How Beauty Brands Should Prepare For What Could Be A Rocky Holiday Shopping Season

This holiday shopping season could be rocky for beauty brands and retailers. 

Consumers remain stressed by lofty interest rates, the cost of living and a contentious presidential campaign, but sentiment has inched upward. Still, value is a top priority, and recent retail earnings reflect a penchant for bargain hunting. Off-price players TJX, Burlington and Ross reported strong second-quarter results, while Ulta Beauty lost prestige market share as it faced cautious consumers. 

It’s not all doom and gloom. According to an August survey conducted by global management consulting firm McKinsey & Co, consumers reported a higher willingness to splurge across both essential and semi-discretionary categories heading into the holiday season. Interest in spending on skincare and makeup as well as toys, vehicles, non-alcoholic beverages and baby supplies increased the most between the second and third quarters of the year.

As retail readies for the busiest season of the year, for the latest edition of our ongoing series posing questions relevant to indie beauty, we asked six analysts and consultants the following questions: What’s the outlook for the 2024 holiday shopping season? How would you advise beauty brands to prepare for it?

Larissa Jensen SVP and Global Beauty Industry Advisor, Circana

This upcoming holiday will test the resiliency of the beauty industry. In fact, beauty’s resilience has made our industry an anomaly of sorts. While other industries experienced ups followed by downs, beauty has just gone up, then up and up again. How will this translate during the 2024 holiday?

When looking across the mass and prestige markets, holiday is more important to and has a greater impact in prestige beauty, which epitomizes the indulgence in little luxuries during the holiday season. For that reason, we look to the performance in prestige during holiday as an indicator of where the consumer mindset is throughout the season with regard to our industry.

Since 2021, holiday has had strong growth across all prestige beauty categories. In 2024, there are many macro and micro factors at play that could impact whether the industry has another strong year. Some may impact sales negatively, others more positively.

For example, in prestige the high-income shopper has been a key driver in our success, but we have begun to see some pullback and softness in beauty spend among high income consumers earning between $100,000 to $150,000 per year. They are one of the larger consumer groups among high earners and have traditionally had strong spend.

Alternatively, we see surges in growth coming from high-income households with children under 18, an indicator that parents are indulging their gen alpha children with prestige beauty products. Based on the social media virality of this new generation of beauty enthusiasts, this dynamic shows no sign of slowing down any time soon and could be a pivotal growth driver during holiday.

Circana is forecasting a positive holiday season for the prestige beauty category. Growth will be softer than in years past, but the industry’s resilience should continue to shine through this holiday season.

Manola Soler Senior Director, Consumer and Retail, Alvarez & Masal 

This year we’ve seen consumer fatigue set in following several years of inflation and high interest rates in the United States. Consumer finances are feeling stretched and that is unlikely to change drastically between now and year end despite the prospect of lower inflation and potential rate cuts in the coming months.

According to Michigan University’s monthly consumer sentiment index, consumer sentiment is trending lower than it has been for the past five years. This mindset, coupled with the upcoming U.S. election, will likely make for a rocky holiday season in retail.

That said, beauty has historically been a resilient category. It tends to be perceived as a small indulgence, and it’s also giftable at attainable price points relative to other consumer categories or luxury goods. In 2024, prestige beauty in the U.S. has maintained single-digit growth in the first half of the year, with categories like fragrance leading the growth. 

As we head into the holiday season, I predict consumers will approach it with a “little treat” mentality, indulging in small luxuries and personal wellbeing rather than splurging on high-ticket items and experiences.

Beauty brands can capitalize on this mindset by providing consumers with product that has a luxe feel but at a more entry level price point. It could be a great moment to play with smaller pack sizes or kits and sets to create added perceived value.

Neil Saunders Managing Director of Retail, GlobalData

I expect the holidays to provide retailers with modest growth, but sales will likely fall short of being spectacular. There just isn’t enough firepower in the consumer economy for an incredibly robust advance. This, however, is largely good news because it means that, despite all the challenges, there are still gains to be made.

As we have seen across the course of this year, the consumer is still showing up and opening their wallet for occasions and events. However, retailers need to work hard to coax shoppers into spending. That includes through discounts and deals and through interesting assortments. People are thinking much more carefully about what they buy, which means creativity is an important part of success for brands.

Beauty will continue to be one of the hero categories this holiday season. Many beauty products make for practical and useful gifts, which plays into the idea of buying things that have value. Small indulgences and treats are also high on the agenda for consumers whether through what they put on gift lists or for self-purchases; beauty delivers on these needs.

What I think is important, however, is ensuring that there is good price tiering so that there are options to suit all budgets. Brands want to maximize the number of consumers who buy their products, so that means having a good range of price options.

Another consideration is the timing of the holidays. Spending has been starting earlier and earlier as shoppers look to spread the cost and retailers, including Amazon, kick-off deals early. So, brands need to have very clear promotional calendars that align with new patterns of spending.

Kelly St. John Founder and CEO, KSJ Collective

This holiday season is certain to be filled with twists and turns as consumers continue to face inflation, a complex political and economic climate, and a heated election year.  The calendar does not fall in the consumer’s favor either with five less shopping days between Thanksgiving and Christmas.

Despite all of this, I think there are positive indicators that the beauty category will see a solid performance for holiday 2024 season, with strong single-digit increases and hopefully higher. It will be a highly competitive season amongst retailers with increased door count across the country for some retailers, intentional discounting and pricing and strategies and new promotional tools and offers. Consumer behavior tells us they are focused on value and price as they make their purchasing decisions.

