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Key takeaways:
Personalised products and tailored solutions. Beauty consumers are demanding personalised products or otherwise the elevated support and guidance needed to select products that compliment individual complexions and skin types. Data science tools can help with the latter, and although only a minority of brands are making it happen, virtual consultations are among the fastest-growing innovations.
Optimising the digital bridge. A paradox at the heart of beauty innovation is that most consumers shop online, but very few believe it lives up to the IRL luxury shopping experience. Making strides in augmented reality try-on is one way of bridging this gap, as well as tapping into the growing popularity of video shopping on platforms such as TikTok Shop.
Traceability and trust. Leading beauty names are now investing in traceability solutions to map out supply chains and, in some cases, offer transparency to consumers. A small-but-significant minority of consumers express real excitement about these kinds of innovations and, with so many disputable claims in the sector, they offer a strong way of reassuring consumers they can trust in the products they are buying.
Calling for customisation
Customisation or personalisation are the types of innovation that global luxury beauty consumers want the most from brands. Three-quarters of survey respondents expressed enthusiasm for bespoke product offerings.
The Vogue Business Beauty Index has updated the way it tracks customised offerings since last year. Only formulations that are specific to the customer are now awarded a full mark. No brands within the Index meet the rigorous new criteria following the discontinuation of Kiehl’s personalised Apothecary skincare service, which previously required consumers to take a skin test and complete a quiz so that Kiehl’s staff could match them with products best suited to their skin type and concern.
Forty-seven per cent of brands offer partially customised products, but this is limited to packaging design or product curation from a preselected list of bespoke beauty kits. While still of value, these offerings don’t fully respond to the underlying consumer need for selections that match the particularities of skin tone or type.
While Kiehl’s arguably spearheaded the now-booming bespoke wellness space, the removal of its true personalisation offering highlights the issues with scaling these initiatives. Ultimately, the bigger a brand gets, the more challenging it may become for it to create tailored product offerings.
A possible exception is haircare. Function of Beauty typically offers personalised haircare regimens off the back of customer-completed online quizzes and alongside allowing consumers to build out their unique ‘hair profiles’, the brand has rolled out a mass retail concept where consumers can customise its ‘base’ products with selected ‘booster shots’, depending on their hair type.
The success of high-cost hyper-customised offerings in other wellness industries, such as blood glucose monitors or sleep-tracking devices, show that consumers are willing to pay a premium for products that respond to their individual needs — especially when there are significant health or lifestyle benefits attached.
A more affordable option, particularly considering the rapid development of artificial intelligence, is data science-backed product recommendations using image-based skin diagnostics or colour-matching technology. Instead of developing personalised formulations, using this tech, brands can now point consumers to products within their existing range that suit a shopper’s skin profile or complexion. Thirty per cent of brands now offer this, with Fenty Beauty and Paula’s Choice starting to do so within the last year.
Additionally, 43 per cent of brands within the Vogue Business Beauty Index offer recommendations based on online quizzes. The rapid adoption of this approach is normalising this feature and integrating it into the expectations of a brand. While with expectations comes the pressure to fulfil, consumer quizzes can provide brands with the vital customer data that is becoming harder to acquire through traditional online tracking tools such as cookies.
This makes data-led strategies essential to gaining a competitive advantage and for developing the type of personalised offerings that consumers are looking for.
Online beauty experience continues to pose a challenge
While e-commerce may take up a large portion of the beauty space — 83 per cent of consumers buy 50 per cent or more of their beauty products online — customer acquisition and retention remains a challenge for many retailers. The fallibility of luxury beauty e-commerce leaders has been demonstrated in recent years, with Net-a-Porter, Farfetch and Browns all among those to close or scale back their beauty assortments. When bargain-happy beauty customers can buy the same products from multiple retailers, price usually becomes the main differential.
Aside from online product availability, a physical retail presence remains important for beauty brands — and competition for prime floor space is high. Health and beauty was the fastest-growing retail segment in terms of leases in Europe during 2023, according to real estate firm Cushman & Wakefield. The ability to smell, sample and speak to experts about products are all aspects that make beauty retail so powerful. Aesop’s much-lauded store spaces are currently the highest rated by beauty customers worldwide (just ahead of La Mer and Nars Cosmetics, per 2023 data). Once a customer is secured physically, it is common for e-commerce to take over for repeat purchases; 80 per cent of sales at Elfcosmetics.com are to members of their loyalty scheme.
