How Millennials are refashioning the make-up market: an in-depth analysis
today May 17, 2017
In 2016, make-up label Nyx recorded a revenue of €450 million, equivalent to a stunning 125% growth year-on-year. Nyx was bought by the L’Oréal group in 2014, and already operates about ten stores in France and some one hundred worldwide. And it does not advertise on TV or in magazines. The runaway success of this brand, which communicates only via social media, was fuelled of course by Millennials, a generation which is currently the focus of huge media attention and has strongly contributed to reshaping a host of consumer markets, make-up in particular.
Connected and self-centred?
Let's first of all define this consumer group, born on the eve of the digital revolution and also known as Generation Y. It consists of men and women between 18 and 35 years old, born between 1980 and 2000. In France, they make up approximately 20% of the population, and in the USA they amount to 92 million, according to Goldman Sachs, and have recently become the generation with the strongest purchasing power overall, outstripping Baby Boomers.
Millennials are young, hyper-connected, and have new ideas about beauty. "In the last few years, make-up has become more important relative to other beauty segments such as skincare and fragrance, driven chiefly by the younger generation and the social media surge, said Mathilde Lion, a European beauty industry expert at market research firm NPD Group. This phenomenon goes hand in hand with the trend for personal make-over and for 'selfie-ready' products."
Make-up has posted a record 8.4% rise in 2016 and is the main growth driver for the cosmetics market worldwide, estimated at €205 billion. The selfie generation is keen to spend its money on beauty: according to a survey by Ipsos, published by L'Oréal, the cosmetics budget of US consumers aged 19-24 is $49, much higher than the national average of $37.
Big names on a spending spree
The beauty industry's major international players have not remained idle, setting their sights on emerging make-up brands that are not yet household names, but which were able to win over influencers, building a close online relationship with their customers. Last year, the Estée Lauder group spent $1.45 billion to acquire Too Faced (whose revenue grew 70% in 2016), and also bought Becca Cosmetics in the same year. In early 2017, Coty, another big name focusing chiefly on fragrance, spent € 600 million on Younique , an innovative US brand whose beauty consultants sell their products solely via social media: the Tupperware party 2.0. French giant L’Oréal was the one which opened the dances, by acquiring Urban Decay in 2012, and Nyx two years later.
The growth of all of these labels has gone virtually unnoticed by those who do not use Instagram and its ilk, but emerging brands have made their name with Millennials first and foremost. Yet, it would be simplistic to ascribe their success simply to a generation of "channel-hopping, narcissistic individualists," as a Nielsen survey pigeon-holed them, since there are other factors that explain their influence on the beauty market: above all, their degree of expertise and their strong community spirit.
No cutting corners
Thanks to online tutorials and advice, blogs and a strong group dynamic, beauty aficionados are increasingly pooling together into communities, sharing expertise on cosmetics products and their use. "Millennials have become experts, they have an interest in professional make-up techniques and are capable of taking on the role of consultants for other generations," explained Mathilde Lion, adding that the number of beauty-related searches on YouTube increased by 50% between 2014 and 2015.
The Millennials' expertise means that brands cannot afford to put a foot wrong. The Generation Y wants "to understand what lies beneath a product's cap, said Eric Briones, a strategy consultant and co-author of the book 'La génération Y et le luxe' (Luxury and the Y Generation). "They demand that cosmetics labels cater to their every whim, without giving up on anything," and are especially strict on service levels.
At the same time, Millennials feel they are free not to put their trust in one label only. "Digital natives are no longer loyal to one product or one style alone, they are increasingly sophisticated and demanding, said Diane Lucas, Communications & Community Manager for French website The Beautyst, recently acquired by Feelunique. Social media are the point of contact between Millennials and brands. Proximity, advice and beauty kits: these elements are all part of their purchasing experience, which is not uniquely focused on the purchase act itself." A fact exemplified by success of The Beautyst, as an online community and e-tailing site which connects users, influencers and brand.
