There has never been a drop like this. So far, Kline’s largest market decrease has been a 0.8 percent drop in 2009 during the last recession. The only other occasion Kline observed a market drop was during another recession in 1991, when the market fell by 0.3 percent.
“Given the unprecedented situation that is unfolding globally as both a health and a financial crisis, it is unsurprising that the beauty business is having its worst year,” says Carrie Mellage, Vice President of Kline’s Consumer Products Practice. “Even our worst-case scenario of -8 percent may not seem steep enough in light of the bad days we are all experiencing, but there are enough key categories in the mix to keep the market steady.”
Indeed, according to Kline’s forecasting study, beauty categories are divided into four groups:
Hand sanitizers and liquid hand soaps are two categories that will see a boost in demand.
Shampoos and deodorants are examples of everyday essentials that consumers are expected to use on a regular basis.
Soothing products, such as facial skin care and nail polishes, are predicted to drop in the near future, but may profit from customers using them as a treat and/or to retain or build a portion of their routine that they can still control;
Can-wait categories, such as scents and color cosmetics, are projected to suffer significantly during the social separation caused by the health crisis and will continue to suffer in the years ahead as a result of the economic consequences.
“We expect the cosmetics market to suffer in 2020 and the years ahead, but we expect it to recover in three to five years, as it has in all previous recessions,” Mellage said. “In comparison to other businesses, the beauty industry is relatively recession-proof, and customers will continue to seek its products – both for essential requirements and as an enjoyment.”
In the past, the “The “lipstick theory” has shown to be correct, with lipsticks (through the four recessions from 1973 to 2001) and eye cosmetics (during the most recent recession of 2008-2009) performing very well. “Perhaps there will be another winner in the mix this time,” Mellage concludes.
Why is the cosmetics sector recession-resistant?
Some of the first things that come to mind when people think of recession-proof businesses and industries are the supermarket and IT sectors. Everyone needs to buy food and communicate, but there’s also an innate urge that comes out when they’re depressed. Regardless of the circumstances, evidence reveals that the ordinary individual wants to feel good about herself. This is why the beauty industry is regarded as one of the most recession-resistant sectors of the economy, and it is something that anyone seeking for a job should investigate.
What is a recession-proof industry?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
Are cosmetics resistant to economic downturns?
“We were founded out of a recession, therefore recessions don’t worry us,” Kilmer-Purcell remarked.
Beyond its own operations, it’s understandable that Beekman 1802 is optimistic about the coming year. While predictions of a recession in 2020 continues to echo, unemployment remains low, and trade-related risks have been mostly avoided.
The beauty industry has long been regarded as a recession-proof industry, as consumers can still afford cosmetics even when they can’t afford more extravagant expenditures such as cars or homes. However, the widely quoted lipstick index, coined by The Este Lauder Companies chairman emeritus Leonard Lauder and indicating an 11 percent increase in lipstick sales during the 2001 recession, is an ambiguous marker today. According to third-quarter NPD statistics, the biggest category in beauty, makeup, has witnessed a 7% year-over-year decline to $1.3 billion.
“The NPD Group’s executive director and industry analyst, Larissa Jensen, stated, “Beauty is not recession-proof.” “We watched every category struggle in 2008 and 2009. Will there be growth categories if there is a recession in 2020? Yes, but we have no clear indication of what they are at this time.”
Tinted moisturizers, eyebrow products, and lip glosses, according to Jensen, are current bright spots in color cosmetics, reemphasizing a return to the no-makeup look. This haste to “After the 2008 recession, in September 2009, “the natural look” was also a hit. Less of a makeup routine usually means less money spent.
As a result, skin care may be the beauty industry’s recession-proofing strategy. According to the most recent NPD data, the category sold $1.4 billion in the most recent quarter. However, premium players are no longer limited to established names like as La Mer; newcomers such as Dr. Barbara Strum and Augustinus Bader offer products that sell for $350 and $265, respectively. As beauty prices have risen to such high levels, and cross-segment purchasing has grown more common as a result of masstige brands, the formerly obvious trade-down impact has become less obvious.
