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Inflation’s Impact on the Cosmetics Industry: Uncover Consumer Behavior

Prepared by:

Noa Shachaff

Head of Consumer Insights & Analytics, Revuze

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Overview

During the past year, inflation and prices soared while wages remained mostly flat, affecting how consumers shop. We were curious to understand how these changes affected consumers’ shopping behavior, so we took a deep dive into data from the beauty and cosmetics industry.

Interestingly, we found fascinating relations between inflation and what it means for consumers when they shop. Read on to discover how consumers reacted, what it means for your brand, and how to position yourself in this new market.

Background

As a result of the ongoing supply chain crisis kickstarted by the COVID-19 pandemic and the Russia-Ukraine war, the world economy has changed significantly.

A big focus of these changes has been on the soaring inflation rates, reaching double digits in the UK and a high of 9.1% in the US during June.

And so, with prices rising all across the board and wages stagnating, households’ budgets and disposable income have been effectively reduced, ushering in a cost of living crisis.

This, in turn, naturally affected consumers’ spending habits, as pricing and value for money become key factors when shopping for items – from groceries to electronics.

Our spotlight has been drawn to the beauty and cosmetic industry, examining how customers reacted to this new reality. Various reports indicate people aren’t buying fewer beauty products, so what has changed?

Methodology

In this original research study, we’ve examined how these circumstances have affected consumer behavior, specifically within the beauty and cosmetics ecommerce industry.

We collected and analyzed over 125,000 online reviews of cosmetic products from major online retailers, including:

Walmart
Amazon
Ulta
Target
Kylie

Our analysis focused on the first three quarters of 2022. While we have data for Q4, we decided not to include it in our analysis as the holiday season can easily skew the data. Product categories we looked into include:

Nail (Gels, Polish, Artificial nails, top coat)
Face (Concealers, foundation, makeup kits)
Eye (False eyelashes, shadow primer, shadow, liner, kits)
Mascaras

How we analyzed our data?

With the help of Revuze’s AI, we managed to analyze our data by specific topics.

Since we’re concerned about how inflation and the cost of living crisis affected consumers’ behavior, we sliced the data by Price and Value for Money (VFM).

Then, we looked at two interesting metrics per each beauty category – volume and sentiment.

What does looking at these metrics under the Price and VFM lenses mean?

For volume, it means consumers mention price/VFM in their reviews while measuring sentiment helps us understand if people are satisfied or dissatisfied with the price/VFM the product provides.

We then checked these metrics for each month, looking for any correlations with inflation.

Here’s what we discovered.

Sentiment main findings

In the next section, we’ll explore strong positive and negative correlations between inflation rates and beauty products sentiment. A positive correlation tells us customers are delighted with the price/ VFM these products offer, while a negative one tells us the opposite.

Sentiment for Eye Kits correlated positively with inflation (0.77)

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Discover how inflation influencing shoppers purchasing behavior around cosmetics

Sentiment for Face Kits correlated positively with inflation (0.74)

Sentiment for Nail Kits correlated positively with inflation (0.71)

Sentiment for Mascaras correlated positively with inflation (0.76)

Sentiment for Foundation correlated negatively with inflation (-0.73)

Volume main findings

In the next section, we’ll explore strong positive correlations between inflation rates and beauty products volume review. Such positive correlations tell us customers discuss price/VFM topics in accordance with inflation rates movement.

Volume for Concealer correlated positively with inflation (0.66)

Volume for Mascaras correlated positively with inflation (0.67)

Volume for Powders correlated positively with inflation (0.58)

On average, all beauty categories correlated positively with inflation (0.66)

Discussion

When talking sentiment, we’re witnessing strong positive correlations between various DIY products, such as eye, nail, and face kits, and inflation.

This means that as inflation went up, people felt much more satisfied when buying these kinds of products, especially in terms of their pricing and value for money they offer.

On the other hand, we saw a strong negative correlation between Foundation products and inflation, meaning consumers felt dissatisfied with these products as the value for money wasn’t there.

Finally, seeing the overall strong positive correlation between volume and inflation says a lot. As inflation soars, consumers mention price and VFM more and more in their reviews, indicating these factors are of interest to them when leaving reviews and possibly when deciding which items to purchase.

Let’s discuss what it means for you.

How inflation changed cosmetics shoppers’ behavior

The beauty industry is unique in that it is not impacted by inflation like other consumer products. Indeed, cosmetic prices have been at their highest since 2016, yet sales are generally increasing, not decreasing.

Coty Inc., one of the world’s biggest beauty companies, reported a growth of 9% in organic sales in Q3 2022. L’Oréal reported a sales increase of the same size. Low-cost drugstore makeup company E.l.f. Beauty reported an even-more impressive 33% rise in sales.

This reflects the cosmetics industry’s general hardiness in times of economic downturn. Consumers don’t show a tendency to stop buying cosmetics as their budgets tighten. But our report does note that feelings changed, as DIY kits are perceived as worthy products, while others are less so.

What we see can be explained as an extension of the DIY trend that emerged due to the COVID-19 pandemic, as consumers could not visit salons and spas. This time, inflation provided yet another reason to do one’s nails, lashes, and makeup in the comfort of their home.

It is also important to note that consumers are highly aware of inflation and increasing prices. They explicitly name pricing and value for money in product reviews, which means they see these as essential considerations for buying decisions.

For you, it means you must remember consumers are price-conscious. It doesn’t necessarily mean they won’t buy luxury items, but they expect – more so than at other times – that your product will be worthy of the price of admission, providing them the bang for the buck they’re after. If they don’t find it with you, they’ll look elsewhere.

Using data to keep your finger on the pulse

Knowing how consumer behavior changes and what affects it can inform everything from pricing to product development to marketing. Staying curious and connected to data is the best way to stay caught up.

Retailers cannot simply go on with business as usual. As consumers’ lives and budgets are changing, so are their needs. Companies that want to hold on to market share and maintain a competitive advantage must stay on top of what is happening, committing to an ongoing practice of data-based industry analysis.

Businesses must collect and analyze data to make informed, data-driven decisions. Among other sources, online reviews emerge as a crucial – and accessible – measure of customer experience, satisfaction, and needs.

Making sense of this data will help you understand what consumers are after. Not just with your product but in the entire market, ensuring you’ll get the competitive edge you need.

Nowadays, with changes lurking behind every corner, getting a hold of your data is more critical than ever.

About Revuze

Revuze works with Fortune 500 companies and brands worldwide to provide valuable insights into consumer analytics. Revuze’s powerful AI can analyze online customer reviews and other user-generated data in any industry.

It can then detect industry-specific lingo and sentiment expressions to help companies learn about their customers, their competition, and new market trends.

It’s all in real-time, with easy-to-read reports, and minimal hassle.

Key Objectives

Industry

Cosmetics

Sources

Walmart, Amazon, Ulta, Target, and Kylie

Time Period

Q1-Q3 2022

Voice of Customer Data Points

125K

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