Is there anything more inspiring than a label headed by a recognisable personality, someone to identify with? Such is for example Kat Von D, launched by the eponymous US musician, tattoo and make-up artist, one of the beauty brands with the fastest growth rate in the industry, now also available in Europe at Sephora. Kat Von D has 5.9 million followers on Instagram and she "tests and wears herself all that she creates and produces," claims the brand on its website. Its growth was orchestrated discreetly by the Kendo group, owned by LVMH.
Bolstered by the aura of beauty gurus, a new, 100% digital kind of company is emerging, as exemplified by US start-up Glossier. This up-and-coming skincare and make-up brand, a pure player and a fast-growing one, was created in 2014 by US blogger Emily Weiss, who built a strong community around her ‘Into the Gloss’ blog. Branded as authentic, given how her founder "lays herself bare" on a daily basis, Glossier has already achieved cult status in the US and is eagerly awaited in Europe, where it is expected to land soon. Glossier has a staff of 60, some of whom interact constantly on social media with its customers, and is about to extend its product range and create 200 new jobs.
The range of make-up products is endless, and some product categories in particular are booming. "Eyebrow make-up and enhancing products such as concealers and illuminating highlighters, as well as lipsticks, all of them highly popular with Millennials, are strongly contributing to the growth of the make-up market in Europe, " said Mathilde Lion of the NPD Group. In the prestige beauty segment, lip product sales increased by 18% in Europe in 2016, and the eyebrow category rose 29%, within a European make-up market which in total grew by only 5%.
Cosmetics giants need to adapt
Major cosmetics brands have been shaken by the arrival of these new players, and are reviewing their strategies to win over Millennials. To have an online presence and be active on social media is no longer bold, it is now a necessity. "We are forced to redefine the luxury industry's basic approach, which until now was founded on distance and awe," admitted Françoise Lehmann, the General Manager of Lancôme, in an interview to French magazine Monde.
"Alternative brands are changing the landscape, and classic prestige labels are responding by refashioning their range and creating dedicated lines, said Mathilde Lion. Like Estée Lauder has done for its Edit line, whose brand ambassador is Kendall Jenner, the prestige labels' new faces speak directly to Millennials." Dior Beauty has picked it-girl Bella Hadid, and Chanel has enlisted young Lily-Rose Depp.
For Shiseido, "Millennials have clearly become a priority target for the brand worldwide," said Lindsay Azpitarte, Marketing Director EMEA for the Japanese label. "They are a growing generation and they must be attracted early on, and turned into loyal customers. But with Millennials, brands must deliver on their promises, because they are knowledgeable cosmetics and beauty consumers." Online narratives are a way of appealing to them. Shiseido recently hired influencer Poppy Delevingne as the face of its make-up tutorials.
Retail still part of the purchasing experience
Though e-tail is booming, stores are still part of the Millennials' daily experience. But stores must now incorporate advanced digital tools, as recently deployed by Sephora at its New York and Val d’Europe (France) stores, which feature giant screens, tablet pcs and make-up simulators. "Web to store to web: the purchasing approach of the new, hyper-connected generation is evolving. Millennials will search online for the best prices, then visit stores to test the products and finally scout for information on social media before making a purchase," said Diane Lucas of The Beautyst.
In other words, there is still room for beauty retailers on the high street. While L’Oréal is now opening monobrand stores for its make-up labels (L’Oréal Paris, Urban Decay, Nyx), Italian budget make-up retailer Kiko has opened more than 1,000 stores worldwide in 20 years, with nearly 200 new branches in France in seven years.
Amid all the hype, you could almost forget that Millennials are not alone. "They are the target segment for the future, but it seems that brands are now overdosing on them, said Mathilde Lion. Be careful not to forget other age groups!" Her opinion is shared by Lindsay Azpitarte of Shiseido: "Our ideal customer is over 35. The key is to offer products suitable for every generation." 15-18 year olds will be the next prime target, the next generation to shake up the market.
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