John Nelson, Smithers08.29.21
Personal care and cosmetics companies, have faced some unique challenges during Covid-19 – not only were many retail stores closed, but social distancing and mask wearing in many regions impacted sales badly.
In response, many looked to improve online sales and also accelerate plans for subscription beauty models. This has in turn placed a new emphasis on packaging that optimizes interactions and brand equity in direct-to-consumer sales.
The market interest for companies in this space can be witnessed in the direct-to-consumer brand Glossier—one of the latest unicorns in the industry. It was valued at $1.2 billion, even before Covid-19 struck. The company sells almost exclusively online and promotes its house-brand serums, balms and cleansers to over 2 million followers via Instagram. Significantly it reported a rise in sales for all product segments – including color cosmetics, skincare and fragrance lines – across 2020.
The Covid-19 Marketplace
The overall packaging market declined by 6.0% from $915 billion in 2019 to $860 billion in 2020, according to Smithers’ latest market study. This contrasts with a +2.7% rise forecast pre-pandemic.
In the personal care segment, the drop was more pronounced. The market fell by 14.8% from $27.59 billion to $23.52 billion. In response, the industry has looked to replace retail sales with greater use of e-commerce; and in particular, move consumers into subscription service models. Smithers data shows that direct-to-consumer e-commerce packaging sales for the segment rose from $2.58 billion in 2019 to $3.77 billion in 2020 – with future growth forecast at an impressive 17.8% CAGR, the market is set to more than double by 2025.
When selling into this channel there are distinct challenges – preserving brand equity, ensuring security, showcasing a brand’s sustainability credentials, and maintaining a personal relationship with the customer. Packaging can be a key tool to do this, especially as an e-commerce delivery sidesteps many of the conventional cues personal care brands rely on in a real-world retailing. As this segment evolves, packaging and subscription models will become more important, and increasingly intersect with demands for personalized and digital beauty.
Replenishment
Through 2020, there has been an impetus to move one-time sales on third-party platforms to subscription models. The main benefits of replenishment subscriptions to the consumer are convenience and price. Kopari Beauty, for example offers a 10% discount to subscribers; and brands typically waive delivery charges as an added incentive. For the brand, the sale can be locked in, and there is less danger of product substitution, which browsing suggestion algorithms on sites like Amazon or Alibaba make very easy. A recent survey from Ipsos reports that one in five consumers had bought fake cosmetics online in 2020.
In e-commerce the ability to reorder favorites and discounts can retain customers. Unilever’s recently updated concept for its Love Beauty and Planet, for example, has an on-pack QR code that on scanning directs the consumer directly to a webpage to reorder replenishments.
Packaging displayed on any website must be readily understandable, for example showing the size and number of products available in a multi-pack.
It is reported, for example, that L’Oréal now spends 30% of its annual media budget in digital channels, including social media placements. In such product reviews, sponsored placements need to focus on the unboxing experience via the packaging to differentiate it. There is also a requirement for simpler graphic designs that are recognizable and easy to identify and read on smartphone screens, or in social media posts.
Robustness in delivery is also important, because shoppers can more easily switch over to alternative providers after a negative experience with damaged goods.
Subscription Models
One important emergent trend for personal care packaging that was only temporarily delayed by Covid-19 is the increased preference for re-use or refill packaging. The typical format is for a durable base unit that can be refilled regularly with refills delivered to the consumer’s home, typically in flexible polymer packs. This can, and is, being marketed as a carbon-cutting measure, but also serves to bind the consumer to using a single product and packaging system.
This is suited best to formats where there is not much of a demand for novelty, or variation in products between seasons – such as deodorants. In January 2021, Unilever introduced a refill design for its Dove brand. This has a stainless steel base unit on which the Dove logo is picked out in silver, combined with refills for three fragrances in pouches manufactured with 98% recycled polypropylene. Unilever says this reduces the plastic content by 54%, relative to the pre-existing Dove pack.
In the U.S., Grove Collaborative uses a similar concept. It sells its Peach Forever Deodorant Case and a refill starter set for $19.95; with refills then costing $11.95 each.
One clean beauty brand – UK-based Wild – has taken this concept further. It now offers refills made from bamboo pulp, designed to complement its natural vegan-friendly formulas. The 43g bamboo refills are made of two layers of recycled bamboo pulp separated by a waxy inner layer. An aluminium base set and three refills sell at $34.40, or $12.00 for the base unit and one refill, if the shopper joins Wild’s subscription service.
Elsewhere, P&G began trial sales of 50ml refillable pods for its Olay X moisturizer via Amazon in August 2020. Henkel meanwhile has chosen to forgo any plastic packaging with the Solids Box for its NAE brand. Deliveries, also currently sold via Amazon, contain solid face, body and shampoo bars, and reusable soap pouches.
