India’s blossoming billion-dollar beauty market

Beauty e-commerce platforms boost sales

Business

September 27, 2021

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India’s blossoming billion-dollar beauty market

Indian cosmetic companies innovate to keep up with rapidly-changing consumer trends (Photo: Apostolos Vamvouras/Unsplash)

Aided by nifty social-media marketing, rising digitisation and the advent of e-commerce beauty platforms, the cosmetics industry in India is headed for a major boom in sales. However, to stay relevant, brands, big or small, must continuously adapt to emerging trends, such as eco-friendly and durable makeup products.

Move over fashion and beauty magazines. Tens of millions of Indian women, young and not so young, are looking at their smartphones for the latest hot tips on beauty and make-up as Indian beauty influencers such as Kaushal Beauty, Shreya Jain and Malvika Sitlani have garnered hundreds of millions of views on their YouTube channels and Instagram accounts with creative makeup tutorials and beauty advice. This boom has been enabled by the massive and rapid shift to smartphones across India and availability of cheap data on all mobile connections, across the country.

Demographic growth, improving socio-economic standards and large-scale development of digital and manufacturing sectors has resulted in a booming demand for cosmetic products in India, which is no longer restricted to metro and mini-metro urban centres, but also equally powerful in the rural areas. The evidence of this boom in rural areas can be seen in how almost every village in India now has a beauty salon: no longer a luxury only reserved for the wealthy townsfolk.

Even in the wake of the Covid-19 pandemic, as several businesses in the country and indeed around the world faced devastating financial losses, beauty products showed quite a lot of resilience despite restrictions and months of lockdown, and have made an impressive comeback in sales as lockdowns eased.

Globally, the beauty industry, which constitutes an endless variety of skincare, makeup and hair products, amounts to a staggering USD 511 billion, and it is projected to reach USD 716.6 billion by 2025. Two of the world’s biggest markets are the United States, with USD 62.46 billion, and China with USD 69.4 billion. The Indian beauty industry may be catching up as well, jumping from a mere USD 11 billion in 2017 and is expected to close USD 30 billion by 2025.

Those in the beauty business in India believe this boom can largely be attributed to the sudden influx of e-commerce retailers focused on the beauty segment. Leading companies like Nykaa and Purplle have been especially crucial in helping smaller brands and startups make strides in the market. For example, Earthyblend, a Bengaluru-based personal care company focusing on vegan, environment-friendly and safe products, introduced its brand True Frog in early 2020.

“Earlier we were dependent on small outlets. After Nykaa came in, we picked up on sales and this focus on e-commerce has really contributed to the growth of the beauty industry. We don’t see any kind of decline happening; it’s only going to grow,” Merlin Atman, marketing manager at Earthyblend, tells Media India Group.

Initially founded in 2021 as a start-up, Nykaa, India’s leading cosmetics e-commerce company, has grown into a top destination for beauty products, and now has its not only its own brand of makeup and skincare products, but also its own chain of physical outlets, with a revenue of INR 18.5 billion in the year ending March 31, 2020. Its success has spurred a number of smaller competitors including Plum and Amazon-backed MyGlamm.

Online retail is also an important reason why the Covid-19 pandemic has not had too much of a devastating impact on the cosmetics industry. Although the lockdowns in 2020 reduced average monthly sales of skincare, for example, by more than 30 pc compared to December 2019, the month of June, as “unlock” began, brought a high rate of recovery in value sales.

“We are experiencing approximately 20 pc growth every month. We did have some initial issues with production because of Covid-19 but with regards to sales, it actually went up because of the change in shopping habits; people sitting at home started to shop online a lot more. I believe the beauty industry has been quite resilient to the pandemic,” says Atman.

