Following the global regression in advertising expenditure for beauty of -1.2 percent in 2018, this year will see growth of 2.7 percent, according to the figures published on Monday. Beauty Adspend Forecasts* by Zenith will even rise to 4.7 percent in 2021. This acceleration in growth will be driven by the global expansion of e-commerce advertising and the improved range of high-quality digital environments. Advertising spend on cosmetics will total USD 14.4 billion this year and reach USD 15.8 billion in 2021.
Print and TV suddenly no longer the focus of advertisers
Advertising spend in the beauty segment has faced difficulties in recent years. Print and TV, channels that are capable of building an emotional connection with consumers through bold imagery and high-quality production, have long been the focus of advertisers. Although both are still important components of the communication mix, they have lost many users to the internet in recent years. In 2014, magazines accounted for over 21% of advertising spend on beauty; by 2018, this figure had fallen to 13%. By 2021, advertising expenditure for cosmetics in magazines will only account for 8%, while the overall market will fall to 3%. TV's share of the beauty segment's media mix fell below 50% for the first time in 2016 and dropped to 40% in 2018, with the overall market for TV at 31%. By 2021, a decline to 35% is forecast for the beauty segment, compared to 27% for the overall market.
Shrinking target groups, new competition
The beauty market is becoming more fragmented and brand loyalty is more difficult to maintain as the number of brands increases. Established brands are exposed to competition from new rivals: Direct-to-Consumer (D2C) brands, eco-brands and private labels. Many of these new brands, especially D2C, are trying to grow through targeted promotion without investing in traditional brand building through mass communication, which typically drives the growth of beauty advertising spend.
This combination of shrinking target groups and new competition from new brands that are foregoing high-reach communication measures has led to persistent weakness in the beauty advertising market. Overall, advertising expenditure for cosmetics only grew by a mere 0.9% between 2014 and 2018 in 2016. In 2017 and 2018, advertising expenditure even fell by 1.2%.
Traditional campaigns for brand building
This situation is beginning to change as digital platforms such as Instagram increase the supply of high-quality environments and brands with image-conscious consumers now find more touchpoints where they look for inspiration. These brands are reallocating their budgets accordingly. Meanwhile, D2C brands are realizing that the market share they can gain without awareness is limited, so many are beginning to invest in traditional brand-building campaigns.
Retail vs. D2C sales
E-commerce sales are growing rapidly. Beauty brands are increasingly entering into collaborations with retail platforms as the availability of retail media increases, or relying on their own D2C platforms. However, these are not complementary investments: Spending on retail media may cannibalize D2C sales and vice versa. Brands need to decide which of these two paths to e-commerce to take.
This growth in online brand identity and e-commerce advertising is driving a rapid increase in internet advertising by beauty brands and an overall increase in beauty advertising spend. In 2018, internet advertising overtook television as the largest advertising medium for the beauty industry. Continued double-digit growth is expected until 2021, when it will account for 50 percent of all beauty advertising spend.
The majority of beauty purchases still take place in stores
Despite the growing importance of e-commerce, the majority of beauty purchases are still made in-store. While some consumers browse online, most want to experience a product before they buy it.
"Brands need to work with retailers to create more in-store shopping experiences. They need to use new technologies such as augmented reality to create digital brand experiences that allow consumers to try before they buy online," says Matt James, Global Brand President at Zenith. "By linking e-commerce and in-store experiences, beauty brands can help consumers shop more effectively."
Ethics and sustainability become central
Consumers expect brands to have ethical supply chains and sustainable products and will criticize those on social media that don't live up to this perception. Demand for plant-based products and eco-friendly packaging is growing rapidly - sales of vegan beauty products increased by 38% in the UK last year - and this is expected to continue.
"People are much more conscious of knowing where the products they use come from and how they are tested," says Tamina Plum, Global Head of Clients at Zenth. "Brands that are committed to meeting their customers' expectations can win their loyalty."
Jonathan Barnard, Head of Forecasting at Zenith, summarizes: "Beauty brands continue to invest in internet advertising to leverage the combination of effective brand building and direct sales channels. Nevertheless, TV and print remain important for beauty brands and account for a significantly higher proportion of advertising spend in the beauty care segment than in the overall market."
China spends the most
China is the leading market for beauty advertising spend in 2019 with an estimated 6.2 billion US dollars. This is unusual; for the overall advertising market and within the automotive and healthcare categories surveyed by Zenith earlier this year, China is second only to the US. Retail sales of beauty products grew faster than any other major category last year, driven by strong demand and increasing interest in the men's beauty sub-category. The early adoption of e-commerce advertising is the main reason for China's strong performance in the beauty sector. It has been growing for more than a decade and further investment is expected to increase spending in the beauty sector to US$6.9 billion by 2021.
Great growth potential in the USA
The USA is the second-largest market and spent USD 2.6 billion on beauty advertising in 2019. US beauty advertising continues to focus on TV and print, which account for 40% and 37% of the budget this year respectively. Internet holds at a 23 percent share. Beauty brands are just beginning to tap into the value of e-commerce advertising and there is huge potential for growth over the next few years, allowing the US to close the gap with China.
India is the fastest growing country
India is the fastest growing market for beauty advertising spend and the only market that has not had a negative year since 2014. Zenith forecasts a compound annual growth rate of 19 percent through 2021. India has the least mature beauty market - at just 0.3 percent of GDP, less than half the global average of 0.7 percent - and is therefore developing faster, causing beauty ad spend to grow rapidly along with other categories. Of all the markets in the study, India is also the fastest growing advertising market overall.