Features like augmented reality try-on — allowing consumers to virtually ‘try’ cosmetics such as makeup before they buy — are one way to help bridge the gap. Nearly two-thirds of consumers expressed enthusiasm for this innovation in our 2023 survey, with particular popularity in the US and among 35 to 44-year-olds.
At present, 57 per cent of brands offer this tech, with no additional brands integrating the feature since last year. Leading technology powerhouses, like Pinterest and Google, which recently rolled out virtual try-on for shoppers using mobile devices, are investing aggressively in this. As access to the technology becomes more affordable and user-friendly, dozens of major beauty brands now offer augmented reality try-on for lipstick, foundation and hair dye, including the L’Oréal suite of brands.
Virtual consultations and video shopping have grown faster than any other innovation category since last year. Over half of brands (53 per cent) now offer this feature — including La Mer and Clarins — up from 43 per cent last year. Already an essential part of the purchase journey in China, video shopping has been a big talking point in Western markets, with the launch of TikTok Shop last September solidifying its place in the US. Bytedance, meanwhile, is seeking tenfold growth in its US e-commerce business this year.
Digital consultations with store staff also offer a more surefire way of integrating the luxury experience into online shopping, given augmented reality tech can still feel a little gimmicky or clunky. La Roche-Posay offered free virtual skin consultations as part of a Black Friday deal last year, while startup brands such as Klira have paired online dermatology appointments with personalised product offerings at a relatively affordable price point.
There is still plenty of space for innovation in clever combinations of digital and physical beauty retail, whether by single brands or established retail partners. Sephora, for example, implemented a live beauty studio, big data skin analytics and AI-driven recommendations into its Shanghai-based “store of the future”, which opened last year.
Can added traceability help brands become more transparent?
As we explored in the digital chapter, some of the most successful advertising campaigns last year tapped into consumer fatigue around buzzwords and insubstantial beauty claims. Could added traceability and transparency around the supply chain boost consumer confidence and overcome concerns? Several major beauty players think so.
Back in January, Chanel co-founded the Traceability Alliance for Sustainable Cosmetics (TRASCE) with fellow members — Clarins, Dior, Estée Lauder, L’Oréal, L’Occitane and Shiseido among them — of the 15-strong beauty consortium. TRASCE’s work involves collaboration on a platform called Transparency-One, which aims to help all members map out global supply chains and achieve greater transparency.
Traceability information uncovered by Transparency-One is not yet available to consumers, which is a common thread among similar efforts elsewhere. Just 26 per cent of brands currently share traceability details of products or supply chains, with current initiatives including: Cult Beauty’s work with blockchain-based technology Provenance to digitally verify sustainable claims (such as ‘cruelty-free’ or ‘organic’) made by brands; the Clarins T.R.U.S.T. platform, which utilises certified blockchain tech to trace skincare products; and scannable QR codes at La Roche-Posay that provide augmented product traceability.
Another way to mitigate traceability concerns is to move towards vertical integration, which increases the visibility and direct control brands have over their supply chains. Clarins, for example, has announced plans to grow a third of its own ingredients by 2030.
From a consumer perspective, traceability is not as much of a concern to beauty consumers as it is for those buying luxury fashion — although the gap is closing. The latest edition of the Vogue Business Winter Index saw 45.9 per cent of consumers expressing enthusiasm for brands adding traceability features. For the beauty survey, that was true for 40 per cent of consumers, with demand particularly high among Chinese shoppers (57 per cent expressed excitement).
Traceability is far more in demand than other major use cases for blockchain technology. NFTs, for instance, were met with enthusiasm by only 11 per cent of beauty consumers. And just 10 per cent of brands currently offer some sort of NFT, with the market for virtual tokens failing to jump-start despite rising cryptocurrency prices.
