Beauty Is in Its Flop Era

Summary

The Business of Fashion Podcast: "Beauty Is in Its Flop Era"

Release Date: May 27, 2025

In the episode titled "Beauty Is in Its Flop Era," The Business of Fashion Podcast delves deep into the unexpected downturn in the beauty industry, challenging the longstanding belief that beauty is a recession-proof sector. Hosted by Brian Baskin and Sheena Butler Young, and featuring insights from BoF senior beauty correspondent Daniela Morrisini, the discussion uncovers the multifaceted reasons behind declining sales among major beauty giants and explores the evolving landscape of consumer behavior and brand strategies.

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1. Introduction: The Erosion of the Lipstick Index

The episode opens with an exploration of the Lipstick Index, a term coined during the 2008 global financial crisis by Leonard Lauder of Estee Lauder. This index posited that beauty products like lipstick served as affordable luxuries that consumers gravitated towards during economic downturns.

Daniela Morrisini explains:

"The Lipstick Index... was the theory that when times get tough, people still want small luxuries, and beauty products are the ultimate small luxury."
[01:12]

However, recent financial reports from industry leaders such as Estee Lauder, L'Oréal, and Coty indicate a stark contrast to this theory, revealing declining sales and impending layoffs. This raises critical questions about the current state of the beauty industry and the validity of the Lipstick Index in today's economic climate.

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2. Factors Contributing to the Beauty Industry Slowdown

Daniela Morrisini identifies several key factors that differentiate the current economic environment from the 2008 recession:

• Market Saturation and Increased Competition:

  "There’s so much more to... there are so many more places to shop, like Amazon and also TikTok shop..."
  [02:15]

  The proliferation of beauty brands and the emergence of new retail platforms have saturated the market, making it challenging for individual brands to stand out.

• Rising Prices:

  "The price of beauty products has completely outpaced any other kind of inflation... now things are not unusual. I mean, I said $35 for a Chanel lipstick. I think a lot of luxury lipsticks are closer to $50 now."
  [02:15]

  Inflation in beauty product pricing has outstripped general inflation rates, making luxury beauty items less accessible to the average consumer.

• Changes in Consumer Behavior:

  "People are really starting to feel the effects of what’s going on in the economy in their wallets... people are really starting to trade down in a lot of areas of their life."
  [02:15]

  Consumers are becoming more selective, prioritizing value and potentially reducing discretionary spending on beauty products.

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3. The Decline of the Lipstick Index: Beyond Prestige Brands

The Lipstick Index traditionally focused on high-end products like Chanel lipsticks. However, the current slowdown affects a broader spectrum of the beauty market.

Daniela Morrisini elaborates:

"Even if you have a more affordable product that more people can afford, you still have to get people to come and look at you and come and interact with you."
[03:58]

Affordable brands, including those offering dupes on platforms like TikTok, are also experiencing challenges. The abundance of choices and the need for intense marketing to maintain visibility make it difficult for even budget-friendly brands to capitalize on economic downturns.

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4. Impact on Major Beauty Conglomerates

The slowdown is not uniform across the industry, with certain conglomerates feeling the brunt more than others.

• Estee Lauder, Coty, and Shiseido:
  These companies have reported significant declines in earnings. Daniela Morrisini notes:

  "A company like Estee Lauder... pretty much every company was either swinging to a loss or if they’re still growing, like L'Oréal are still growing, but they’re growing closer to 4%, whereas it used to be double digits."
  [06:49]

• Diversified Brand Portfolios:
  Large conglomerates own multiple brands across various segments, which can dilute their focus and exacerbate the impact of declining sales in specific areas.

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5. The Evolving Role of Retailers and E-commerce Platforms

Retailers like Sephora and Ulta are grappling with the slowdown, while e-commerce giants like Amazon and social platforms like TikTok Shop are emerging as formidable competitors.

• Retail Struggles:

  "Sephora... failed to grow as a division... Ulta has had some quite well-documented struggles."
  [09:02]

• Rise of Amazon and TikTok Shop:
  These platforms offer convenience and competitive pricing, challenging traditional beauty retailers' dominance. The accessibility of rapid replenishment through Amazon’s one-day delivery and TikTok Shop’s engaging shopping experiences attract consumers away from brick-and-mortar stores.

Daniela Morrisini highlights:

"Unlike fashion, in beauty, they (Amazon and TikTok) have convinced, as you said, Lauder, to list most of their top prestige brands on Amazon."
[10:10]

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6. Case Study: The Rise and Fall of Drunk Elephant

Drunk Elephant epitomizes the challenges faced by brands amid the current downturn. Initially celebrated as a pioneer in clean beauty with a strong brand proposition, the company experienced a dramatic decline.

• Initial Success:
  Positioned as a leader in clean beauty, Drunk Elephant attracted a dedicated customer base with premium, ingredient-focused products.

• Downturn Factors:

  "Sales were down about 65% last quarter... courting kids or allowing the brand to become so popular with kids may have turned off their core customer."
  [17:12]

  The brand's unexpected popularity among younger consumers, particularly pre-teens visiting Sephora, diluted its core appeal to an older, more affluent demographic, leading to a significant sales drop.

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7. Strategies for Beauty Brands Amid the Slowdown

Navigating the current landscape requires strategic adaptations to maintain relevance and profitability.

