Beauty

Rising costs are driving beauty consumers to trade down with private labels

Affordable, private-label beauty products offer a sweeter deal for customer
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Target

· 3 min read

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Rising costs are driving consumers to not only reconsider spending habits, but also completely eliminate things from their purchase list that they might not necessarily need. And when it comes to beauty, customers are not necessarily ready to give up on skin care or hair care luxuries just yet.

Instead, they’re trading down. “Beauty, especially color cosmetics, suffered overall during the pandemic. Some consumers became more cost conscious and open to lower-priced labels, including private labels, when they otherwise wouldn’t have been prior to the pandemic,” Michelle Kluz, partner in the consumer practice of Kearney—who was also recently named CEO of Stila Cosmetics—told Retail Brew in an email.

Take Elf Beauty, for instance—it beat Wall Street forecasts in its quarterly results. 

  • For the brand, a portion of that success came from the sales of its $10 hero product Power Grip Primer as consumers traded down from a high-end rival product (which went unnamed) priced at $34, Tarang Amin, Elf’s chairman and CEO, told WWD.

Private-label beauty may benefit from the “trading down” trend, because brands can offer an affordable price with a side of aspirational quality.

Pivoting to private: "If you see that the shampoo…that you bought last month or three months ago went from $10 to $14, you just might say, ‘I’m trading down. Let me see what I can get in private label,’” Marie Driscoll, managing director of luxury and retail at Coresight, told Retail Brew.

  • Private-label brands made up 6.8% of sales at Sephora, in the year ending June 2022, per Jonah Ellin, chief product officer at 1010data.
  • Between April and December 2020, overall beauty sales were down 17% online, and online sales at Sephora and Ulta were down 25.5%.
  • During the same period, private label Sephora Collection and Ulta brand items were slightly up at 0.5%, with the biggest winners being lip balm, eye shadow, mascara, and lip color.

Dollar specific: Private label is a strategy the likes of Dollar General have stuck by.

  • While it continues to carry brands like Maybelline and L’Oréal, Dollar General has introduced several private-label brands to its customers, first with Studio Selection, a personal care label founded five years ago.
  • Studio Selection was followed by makeup and skin care line Believe Beauty in 2019, which the company claims has been immensely popular among its customers.
  • The impetus behind doubling up on private-label beauty comes from both standing out and providing its customers access to “aspirational” brands that’s also affordable, Amanda Wilson, Dollar General’s merchandising director of beauty and personal care, told Retail Brew.

But retailers may likely need to address specific customer needs, instead of only providing an all-encompassing beauty experience. “[Brands] should be communicating with their customers,” Driscoll noted. “They should be engaging in direct conversations.”

As such, brands will continuously need to prove their (affordable) worth.—JS

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