The global beauty industry (comprising skin care,
color cosmetics, hair care, fragrances, and personal
care) has been shocked by the COVID19 crisis.
First-quarter sales have been weak, and there have
been widespread store closures.
The industry has responded positively to the crisis,
with brands switching their manufacturing to
produce hand sanitizers and cleaning agents and
offering free beauty services for frontline response
workers. At the same time, the industry’s leaders
have a responsibility to do their best to ensure that
their companies survive. The global beauty industry
generates $500 billion in sales a year and accounts
for millions of jobs, directly and indirectly. Lives
come first, but livelihoods also matter.
This article examines the likely effects of
COVID19 on the beauty industry over the next
three to six months. Then it explores how the crisis
could fundamentally change the industry in the
long term—and how retailers, strategic players,
and investors can adapt. In many cases, it draws
from the results of a McKinsey Global Consumer
Sentiment Survey that took place in early April.
The short-term outlook for the
beauty industry
Beauty may be in the eye of the beholder, but there
is little debate when it comes to the long-term
attractiveness of the global beauty industry. Not
only has it grown steadily, it has created generations
of loyal consumers. During the 2008 financial crisis,
spending in the industry only fell slightly and fully
bounced back by 2010 (Exhibit 1).
Even though the economic magnitude of the
COVID19 pandemic on brands and retailers will be
far greater than any recession, there are signs that
the beauty industry may once again prove relatively
resilient. In China, the industry’s February sales fell
up to 80 percent compared with 2019. In March,
the year-on-year decline was 20 percent—a rapid
rebound under the circumstances. In a variety
of markets, consumers report they intend to
spend less on beauty products in the near term
(largely driven by declines in spending on color
cosmetics) but more than they will in other
discretionary categories, such as footwear and
clothing (Exhibit 2). Noting the uptick in lipstick
sales seen during the 2001 recession, Leonard
Lauder of the cosmetics company coined the term
“lipstick index” to describe this phenomenon. The
principle is that people see lipstick as an affordable
luxury, and sales therefore tend to stay strong, even
in times of duress.
McKinsey has explored nine scenarios for the
economy over the next few years, based on
epidemiological trends and the effectiveness of
economic-policy decisions. 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. In the
United States, if there is a COVID19 recurrence
later in the year, the decline could be as much as
35 percent (Exhibit 3).
We looked at the beauty industry’s recovery against
each scenario, considering two key factors: where
and how beauty products are being sold and what is
being purchased.
Where and how beauty products are being sold
In most major beauty-industry markets, in-store
shopping accounted for up to 85 percent of beauty-
product purchases prior to the COVID19 crisis, with
some variation by subcategory. Even online-savvy
American millennials and Gen Zers (those born
between 1980 and 1996) made close to 60 percent
of their purchases in stores (Exhibit 4). With
the closure of premium beauty-product outlets
because of COVID19, approximately 30 percent
of the beauty-industry market was shut down.
Some of these stores will never open again, and
new openings will likely be delayed for at least
a year.
2 How COVID-19 is changing the world of beauty