Modern marketing

Surveys have also found that the digital shift is a large factor in the growth of the beauty industry in India. The 2020 Connected Beauty Consumer report, a joint survey by Google, Kantar, a data aggregator, and WPP, an advertising company, revealed that Indian beauty consumers are shifting their attention from television to digital avenues, and heavily relying on social media platforms such as YouTube make-up video tutorials to buy beauty products online. Among the consumers surveyed, 81 pc engaged with beauty creators on YouTube, with 26 pc purchasing a product as a direct result. The study also revealed that the gender divide was mostly non-existent, with both men and women showing similar interest in the industry and averaging three beauty products per month.

This shifting landscape means cosmetics companies must also adapt to keep up with consumer preferences.

“At Earthyblend, we primarily focus on social-media marketing, advertising our products through online beauty influencers, and usually targeting the small, growing ones. Nowadays, social media plays a huge role in a company’s advertising strategy and growth because it offers clarity on the product and it gives people a way to figure out if the product is the right choice for them. They can see the product in action, they can get first-hand feedback from similar people who are actually using them, so that has helped us a lot because it gives us proof of the product quality and how it has helped them,” explains Atman.

Seba Sulthana is an Instagram beauty influencer from Kochi in Kerala, who often makes quick transition reels showcasing creative makeup looks. She explains that a crucial part of gaining a following on apps like Instagram is audience engagement and picking up on viral trends. This is what attracts brands looking for beauty gurus to advertise their products, and big influencers on the platform can get paid ranging from INR 15,000-25,000 per post.

“The brand’s focus is to reach maximum engagement with their product so obviously they would prefer someone with a larger audience for paid collaborations. I have done some barter collaborations with brands, where they provide you with the free product and you make a reel in return,” Sulthana tells Media India Group.

It seems like a win-win situation for brands, as they can avoid spending millions in expensive deals with famous celebrities and yet achieve the same goal of brand loyalty, enticing young consumers to purchase their products.

“Influencers are the need of the hour for the beauty industry right now, and if they promote something there are more chances that people will go ahead and buy them. They are the people who resonate most with regular customers as they interact everyday with their audience and have a closer connection with them, which is not the case with big celebrities or actors,” she adds.

Green and clean cosmetics

According to a research report by Goldstein, there is rising awareness among Indian consumers of the side effects of chemical formulation-based cosmetics, with recent trends showing an increasing demand for herbal cosmetic products. Globally, the clean beauty market is growing rapidly as well, expected to reach over USD 54 billion by 2027, according to Statista.

EarthyBlend is one such company, focusing on using only vegan ingredients in their formulas and being completely anti-animal testing, as well as working on creating biodegradable and sustainable packing solutions for their products.

“A lot of what is put out in the market is not as clean as brands claim it to be, so we wanted to give the best we could within this price range. There is a huge awareness growing about clean beauty and people are actively seeking innovation and new brands in this category,” says Atman.

Some of India’s leading green brands are Lotus Herbals, Biotique and Himalaya Herbals. These companies do, however, charge higher prices than chemical cosmetic brands, and Atman explains that although awareness is increasing, the increased price of being eco-friendly does deter some potential customers.

“We aim to strike a balance between price and really good, international-standard quality. We ensure that the product never gives you any allergies and is completely safe for long-term use. We are also mindful of the sustainability aspect, as it is important to us to ensure our products don’t harm the people who are using it and by extension the environment as well. Most body care products are used in the bath, so we make sure our products do not pollute groundwater or become toxic waste and contribute to environmental pollution,” she adds.

Retail sales of cosmetics and other personal care products is growing at 15-20 pc annually, therefore making domestic demand in India one of the fastest growing across the world, and industry players like Atman believe that as brands continue to innovate and create education around trends such as clean beauty, skincare, and digital advertising, the market will continue to experience massive growth.

“We are only in India right now, but we are looking to expand internationally in the next few years. Earlier, it may not have been possible, but with online access we can now reach anywhere we want, and Indian brands definitely have enough expertise and knowledge to compete with foreign brands. We’re just getting started!” says Atman.

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