As the holiday shopping season approaches, experts are predicting a modest growth in sales, posing a challenge for beauty brands. The National Retail Federation’s forecast indicates a mere 3.5% increase in U.S. holiday retail sales, the slowest rate in six years. Despite inflation easing from its peak, many shoppers are still feeling the financial pinch and are expected to be more judicious in spending. Moreover, the late arrival of Thanksgiving this year has significantly shortened the critical shopping window before Christmas, intensifying competition among brands.
“It’s not expected to be a blowout year,” remarks Sarah Engel, president of January Digital, underscoring the need for brands to think creatively about how to attract and retain customers. Alongside financial pressures, consumers are experiencing “choice fatigue,” which is leading to what Accenture calls “buyers’ block,” where shoppers fail to make purchases due to overwhelming options.
This holiday season is particularly vital for beauty brands, as they not only rely on this period for a significant portion of their annual revenue, but they also see it as an opportunity to attract new customers through strategic promotions, gift sets, and curated bundles. While growth is expected to be moderate, there are still opportunities for brands to thrive. A focus on gifting resonates heavily in this sector, and emotional connections with premium products can drive consumer interest. Therefore, convenience and perceived value in shopping experiences will be key motivators for consumers.
Joe Shasteen, global general manager at Retailnext, emphasizes, “Newness drives customer engagement. Anything that enhances the shopping experience and showcases products more effectively can set brands apart.” In this competitive landscape, beauty brands must adopt agile marketing strategies that prioritize convenience and relationship-building with consumers.
Gift Now, Pay Later
Increasingly, American consumers are turning to credit cards and buy now, pay later (BNPL) services to manage their holiday spending. Research by Salesforce indicates that nearly 50% of consumers report carrying more credit card debt than the previous year. Notably, 28% of shoppers plan to leverage BNPL options this holiday season, a figure that spikes to 67% among parents.
The emergence of younger consumers, dubbed “Sephora tweens,” who gravitate towards premium beauty products, further highlights a lucrative opportunity for retailers looking to cater to gifting trends. Engel notes, “Companies are moving BNPL options to more prominent positions on their websites, making it easier for consumers to consider these options right from product selections.”
Adapting to consumer preferences involves flexibility not only in payment options but also in logistics. Shoppers are seeking conveniences such as buy online, pick up in store (BOPIS) and curbside pick-up, especially given the reduced timeframe for shipping during the holiday season. Salesforce’s data reveals that retailers offering BOPIS see their revenues increase by 5-7 times during this period compared to those that do not implement this strategy.
Brands that excel in providing flexible logistics can create a perception of value without heavily discounting products. Engel highlights, “Value-based services can effectively protect margins,” suggesting that operational efficiency can often lead to higher revenue.
The Price of Value
Across varying income levels, consumers share a unifying desire for value. Promotional strategies must be carefully timed and executed. Salesforce’s research indicates that “Cyber Week,” the seven days following Cyber Monday, is peak spending time, with consumers eagerly anticipating discounts.
Engel advises that brands need not resort to steep discounts to attract buyers during this high-demand period. Instead, introducing gift sets that offer slight savings compared to individual products or exclusive limited-edition items can harness consumer excitement without compromising profitability. Furthermore, brands should explore offering add-ons that extend beyond the holiday season, such as gifts with purchase or exclusive private shopping events.
Creating unique shopping experiences can encourage spending. This might involve customizable gift bundles at a slight discount or luxury gift-wrapping services. Engel suggests, “Anything that feels unique and curated will motivate shopping.” Retailers could enhance the perceived value of their offerings by ensuring attentive customer interactions in-store, contributing to an elevated shopping experience.
As the holiday sales period kicks off, brands still have opportunities on the horizon. Engaging with user-generated content on social media platforms can serve as authentic advertising that resonates with consumers, often requiring less effort than creating fresh content internally. Exploring newer platforms like TikTok Shop or utilizing live-stream selling can also provide effective opportunities for engagement with minimal initial investment.
In this dynamic retail environment, beauty brands must remain versatile, ready to adapt quickly to shifting consumer demands. By emphasizing convenience, unique experiences, and fostering emotional connections with products, brands can navigate this holiday season successfully without sacrificing profitability.
