An “Overnight” Digital Transformation
Like nearly all other industries, the beauty industry has faced unprecedented challenges as a result of COVID-19: shuttered storefronts, halted product development and forced closures of entire sub-sectors. From the personal to the professional, we have seen beauty players racing to pivot their channels, product offerings and digital capabilities to survive volatile customer buying habits.
Before the pandemic, person-to-person recommendations and in-store tests were the key elements influencing beauty and personal care purchases. In one fell swoop, the crisis accelerated the industry’s digital transformation and subsequent adoption of sophisticated technology by numerous years. A McKinsey survey published in October 2020 discovered that companies are willing to conduct at least 80% of their customer interactions through digital channels.
According to Stephane Rinderknech, President and CEO of L’Oréal USA, the giant cosmetics company is actively transforming itself into a hybrid model by conducting half of its business through e-commerce. In early 2020, L’Oréal North America reported a 60% increase in website traffic.
“This presented us with great opportunity, but also a significant change, as the shift in channels meant quickly changing the way we do business to meet the demand,” said Rinderknech.
He also emphasized the role of AI chatbots, augmented reality and big data analytics in fostering “connection, community conversations and conversion” with consumers.
While most retailers expect in-store sales to recover, the shift to online retail is real and will remain even after life starts getting back to normal. The future of physical retail will be heavily experiential as opposed to purely transactional.
“COVID-19 has not changed the importance of beauty, but it has changed how guests engage with it,” said Mary Dillon, CEO of Ulta Beauty, noting that Ulta became an online-only retailer overnight.
34% of consumers are online shoppers within the beauty and personal care sectors, meaning that they buy hair, skin or color cosmetic products through online platforms. Digital-format content from media, other online users and experts significantly influences their shopping and consuming behaviors.
Retail Footprint Expands From Shop-in-Shop Strategy
2020 has also witnessed historical collaborations between beauty specialists and mass merchandisers. Despite the surge of online shopping due to COVID-19, the emotional, hands-on experience of in-store beauty shopping isn’t easily replicated in the digital world. The tactile component of product discovery and try-on is lost when shopping moves online. Thus, it’s challenging for non-essential retailers like Ulta and Sephora to increase online conversions and store foot traffic without the ability to test and try the products.
As accessibility and convenience are crucial for today’s consumers, Ulta’s partnership with Target brings several benefits for both companies, on and offline. The alliance escalates traffic and exposure for Ulta’s beauty offerings and expands the beauty and personal care category within Target’s stores. It also allows consumers to maximize their shopping trips with easy access to affordable, trendy beauty products in tandem with their other shopping demands. The partnership provided an optimal way for Ulta and Target to capitalize on their combined reputations and customer bases to thrive — even under recession.
Similarly, the collaboration between Sephora and Kohl’s is expected to maximize each other's millions of current customers, streamline the buying process and increase add-to-basket size. Despite Kohl's 13.3% sales decrease during the pandemic, a key reason Sephora ultimately ditched JCPenney for Kohl's is the outside location of most Kohl’s stores, facilitating Sephora's curbside pickup services.