Recently estimated at $532 billion dollars, the beauty industry paints a pretty picture, yet some prestige brands this year have shown signs of decline. Beauty giants L’Oreal, Estee Lauder, Coty, and Ulta Beauty were just a few to miss sales expectations. But one thing’s for certain. In this lucrative market, today’s consumers haven’t actually stopped purchasing, they’ve merely shifted towards newer beauty trends and brands. And one trend in question is custom beauty. Ranging from skin and hair care to serums and toothpaste, it’s new market entrants that are shaking things up.
In a survey sample of 3000 participants, the average American woman used 16 beauty products in her daily regime, ranging from morning cleanser and intensive eye cream to lash lengthening serum and blusher. Consumers are overwhelmed with choices on the mainstream market, so how does your beauty product stand out from the masses?
In this post, we’ll define and explore the drivers behind the custom beauty trend, and the new strategies used by independent brands leading the way. We’ll take a snapshot of the new beauty entrants challenging the mainstream market and what legacy brands can do to adapt.
Let’s start with custom beauty and what it’s all about.
What custom beauty means today
In this seemingly over-saturated market, it’s easy to think it’s all been done. For the right price, we can already purchase tailored clothing, custom perfume and color matching makeup, but up until recently, it wasn’t truly skin deep.
Custom beauty today has gone one step further, by converging technology, science, and beauty with e-commerce. These elements combined, allow brands to engineer the perfect products, entirely customized to an individual’s needs, and all from the comfort of their own home.
Take at home custom hair care for example.
Or custom anti-aging treatments.
These brands seek to democratize the custom trend by using e-commerce to bypass the expensive burden of infrastructure. They use online and offline consultations to collect data, before matching it to personalized ingredients and product variations. And it’s all made possible thanks to machine learning and big data collection. Neither are new concepts, but up until recently weren’t highly present in the beauty market. Modern data science allows brands to discover patterns and predictions over time, to create more accurate recommendations. Oily, flaky and sensitive, in search of cruelty-free, organic - no problem!
What’s driving the custom beauty trend
So, who and what are driving the custom beauty trend?
First, are changing consumer preferences and behaviors. Millennials and Gen Z in particular, have a different relationship with brands that can also permeate into their beauty needs. Their online and offline worlds are converging, allowing them to make purchases at any time, anywhere, through multiple channels of sale. They use their consumption as a method of expression and individual identity as well as purchasing based on their ethical considerations. The custom trend presents a wide-ranging opportunity for new and existing brands. People want functional, customer-centric options that incorporate values that align with their ethics - sustainable, vegan, cruelty-free and organic.
There is also the need to diversify. Brands are well aware of the need for inclusion and diversity in their products, marketing, and representation, yet, they still fall short. One-size-fits-all products don't work when consumers come in all races, ages, hair types, and skin problems. Each person has unique needs that aren’t always met by a product range targeted at their mass demographic.
And perhaps the main driver of the custom beauty trend has been new points of sale. Cosmetic products, such as skincare, hair care, and fragrances are the most-sold products online. E-commerce on social media platforms is growing exponentially as a distribution channel, as smartphone users increase. New and private-label brands target social users, combining their love for aesthetics with beauty consumption. Combined with fun, easy to use consultations, and swiping culture, purchasing custom goods has never been so easy.
How custom beauty startups are reshaping the industry
Custom beauty brands are reshaping the mainstream market by converging technology, science, and beauty. When you break down the trend, you can identify three main strategies.
Personalized manufacturing
The role of AI
AI is the power behind personalization, process automation, digital supply chain and more. It typically refers to the analysis of huge amounts of industry data including ingredients, products, and consumer demographics. It aggregates this data to match consumer specifications with specific ingredients to produce the perfect custom product.
A comprehensive skincare database of ingredients, products, and reviews
Proven is one of the new startup entrants using AI to deliver personalized products in quick delivery time. Budding female entrepreneurs developed what is claimed to be the most comprehensive skincare database on the market. ‘The Skin Genome Project’ database was awarded MIT’s 2018 Artificial Intelligence Award and currently analyses over 20,238 skincare ingredients, 100,000 individual products (luxury, prescription, generic, etc.), and 8 million review testimonials, down to the hardness of water and humidity where you live. This advanced database is the brains behind the quiz identifying custom products.
Personalized marketing
An intelligent cleansing device that learns as its used
Personalized marketing includes consumer data collection via online and offline channels. The LUNA fofo is a Swedish beauty tech disruptor doing just that. The AI-based facial cleansing device uses facial scanning to make personal recommendations, using embedded sensors to analyze the skin and create customized massage routines. Accompanying the device is a mobile application FOREO, a self-learning, data collection hub that’s been hailed a pocket beauty coach. The skincare consultation quiz asks users to rate their skin out of 100 and report on levels of hydration. This information adjusts the power, frequency, and duration of T-sonic pulsations as it collects more data, continuously learning and optimizing according to the condition of the user’s skin. The goal is to reach the desirable 100 out of 100 score.
Personalized manufacturing
Use consumer data to predict changes in the skin over time
Part of the new custom beauty brand business model is ensuring consumer loyalty and repeat purchasing. Smart packaging startups do this by using personalized distribution. This means auto-replenishment and automated re-ordering, allowing brands to track consumer usage habits post-purchase.
Atolla is another new MIT born startup, using machine learning to identify skin issues and recommend personalized serums. It has a monthly recurring subscription to build a long term history and profile of consumers’ skin as it changes. The idea is to create a customized serum process, in turn, that removes guesswork and wasteful experimentation. A monthly skin health kit measures the levels of oil, moisture and pH in the face, before being added to a personal online profile.
In the long term, Atolla will be able to create a longitudinal data set of skin issues across ages, races, demographics, and lifestyles. Over time it will predict the change in a person's skin and proactively adjust and deliver the serum.
How prestige brands are jumping on the custom trend
The custom beauty trend is being innovated by new emerging startups, but prestige brands need not despair. The key is to adapt to changing consumer preferences.
Millennials and Gen Z want to buy products from inclusive brands in alignment with their values. This means transparent ingredient lists, ethically tested products and marketing with diverse representation. Proven and Atolla made a point to use fresh-faced models with pores and blemishes on display because consumers of the future want authenticity.
Advancements in technology mean buyer journeys are changing but that’s not to say in-store experiences are dead. JP Morgan research found legacy brands continue to lead in skincare sales thanks to their history, popularity, and resources in research and development. This presents them with the opportunity to innovate faster than emerging brands.
L'Oréal's makeup brand Lancome recently unveiled an in-store AI custom foundation machine. An adviser scans the pigment of the skin before a fresh custom blend formula is concocted. Lancome also acquired ModiFace, an augmented reality startup, simulating makeup, hair, and skincare.
However, the research also found skincare sales to be overtaking makeup since 2017. The selfie generation is growing up and using skincare products earlier than their predecessors.
This means beauty brands may want to focus their investment on developing custom skincare products over cosmetic products.
The future of beauty is personal
As the world of beauty becomes increasingly competitive, consumers are faced with impersonal experiences and overwhelming choice. Prestige and mainstream brands can use custom made products to simplify this complicated process and take the lead in consultation. Customer loyalty will grow when brands eliminate the unrewarding and wasteful cycle of experimentation.
It’s time for legacy brands to collect data directly from consumers and use it meaningfully. Buyer habits are changing but new technologies allow them to be heard. While the custom trend makes up just a small percentage of sales, democratizing these once luxury products will help to expand audiences.
If you’re a large or legacy brand looking to explore the custom trend, we've got the tools and expertise you need. Get in touch to book a free demo and see how it works!
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