On June 16, Unilever expanded its refill options to haircare by unveiling a reusable aluminum bottle concept for its Love Beauty and Planet line. This is being offered for sale both online, and in the real world via Target stores. The initial 16-oz aluminum bottle sells for $9.99, and the 32.3-oz refill bottle, made from rigid recycled PET, for $14.99 each.
Digital and Personalized Beauty
Not all beauty segments have been affected equally over the past 18 months. Stay-at-home consumers have had less exposure to sunlight, more exposure to blue light from screens, and are facing new problems, such as mask acne, dubbed ‘mascne.’ In response there has been more interest in skincare lines, including brands that combine smart or digital beauty assessments with subscription sales.
In personalized beauty, U.S. brand Atolla was originally spun-off from research at the Massachusetts Institute of Technology (MIT). Its prospective subscribers complete an online questionnaire and a mailed at-home test kit. They then receive tailored skincare serums, including consultations with an in-house Atolla aesthetician. Tailored regimes consisting of a cleanser, a serum, and a moisturizer cost $69 per month, with clean label packs personalized with the user’s name. Similar business models are run by Y’OUR, Curology, and Proven Skincare. Function of Beauty offers a comparable service for bespoke haircare products.
London-based independent fragrance house Rook Perfumes has moved ever further into the digital realm, by embracing blockchain and non-fungible tokens (NFT). To design a forthcoming scent, it is selling 100 NFTs each worth 0.3 etherium cryptocurrency ($830). Purchasers will gain access to Rook’s design team, help shape the composition of the as-yet unnamed fragrance, and receive the option of priority, discounted purchases.
2021 and Beyond
As lockdown orders are now being rescinded – at least in some countries – personal care companies will need to reappraise their strategies. There is an understandable desire to bring as many consumers back into shops as possible, especially for premium product sales. Conversely, many shoppers report that having transitioned to online sales by necessity in 2020, they intend to do more shopping in this channel in future.
Thus, brands will have to be careful about which of their products are most suitable for e-commerce sales, and where these can best leverage digital beauty platforms, as well as new sustainability concepts, such as refill packaging, that are well suited to this channel.
About the Author
John Nelson is an award-winning editor and journalist working in the market reports and consultancy business of Smithers. There he covers market and technology developments across multiple technical and commercial segments, including home and personal care, sustainability, packaging, printing, paper, nonwovens, rubber and tires.
In response, many looked to improve online sales and also accelerate plans for subscription beauty models. This has in turn placed a new emphasis on packaging that optimizes interactions and brand equity in direct-to-consumer sales.
The market interest for companies in this space can be witnessed in the direct-to-consumer brand Glossier—one of the latest unicorns in the industry. It was valued at $1.2 billion, even before Covid-19 struck. The company sells almost exclusively online and promotes its house-brand serums, balms and cleansers to over 2 million followers via Instagram. Significantly it reported a rise in sales for all product segments – including color cosmetics, skincare and fragrance lines – across 2020.
The Covid-19 Marketplace
The overall packaging market declined by 6.0% from $915 billion in 2019 to $860 billion in 2020, according to Smithers’ latest market study. This contrasts with a +2.7% rise forecast pre-pandemic.
In the personal care segment, the drop was more pronounced. The market fell by 14.8% from $27.59 billion to $23.52 billion. In response, the industry has looked to replace retail sales with greater use of e-commerce; and in particular, move consumers into subscription service models. Smithers data shows that direct-to-consumer e-commerce packaging sales for the segment rose from $2.58 billion in 2019 to $3.77 billion in 2020 – with future growth forecast at an impressive 17.8% CAGR, the market is set to more than double by 2025.
When selling into this channel there are distinct challenges – preserving brand equity, ensuring security, showcasing a brand’s sustainability credentials, and maintaining a personal relationship with the customer. Packaging can be a key tool to do this, especially as an e-commerce delivery sidesteps many of the conventional cues personal care brands rely on in a real-world retailing. As this segment evolves, packaging and subscription models will become more important, and increasingly intersect with demands for personalized and digital beauty.
Replenishment
Through 2020, there has been an impetus to move one-time sales on third-party platforms to subscription models. The main benefits of replenishment subscriptions to the consumer are convenience and price. Kopari Beauty, for example offers a 10% discount to subscribers; and brands typically waive delivery charges as an added incentive. For the brand, the sale can be locked in, and there is less danger of product substitution, which browsing suggestion algorithms on sites like Amazon or Alibaba make very easy. A recent survey from Ipsos reports that one in five consumers had bought fake cosmetics online in 2020.
