The beauty industry is on a path to premiumization of all sorts of products in the personal care segment, from hair and skincare essentials to sun care to fragrance. This movement is driven by consumers who are increasingly willing to invest in high-end products that perform and offer a more premium experience. The result is mass market growth fueled by increases in usage and price hikes.
How does the rise of premiumization affect indie beauty brands?
Indie brands can now compete head-on with more established players. According to Miche Beauty Co-Founder and CEO, Michelle Ballard, premiumization levels the playing field for indie brands to scale as the margins are better, a brand’s target customer typically has more disposable income, and consumers are more inclined to support quality niche brands. Recently, the prestige beauty segment has seen more stability as brands grapple with economic conditions, supply chain disruptions, and raw ingredient price fluctuations. With that in mind, premium products could shift to become the norm, regardless of price point.
Today’s consumers are seeking not only quality ingredients and efficacy, but also a better brand experience. They are taking a more calculated approach to their purchases, opting for long-lasting, multitasking beauty products. Those on a tighter budget will simplify their beauty routine by combining cost-effective products with a few premium items. The upside of premiumization is the potential for innovation in the prestige category. As these innovations become more cost-effective, they can eventually shift to the mass market.
The role of digital marketing and social media
Marketing also plays a crucial role in premiumization. Brands like Glossier and Supergoop! are using social media and influencer marketing to build buzz and create a sense of exclusivity around their products. They are also investing in in-store experiences, such as pop-up shops and interactive displays, to engage with consumers and showcase their products in a premium way.
Additionally, L’Oreal’s premiumization strategy has been largely informed by the increased level of expertise and desire for value-added products among consumers, which has been brought about by digital and social media. This is illustrated by the 40% increase in online beauty videos and 1.6 billion more “beauty” searches on Google last year.
Innovation to meet consumer expectations
The more informed people are about a product category, the higher their expectations become. When given more options and features, consumers are often willing to pay a premium price. L’Oreal’s latest product offerings are a prime example of this trend in action. To sustain growth, formulas at mass must rely on raw material suppliers who can innovate or cost-effectively provide high-performance materials that meet consumer standards at an accessible price point. L’Oreal’s solution to this challenge is investing in biotech through partnership with Debut to manufacture and scale cost-effective, high-performance raw materials that maintain margins while accelerating growth.
Overall, the path to premiumization in mass requires a holistic approach that encompasses packaging and product innovation with exceptional ingredients and formulations. By investing in these areas, brands can create high-quality products that resonate with consumers and stand out in a competitive market.