The “lipstick effect” takes a budgetary twist

The founder of Melbourne-based cosmetics contract manufacturer New Laboratories, Rohan Widdison, says the brands caught in the middle are most vulnerable during tough economic times.

“Mid-market products that fail to innovate and differentiate themselves from the broader market are therefore being pressured on both ends – they can neither claim to be premium luxury cosmetics, but they are not the kind of cosmetics you would expect from the Buying drugs wouldn’t save either,” he said.

“Beauty is one of the fastest growing categories right now… not a category that we’ve ever really been able to reach [on before].’

Brad Banducci, Woolworths boss

Meanwhile, online sellers like Amazon have expanded their range of skincare and makeup products, offering subscription plans where shoppers get them delivered on a regular basis.

“We’ve seen an increase in ‘Subscribe & Save’ subscriptions in the beauty space, showing that Australian shoppers are looking to save on beauty essentials. We’ve seen an increase in subscriptions to products from trusted everyday beauty brands like Maybelline, La Roche-Posay, Revlon and Cetaphil,” said an Australian spokesman for Amazon.

Last month, Big W told investors in its parent company Woolworths that “luxury-for-less” beauty brand MCo was the fastest-growing makeup line in its supermarkets and discount stores, noting that shoppers are “reducing purchases from specialty retailers” barter” would buy makeup with them instead.

“Beauty is one of the fastest growing categories right now… not a category that we’ve ever really been able to reach [on before]’ said Woolworths CEO Brad Banducci.

Kmart CEO Ian Bailey is also optimistic about the performance of his store’s beauty offering.

“We’ve put a lot of effort into cosmetics and in fact the range of products has been very, very popular – it’s growing really fast,” he said this month after an event for the Melbourne Fashion Festival.

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He said that Kmart has gotten better at making private label products in a number of categories that are similar to more expensive stores. This encouraged some shoppers to exchange their purchases for cheaper products, freeing up their money for other things.

“[They say], why should I spend more for this item? I can get it at Kmart for that price, and if I have a higher income I can choose to do something else,” he said.

There’s still a wide network of brick-and-mortar beauty retailers across the country, from the beauty salons at Myer and David Jones to Sephora and rich list mecca Jo Horgan.

The retail environment means that online-only beauty brands like Adore Beauty have to work extra hard to grow their customer base. Shares of the company are down more than 19 percent year-to-date, and the company told investors in February it no longer expects double-digit sales growth in 2023.

Tamalin Morton, Adore’s chief executive, said the company is focused on expanding its private label offering to create products that resonate specifically with the brand’s customers. She also pointed to the company’s strategy of stocking products that span multiple price points.

“Adore Beauty has a diverse range of over 270 brands and more than 12,000 products – from mass to luxury, so we are well positioned to meet evolving consumer needs and budgets,” she said.

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