In e-commerce the ability to reorder favorites and discounts can retain customers. Unilever’s recently updated concept for its Love Beauty and Planet, for example, has an on-pack QR code that on scanning directs the consumer directly to a webpage to reorder replenishments.
Packaging displayed on any website must be readily understandable, for example showing the size and number of products available in a multi-pack.
It is reported, for example, that L’Oréal now spends 30% of its annual media budget in digital channels, including social media placements. In such product reviews, sponsored placements need to focus on the unboxing experience via the packaging to differentiate it. There is also a requirement for simpler graphic designs that are recognizable and easy to identify and read on smartphone screens, or in social media posts.
Robustness in delivery is also important, because shoppers can more easily switch over to alternative providers after a negative experience with damaged goods.
Subscription Models
One important emergent trend for personal care packaging that was only temporarily delayed by Covid-19 is the increased preference for re-use or refill packaging. The typical format is for a durable base unit that can be refilled regularly with refills delivered to the consumer’s home, typically in flexible polymer packs. This can, and is, being marketed as a carbon-cutting measure, but also serves to bind the consumer to using a single product and packaging system.
This is suited best to formats where there is not much of a demand for novelty, or variation in products between seasons – such as deodorants. In January 2021, Unilever introduced a refill design for its Dove brand. This has a stainless steel base unit on which the Dove logo is picked out in silver, combined with refills for three fragrances in pouches manufactured with 98% recycled polypropylene. Unilever says this reduces the plastic content by 54%, relative to the pre-existing Dove pack.
In the U.S., Grove Collaborative uses a similar concept. It sells its Peach Forever Deodorant Case and a refill starter set for $19.95; with refills then costing $11.95 each.
One clean beauty brand – UK-based Wild – has taken this concept further. It now offers refills made from bamboo pulp, designed to complement its natural vegan-friendly formulas. The 43g bamboo refills are made of two layers of recycled bamboo pulp separated by a waxy inner layer. An aluminium base set and three refills sell at $34.40, or $12.00 for the base unit and one refill, if the shopper joins Wild’s subscription service.
Elsewhere, P&G began trial sales of 50ml refillable pods for its Olay X moisturizer via Amazon in August 2020. Henkel meanwhile has chosen to forgo any plastic packaging with the Solids Box for its NAE brand. Deliveries, also currently sold via Amazon, contain solid face, body and shampoo bars, and reusable soap pouches.
On June 16, Unilever expanded its refill options to haircare by unveiling a reusable aluminum bottle concept for its Love Beauty and Planet line. This is being offered for sale both online, and in the real world via Target stores. The initial 16-oz aluminum bottle sells for $9.99, and the 32.3-oz refill bottle, made from rigid recycled PET, for $14.99 each.
Digital and Personalized Beauty
Not all beauty segments have been affected equally over the past 18 months. Stay-at-home consumers have had less exposure to sunlight, more exposure to blue light from screens, and are facing new problems, such as mask acne, dubbed ‘mascne.’ In response there has been more interest in skincare lines, including brands that combine smart or digital beauty assessments with subscription sales.
In personalized beauty, U.S. brand Atolla was originally spun-off from research at the Massachusetts Institute of Technology (MIT). Its prospective subscribers complete an online questionnaire and a mailed at-home test kit. They then receive tailored skincare serums, including consultations with an in-house Atolla aesthetician. Tailored regimes consisting of a cleanser, a serum, and a moisturizer cost $69 per month, with clean label packs personalized with the user’s name. Similar business models are run by Y’OUR, Curology, and Proven Skincare. Function of Beauty offers a comparable service for bespoke haircare products.
London-based independent fragrance house Rook Perfumes has moved ever further into the digital realm, by embracing blockchain and non-fungible tokens (NFT). To design a forthcoming scent, it is selling 100 NFTs each worth 0.3 etherium cryptocurrency ($830). Purchasers will gain access to Rook’s design team, help shape the composition of the as-yet unnamed fragrance, and receive the option of priority, discounted purchases.
2021 and Beyond
As lockdown orders are now being rescinded – at least in some countries – personal care companies will need to reappraise their strategies. There is an understandable desire to bring as many consumers back into shops as possible, especially for premium product sales. Conversely, many shoppers report that having transitioned to online sales by necessity in 2020, they intend to do more shopping in this channel in future.
Thus, brands will have to be careful about which of their products are most suitable for e-commerce sales, and where these can best leverage digital beauty platforms, as well as new sustainability concepts, such as refill packaging, that are well suited to this channel.
About the Author
John Nelson is an award-winning editor and journalist working in the market reports and consultancy business of Smithers. There he covers market and technology developments across multiple technical and commercial segments, including home and personal care, sustainability, packaging, printing, paper, nonwovens, rubber and tires.