“What you’re seeing in makeup is more of a category cycle than a recession. When there are more pricey skin-care options than ever before, makeup could do better and rebound during softer times,” said Rich Gersten, partner at Tengram Capital Partners.
Merz Aesthetics, a beauty company, does not expect the 2020 recession to stymie its newest expansion plans Merz just restructured its global pharmaceutical business to focus solely on its beauty clientele.
“If indicators point to a recession, we feel it will have a minor impact on our expansion ambitions,” said Bob Rhatigan, Merz Aesthetics’ global CEO. “During the 2008 recession, the non-invasive medical aesthetics sector did not shrink, and the usage of injectables like neurotoxins increased. People still want to feel good in difficult economic circumstances, and looking good will help them do so.”
What Rhatigan was alluding to with injectibles was similar to what Gersten saw with salon services in 2008. Gersten was part of L Catterton at the time, which controlled Frdric Fekkai.
“There are some services that certain clients will not give up,” he stated. “They may extend the time between appointments by one or two weeks, but at the end of the day, there are treatments linked to one’s looks that will not be abandoned.”
Jensen has higher-than-average hopes for DTC beauty brands like Glossier, which have sprung up after the 2008 financial crisis.
“It is dependent on the kind of your business. Madison Reed didn’t exist ten years ago, and I believe it has a good chance of succeeding since it’s better than drugstore hair color,” she remarked. “It’s like buying something in a salon, but at home.”
DTC brands have more control than many omnichannel peers because they don’t have the overhead margins of wholesale partners or the constant promotional activity that the beauty industry has opted for recently.
“Direct-to-consumer firms have the advantage of being able to control prices more easily, discount when they want, and promote when they need to. “They also have a better way of communicating those changes to customers,” Gersten added.
People still want to look good.
Even in difficult economic times, people care about their appearance. They may be required to maintain a certain image in order to keep their employment, or they may choose to clean up their appearance in order to create the best first impression possible on an interviewer. People are hesitant to give up services that help them look and feel their best for a variety of reasons. These aesthetic services, whether it’s a basic trim or a new manicure, may help lift people’s spirits even in the darkest of situations.
It can’t be automated.
The hair salon will be one of the last enterprises to be fully automated. While robots and computers are increasingly replacing vocations such as grocery checkers and factory assembly, no robot can cut your hair as good as your favorite stylist. It’s possible that it will happen in the future, but we’re not there yet. As a result, customers will continue to pay (and pay well!) for hair salon services from stylists they know and trust. They’re also unlikely to do it from home.
It can be tailored to your budget.
Even if they have to cut back on other parts of their budget, most people are still eager to spend their hard-earned money on hair salon services. Even if you’re on a tight budget, you can usually still afford salon services. Instead of having their hair cut and colored, individuals may choose to merely get it chopped. This month, instead of a full mani and pedi, a fast repolish could suffice. They will, however, schedule an appointment.
What is the economic impact of lipstick?
When customers nevertheless spend money on tiny indulgences during recessions, economic downturns, or when they individually have little money, this is known as the lipstick effect. They don’t have enough money to buy big-ticket luxury products, but they do have enough money to buy tiny luxury items like expensive lipstick. As a result, businesses that profit from the lipstick effect are more resilient to economic downturns.
What industries do best during a downturn?
- While some industries are more vulnerable to economic fluctuations, others tend to do well during downturns.
- However, no organization or industry is immune to a recession or economic downturn.
- During the COVID-19 epidemic, the consumer goods and alcoholic beverage sectors functioned admirably.
- During recessions and other calamities, such as a pandemic, consumer basics such as toothpaste, soap, and shampoo have consistent demand.
- Because their fundamental products are cheaper, discount businesses do exceptionally well during recessions.
Which businesses prospered during the Great Depression?
Chrysler responded to the financial crisis by slashing costs, increasing economy, and improving passenger comfort in its vehicles. While sales of higher-priced vehicles fell, those of Chrysler’s lower-cost Plymouth brand soared. According to Automotive News, Chrysler’s market share increased from 9% in 1929 to 24% in 1933, surpassing Ford as America’s second largest automobile manufacturer.
During the Great Depression, the following Americans benefited from clever investments, lucky timing, and entrepreneurial vision.