Less shopping days between Thanksgiving and Christmas will drive growth in retail online DTC business as well as buy online, pick up in store. For the beauty consumer, I believe it will be very much about it meeting customers where they are at, speaking their language in all marketing and promotional materials, and presenting a highly curated assortment with vast options in sets and bundles.

Critically important will be beauty brand’s ability to engage the consumer. Today a brand must have a story and a point of difference. There needs to be a sales associate in store or digital experience on line that brings value to customers so that they feel good about themselves for having made the purchase. In my mind, the entire thought process in how the 360-degree strategy is composed must connect with consumers on an emotional level, bringing them joy, comfort and optimized wellbeing.

Brands need to consider the in-store experience more than ever this holiday season. I think that if they strategically invest in selling support in stores and take the time to carefully and intentionally train staff so that they capture the magic of the brand that will translate to the consumer. Regardless of how mindful the consumer may be when considering her holiday spending, brands that can emotionally connect with the consumer this holiday will be in the best position to win.

The beauty category has continually proven to be resilient during the most trying of economic times. Having begun my beauty career at The Estée Lauder Cos., the “lipstick effect” coined by Leonard Lauder some 20-plus years ago following 9/11 continues to have merit today. If brands can meet the customer where they are and connect emotionally, consumers will continue to indulge the small indulgences, especially at holiday.

Fiona Glen Director of Projects, The Red Tree   

There are some major factors that will play out for this holiday season at a consumer level this year. On one side, we have interest and mortgage rates beginning to drop, giving consumers the confidence to spend this holiday season. The categories that have really won in this passing economic climate have been fragrance and haircare, which could have particularly excellent holiday seasons if planned well. 

Then, conversely, consumer consciousness continues to drive mindful buying decisions, and some consumers may have learned to love buying downgrades that they’ve made, making that all important conversion more difficult to achieve than ever.

Value is a term frequently used in holiday trading and a term often associated with price discounts. I think, to win this holiday season, it’s important for brands to creatively consider what value means to their brand and how it can be communicated better than their competitors.

Using consumer data effectively to target and convert is a non-negotiable here. For example, I would love to see more beauty brands doing personalized activity such as private sales or events to their most engaged consumers rather than chasing their whole mailing database. 

Channel of the moment, TikTok is undoubtedly going to have a great holiday season, and I think there are leanings that all brands and channels can take learnings from. Its "when it’s gone it’s gone" sales and bundles give consumers that need to commit to an offer immediately for fear of missing out. I’d love to see this explored wider by beauty brands, which could also bring more theatre to some of the more stagnant sales channels. 

Going early with holiday has benefits for consumers in that they can spread their costs further and for brands and retailers that can bank the sales and avoid enforced markdowns from inventory overstocks. Holiday starting early is not going away, so everyone needs to be prepared significantly earlier than last year.

Overall, it’s really about having a strong, considered and unique strategy, yet being nimble and prepared enough to react quickly. It’s all to play for.

Susannah Dellinger Founder and CEO, Bright Beauty Collective

As we start to dive into the 2024 holiday shopping season, we can already feel the beauty industry bracing for the festivities with a lot of uncertainty. The economic jitters and fierce competition is reality. But I think the outlook is sparkling with potential for those who can master the art of holiday retail magic. Here’s how we think beauty brands can sleigh the season in retail beyond the tried and true tips of adding bows to literally everything.

Make everyone feel special: Holiday shoppers love a good personal touch. Use data to tailor your digital messages and offers that feel like a gift wrapped just for them. Personalized retail promotions, exclusive collections, holiday gift sets, limited-edition products and an in-store experience where they get one-on-one attention can make customers feel like they’re getting VIP treatment—and who doesn’t love feeling special?

Go green or go home: This year, sustainability continues to be the new black. Show off your eco-friendly initiatives and ethical practices like a badge of honor. Think recyclable packaging and cruelty-free products. Not only will you win over environmentally-conscious shoppers, but you’ll also avoid being on the naughty list.

Look for out-of-the box holiday pop-up experiences: Step outside of your retail comfort zone and look at holiday pop ups in unique places such as high-end hotels and luxury restaurants and reach an entirely new customer (one of our favorites is at the Faena Miami)

Rock the omnichannel experience: Whether it’s a cozy in-store experience or a slick online setup, make sure your shopping journey is seamless. Think of it as your brand’s holiday party. Make sure the invites (or promotions) are out, the decorations (or website) are dazzling, and the service is top-notch.

Stagger holiday giftables throughout the season: With the official start of holiday shopping in retail now being as early as September, often those holiday giftables and sets you planned strategically for will often be sold out prior to Halloween, and your customer hasn’t even started shopping for actual gifts yet. Be sure to leave something up your sleeve for November whether it be in retail or on your own e-commerce

Plan ahead or else: The holiday rush can be a whirlwind. Avoid the chaos by planning your inventory and logistics as meticulously as you plan your holiday party guest list. Efficient stock management and reliable shipping partners will keep your holiday sales from turning into a supply chain fiasco. 

In short, to thrive this holiday season, beauty brands need to blend tech-savvy strategies with a touch of sustainability and a big sprinkle of personalized magic. So, deck the halls with digital prowess and make this season one for the beauty history books. At Bright Beauty Collective, we’re ready to see which brands will sparkle the brightest this holiday season.

If you have a question you’d like Beauty Independent to ask beauty analysts and consultants, please send it to editor@beautyindependent.com.