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COVID-19 Impact: Beauty and skincare startups change the DNA of their business

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COVID-19 Impact: Beauty and skincare startups change the DNA of their business

COVID-19 Impact: Beauty and skincare startups change the DNA of their business
COVID-19 may have changed commerce and consumption for the foreseeable future, and the market for beauty and wellness is no exception. It’s little wonder that startups in the business of beauty, cosmetics and wellness have begun changing the way business is done. The long and short of it is simple: with fewer people venturing out amid the COVID-19 pandemic, product strategies of these companies have been re-designed to focus more on wellness and less on beauty.
‘Cosmetics are making way for basics’
“We are going back to the basics,” says Aishwarya Sawarna Nir, founder of the beauty and wellness brand Global Beauty Secrets. “Earlier, cosmetics were poised to be market leaders for the beauty industry. But COVID-19 has forced us to look at skincare, basic personal care and basic hygiene products like hand-wash and sanitiser,” she said. Aishwarya’s focus on wellness as opposed to beauty isn’t without reason. American management consulting firm McKinsey, for one, has said that the 500-billion-dollar global beauty industry could be in for a slew of changes post-COVID-19.
“Based on the scenarios most expected by global executives and current trends, we estimate global beauty industry revenues could fall 20 to 30 percent in 2020,” says a McKinsey report published in May. “In China, the industry’s February sales (in April) fell up to 80 percent compared with 2019," it added.
Revenues of emerging beauty and skincare brands badly hit
There’s every indication that the Indian market may follow these market trends. “Revenues have been hit since COVID-19 and that has reversed growth in the sub-sectors,” says Aishwarya, “Most businesses are seeing a negative sentiment and there are tremors being felt in terms of liquidity.” It isn’t just liquidity. The hit in supply chains meant that logistics costs and delivery costs went up nearly four-fold.
“Post-lockdown, our sales — both, physical and online — were affected,” says Dipali Mathur Dayal, founder and CEO, Super Smelly. “Our revenues dropped by over 60 percent, which took us back to levels we last experienced at the beginning of 2019," added Dayal.
Product strategy overhaul
As a strategy, and given that stressed supply chains did not allow Super Smelly to launch new products, the company banked heavily on existing products in the wellness space. “Face-washes, hand-rubs and face-packs got us better numbers than before, and our category revenues began doubling soon enough,” Dipali says, adding, “We embarked on a vernacular-language ad campaign, which saw customer queries increase by 70 percent.”
It’s the same story at Global Beauty Secrets too. Wellness products like the Turkish Watermelon Day Cream, Egyptian Honey and Castor Oil, and the company’s Japanese Adzuki Bean Face Wash have begun seeing greater patronage. However, products like the Rose and Kewda Body Mist are seeing a decline in demand.
Global Beauty Secrets' Turkish Watermelon Day Cream and Japanese Adzuki Bean Face Wash have begun seeing greater patronage
“It’s simple: the consumption of sunscreen, lipstick and makeup is seeing a decline,” insists Dipali, “Overall wellness has become a goal. It’s a fantastic change, and we have been witnessing it in sales numbers across categories.”
This shift in customer preferences has caused beauty and wellness startups like Upakarma Ayurveda to launch products like Saffron Night Serum, Onion Hair Oil, Onion Shampoo & Vitamin C Face Serum, which it terms “natural beauty” products. “These launches were done keeping in mind that this market —wellness and natural beauty products — will keep growing till 2025,” says Vishal Kaushik, the company’s co-founder. The last few months saw Upakarma Ayurveda report a 35 percent increase in month-on-month revenues.
The not-so-easy online shift
This much-talked-about shift in consumer choices has made its entrance with an equally significant shift towards online sales. Upakarma Ayurveda, for instance, says it has reported a mind-boggling fifty-fold increase in clicks on its websites during the lockdown.
“We always knew that the online market would exceed the offline market,” says Vishal, “We’re also finding new customers online, and this lets us tap into a whole new audience.” Aishwarya agrees. “In due course, we will move all our sales at Global Beauty Secrets towards online channels,” she says.
While this no doubt means that big-brand traditional retail could see tough days ahead — 70 percent of the sector relies on physical sales. In fact, McKinsey has reported that merely 20 percent of American Gen-Z (those born between 1997 and 2020) respondents and 23 percent of millennials (born between 1980 and 1996) respondents to its survey have preferred browsing for and buying skin-care products online.
While the shift to online buying is as clear as daylight in the beauty and wellness segments, shifting entire inventories online could turn out to be a herculean task for brands heavily reliant on offline sales. For instance, Super Smelly signed up with locations like airports for offline sales, in its quest to be omnipresent — a decision that did not augur well during the lockdown.
“We encountered challenges in offline sales, owing to this and our need to be omnipresent,” says Dipali, “We were, after all a B-to-C company building offline infrastructure.” But with malls and physical retail establishments slowly re-opening, and the jury still out on whether consumers will return to stores, some startups may prefer to wait before deciding whether or not to get back to the store or just move all products online.
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