— This is the script of CNBC's news report for China's CCTV on July 13, 2020, Monday.
Although the lipstick effect itself is somewhat controversial, the beauty industry has been doing well. According to McKinsey, a consultancy, global sales of beauty and cosmetics have been growing every year since 2005, including during the financial crisis, but are likely to be broken by the pandemic.
If there is a second wave later this year, global sales of beauty products could fall by 20-30 per cent, including a 35 per cent drop in the US market, McKinsey predicts. Lipsticks face the biggest hit.
During the epidemic, isolation and reduced travel reduced consumer demand for lipstick, coupled with the need to wear masks when going out, making lipstick almost useless. In Japan, data from cosmeceuticals tracking stores show that between February and April, foundation blush and eye makeup products both saw a decline of about 20 percent from a year earlier, compared with a decline of nearly 50 percent for lipstick and more than 60 percent in April.
Therefore, the lipstick effect seems to be no longer effective under the epidemic, and many media have put forward some new concepts, such as eyeliner effect mascara effect or nail polish effect. In a word, for women who love beauty, the parts not covered by masks should be well dressed up.
According to McKinsey, which tracks Amazon's U.S. sales, nail polish sales jumped 218% in the four weeks ended April 11, while lip makeup sales and prices fell. Under the epidemic situation, consumers have higher requirements on the lightness and makeup holding of beauty products, and cosmetics brands have also launched some targeted products to meet the demand.
In the United States, some major shopping malls have filed for bankruptcy and many more are facing bankruptcy, which has led cosmetics giants to increase their investment in e-commerce channels and boost online sales.
According to the Financial Times, L 'Oreal started its digital transformation in 2013, and has been responding rapidly to the epidemic. In terms of advertising and marketing expenditure, the online proportion has increased from 50% before the epidemic to 70%. In the first quarter, the total sales of the company declined, but the sales of online channels increased by 53% year on year.
This has helped L 'Oreal's share price rise 9.32% so far this year, compared with 13.66% drops for Shiseido and 8.16% for Estee Lauder, both of which have suffered.
The global beauty industry generated $500 billion in sales last year, created millions of jobs fdirectly or indirectly. So it's not just about beauty, it's about economics and livelihoods. We will keep an eye on its development.