According to Circana (formerly IRI and NPD), beauty product sales at mass merchants accounted for the majority of sales across most beauty categories last year, amassing $30 billion in annual retail sales in the U.S.
 
However, the $27 billion prestige beauty business, including department and beauty specialty stores, has been the growth engine for the industry, with both sales revenue and unit sales growing faster in prestige than mass in 2022, while also experiencing the softest price increases.

Consumers ‘Trade Up’

“For many consumers, beauty is indispensable,” said Larissa Jensen, beauty industry advisor at Circana (and a member of Beauty Packaging's Board of Advisors). “In fact, among beauty shoppers who reported reducing their overall spending due to inflation, seven out of ten said they were not cutting back on their beauty spending. On the contrary, consumers have shown us that when economic sentiment gets shaky, they turn to prestige beauty products for an emotional lift. This ‘treat mindset’ is a big piece of what ties the complete beauty industry picture together.”

Hair Care is the Fastest-Growing Category in Prestige Market

Category-level contrasts are very telling in terms of how consumers are shopping across mass and prestige retailers, says Circana. For example, shampoo, conditioner, and hair color sold in mass stores were among the top overall beauty categories to experience unit sales declines in 2022, even as hair care was the fastest-growing category in the prestige market.
 
“Consumers are trading up when it comes to their hair care because they are seeing the value in investing in prestige brands,” said Jensen.

Consumers Invest More in High-End Fragrances

Consumers are also trading up when it comes to their fragrance purchases, by investing more heavily in high-end, luxury fragrances. In 2022, sales revenue for fragrances priced over $150 grew by 16%, versus 2021.
 
“Part of the investment stems from consumers using scent as a form of self-care, to satisfy their expanded wellness needs,” explained Jensen. Among fragrance wearers, 71% look for a scent that lifts their mood, and 50% are interested in fragrances they link to a physical or wellness benefit such as de-stress, focus, and energize.

Skincare Outperforms Other Categories

Skincare was the mass market’s best performing category in 2022, based on unit sales growth. Furthermore, facial skincare sold in the mass market was the top-performing segment across the entire beauty industry, based on sales revenue gains. Skincare, however, was the anomaly on the prestige beauty side, as it was the only category to experience flat sales in higher price-points in 2022.
 
The global skincare market will be worth an estimated $145.8 billion by 2028, with a CAGR of 5.52%, according to Fortune Business Insights’ forecast.
 
“We are observing a democratization of the skincare market, as more consumers decide that they can actually spend less to get the desired results – whether that means purchasing lower price-points within the prestige stores or turning to dermatologist-recommended brands in mass outlets,” said Jensen.