, January 2017 – March 2018
                                                                                                                                      • Figure 65: Table - TURF Analysis – Interest in retail offerings, June 2018

                                                                                                                                  Beauty Retailing - US - September 2018

                                                                                                                                  US $4,395.00 (Excl.Tax)