Meanwhile, the use of virtual influencers has seen a slight uplift. Shiseido generated its own virtual ambassador, Shi, to develop a presence in the digital world while boosting its appeal in markets like Asia-Pacific. Clinique partnered with 3D-modelling firm Daz on its collection of 8,888 female and non-binary profile picture avatars. Though these both remain point-in-time activations that generate short-term buzz, rather than integral strategies for the long haul.
Case study: Nars’s experimental feat
Nars Cosmetics has long been at the forefront of digital innovation in beauty. The brand won accolades for its early use of virtual influencers, was an early adopter of AI-based shade finders and has developed virtual stores, virtual reality games and immersive experiences on platforms like Drest and Roblox. The brand has also ventured into the metaverse, celebrating its cult Orgasm shade with an auction of digital collectibles.
This experimental mindset has seen it rewarded with first place in this year’s innovation pillar, ahead of stablemate Shiseido and new addition Clinique (last year’s leader Charlotte Tilbury drops to fourth position).
As well as benefiting from the new ways in which product personalisation is scored this year (Nars offers customised makeup bundles), the brand’s aforementioned digital initiatives underscore a consistently high performance in the innovation space. The only two categories it failed to score in were cryptocurrency payments and product traceability.
Nars rated highly on “has products I can personalise to my needs” and “makes me feel connected to those in the know about beauty”, indicating that some aspects of its innovation strategy have been effective in the eyes of consumers. Yet it remains unclear how the brand’s strategy in gaming, NFTs and virtual influencers are faring in the minds of its loyal followers. Nars was rated 6.2 out of 10 on average by beauty consumers when asked to what degree they believe it was an innovative brand, below the Index average of 6.39 and way below top scorer The Ordinary with 7.08. With many brands still in the ‘experimental’ phase of developing new tools and technologies, audience reach may be limited until such developments become more normalised in the purchase journey. As audiences for some platforms, such as Roblox, skew younger, we may also see a generational gap forming in the future as to how innovative shoppers believe brands to be.
Expert interview: Noelly Michoux, founder and CEO, 456 Skin
What does success look like for beauty innovation in 2024?
The truly innovative brands of 2024 are those that prioritise meaningful, health-focused advancements. This isn’t about fleeting trends but about real, impactful changes. It’s about crafting products that place human health and the natural world front and centre, ensuring every component serves a purpose beyond aesthetics.
Today’s beauty innovation has to integrate the emotional, cognitive, even cultural aspects of the consumer’s needs. Fields such as ethnobotany — creating formulations rooted in the botanicals of one’s heritage, aligning formulas to Halal or Kosher standards — or nutraceuticals and neurocosmetics all have the potential to deliver products that nourish the mind and body, addressing emotional spiritual and aesthetic desires. It’s about leading with integrity, creativity and a profound respect for the interconnectedness of health, beauty, culture and nature.
Why is personalisation so difficult to implement at scale, and how can brands overcome this?
Navigating personalisation means balancing scale with individual touch, and that is as daunting as it is essential.
However, scaling this personalised approach is a massive challenge due to resource limitations. Implementing true personalisation requires significant investment in technology, data management and staff. At 456 Skin, we embraced a dual model to tackle this: we keep personalisation as the bedrock of our research and development, iterating based on feedback and moving the best-performing combinations into standardised production for scale, while still offering full customisation options for customers to prefer freshly made-to-order formulas. This allows us to maintain our genuine commitment to customisation while expanding our reach.
Why is personalised skincare of particular importance for women of colour?
The skincare research equity gap is real. The oversight of darker skin tones in skincare can be traced back to deeply rooted societal biases. While there are strides towards more inclusivity, the industry still hesitates to genuinely shift its perspective. For ages, understanding skin tone was purely based on colour, leading to myths, uninformed conclusions, and leaving an entire segment of our population in the shadows, unaware of their unique skincare needs. 456 Skin is revolutionising an industry entrenched in old-fashioned processes by studying the science of skin tone and creating formulas alongside our community. This approach allows us to finally provide women with products made specifically for them, based on their unique physiology — something unprecedented. Customisation has proven to be a faster track to understanding and meeting the unique needs of darker skin tones.
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