Why Social Media Changed the Game in the Beauty Industry: Analyst

Despite growing consumer caution and inflation, the beauty industry is thriving. According to the analyst, social media is one of the reasons why it continues to grow.

“I think social media has changed the game in the beauty industry,” Canaccord Genuity managing director Susan Anderson told Yahoo Finance Live (video above). “I think that really made the consumer engage with the category.”

Social media is increasingly becoming the primary advertising channel for companies selling cosmetics, skincare and other beauty products. Thanks to platforms like TikTok, YouTube and Instagram, brands can promote products to millions of users while lowering advertising costs compared to other forms of marketing.

In this photo taken on March 16, 2023, social media beauty and lifestyle influencer Debasree Banerjee applies makeup during a livestream on her YouTube channel in Mumbai.  - In the glow of a ring in a guest room in a Mumbai skyscraper, Indian makeup artist Debasree Banerjee has found fans around the world with a simple mantra: bronze is beautiful.  (Photo by SUJIT JAISWAL / AFP) / To AFP article

In this photo taken on March 16, 2023, social media beauty and lifestyle influencer Debasree Banerjee puts on makeup during a livestream on her YouTube channel in Mumbai. (Photo by SUJIT JAISWAL/AFP via Getty Images)

In 2022, cosmetics companies spent approx estimated at USD 7.7 billion on advertising, and more than a third of this expenditure was spent digital advertising.

And while many brands have added social media to their core strategies, elf Beauty (ELF) has gone even further, starting out as a digital brand before moving to traditional media.

This helped elf — one of the first beauty brands on TikTok, according to its CEO — to reach a younger demographic and deliver 16-quarter sales growth. Elf resources have increased by more than 65% since the beginning of the year.

“I think they’ve done a really good job of promoting the brand on social media,” Anderson said. “The younger generation, especially Generation Z, are discovering all their makeup products online. So I think they really met the needs of this generation. And now they’re moving to more traditional media, like the Super Bowl ad they did this year, and I think that’s attracting even more consumers to the brand.”

In addition to helping mass brands connect with potential buyers, Anderson pointed out that social media has also made it easier for consumers to discover smaller brands. This competition has spurred the entire industry, forcing brands to innovate and keep up with rapidly changing trends.

“It really allowed smaller independent brands to emerge,” said Anderson, “whereas 30 years ago it was really difficult for these smaller brands. You had to go into a store like Target or Macy’s or something. So that really allows for novelty, constant novelty and inventiveness in this category, and I think that’s really played a role in creating new products, new categories, and really encourages consumers to keep trying new brands and new things.”

There is momentum in this category at the moment. Recent data shows that consumers continue to indulge in affordable luxuries despite a decline in discretionary spending, which has been dubbed the “lipstick effect”.

“It’s really a category that has remained very strong while we’ve seen some other categories disappear, such as home and to some extent clothing post-COVID,” Anderson said. “It’s not usually a category that (consumers) cut a lot during weaker macroeconomic periods, so we expect the strength to continue as we look throughout the year.”

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