• Balancing Innovation with Consistency:
  Constantly launching new products can lead to market saturation and consumer fatigue. Daniela Morrisini suggests:

  "There is a degree of kind of going back to basics and figuring out what was it that originally made our brand stand out... and communicating it to people better."
  [18:18]

• Focusing on Replenishment and Routine Building:
  Emphasizing products that consumers regularly repurchase can foster loyalty and steady sales, as opposed to relying solely on trendy, viral items.

• Successful Brand Examples:

  • MAC Cosmetics:
    Reintroducing classic products with modern twists to appeal to both loyal customers and new, younger audiences.

    "They brought out a new iteration of a lip gloss they’ve had for a very long time... speaking to the current trend."
    [19:26]

  • Kiko:
    Implementing a premiumization strategy by increasing prices and enhancing in-store services instead of relying on heavy promotions.

    "They’ve been increasing their touch time with the customer and keeping people in store longer."
    [19:26]

  • Charlotte Tilbury:
    Addressing the issue of brand dupes by reinforcing the value and artistry behind their products.

    "We are legendary for a reason. You're paying for my artistry and expertise."
    [21:51]

---

8. Future Outlook: Emphasizing Value Over Price

The beauty industry is anticipated to continue facing challenges with softening sales expected to persist until market conditions stabilize.

• Consumer Value Perception:
  Brands must communicate value beyond mere pricing, focusing on quality, efficacy, and emotional connections.

  "It’s about value. People are really attuned to perceptions of value."
  [22:21]

• Recovery Pathways:
  Developing strong, loyalty-driven customer bases and refining brand identities can help navigate the slump. Emphasizing routine use and maintaining product excellence are crucial for long-term resilience.

Daniela Morrisini concludes:

"Brands that find ways to communicate value better than others have the best chance of making it through this era."
[23:19]

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Conclusion

"Beauty Is in Its Flop Era" provides a comprehensive analysis of the current challenges facing the beauty industry, debunking the myth of its recession-proof status. By examining the decline of the Lipstick Index, the impact on major conglomerates, the rise of e-commerce competitors, and specific brand case studies like Drunk Elephant, the episode underscores the necessity for brands to adapt strategically. Emphasizing value, fostering customer loyalty, and balancing innovation with consistency emerge as pivotal strategies for survival and eventual recovery in this evolving landscape.

---

For more in-depth analysis, be sure to check out Daniela Morrisini's articles, including "The Beauty Slowdown Explained" and "The End of the Lipstick Index," available exclusively to BOF Professional subscribers.

Transcript

[Sheena Butler Young]

Foreign.

[Brian Baskin]

Hello and welcome to the Debrief from the business of fashion where each week we delve into Our most popular BoF professional stories with the correspondents who created them. I'm executive editor Brian Baskin.

[Sheena Butler Young]

And I'm senior correspondent Sheena Butler Young. The beauty category has long been viewed as recession proof. When times got tough, consumers traditionally turned to small luxuries like makeup and skin care for comfort. But recent results from beauty giants like Estee Lauder, l' Oreal and Coty tell a new tale. Sales are down, layoffs are looming, and the so called lipstick index seems to have lost its shine.

[Brian Baskin]

Today we're diving into what's driving this slowdown. Why are consumers pulling back and what do they still want to buy? And how are brands responding? To answer all these questions and many more, we're joined by BoF senior beauty correspondent Daniela Morrisini. Hello, Daniela, and welcome back to the debrief.

[Daniela Morrisini]

Always a pleasure, Daniela.

[Brian Baskin]

Let's start big picture. Your article that prompted this episode was called the End of the Lipstick Index. I think the best place to start is telling us what is the lipstick index.

[Daniela Morrisini]

So this is one of economists favorite terms, I think, for those that cover the consumer goods industry. In 2008 in the wake of the global financial crisis. Leonard Lauder, who is the son of Estee Lauderin at the time, was the company's leader, coined this expression because even though the global world economy was crashing, beauty was doing really well and seemed very resilient. And his theory was that when times get tough and people are really suffering, suffering for money, they will still want small luxuries and that beauty products are the ultimate small luxury. Because a lipstick, especially from like a prestige brand like chanel, is maybe $35, right? But one of their handbags is going to be $3,500 if you're lucky.

[Sheena Butler Young]

Not today. That 3,500 has evolved. Can we talk about then what is so different this time around? We're in probably the third alleged recession, if you want to believe the headlines. But why are consumers not then flocking to small luxuries like lipstick right now? What's been so different at a high level, at least we'll get into the details. But at a high level, what's so different?

[Daniela Morrisini]

So if we think back to 2008, I was going to try and make a comparison about all the fashions being different. But I think actually with the Y2K thing, people are kind of still dressing like it's 2008. But if we, if we look back to how the beauty industry looked at that time, I think there was a lot more consolidation, right? Of course there were indie brands, but generally speaking, the big beauty conglomerates really controlled a lot of the market. So there were just simply fewer brands, for one, fewer brands, fewer choice and fewer places to buy them. You know, department stores were really king at that point. Maybe a local drugstore for a more mass brand. So there was less to choose from. And also, you know, I would love to get the data on this to prove it, but I'm pretty sure that the price of beauty products has completely outpaced any other kind of inflation. Things were just cheaper throughout Covid and we'll touch on this later. There was such a boom coming out of the pandemic and pricing just really went out of control. You know, it's not unusual. I mean, I said $35 for a Chanel lipstick. I think a lot of luxury lipsticks are closer to $50 now. Fragrances are, you know, often over $250. So that's the other thing is that the prices have just really, really grown. But I think the main thing that is different now versus 2008 is there's just so much more to. There's so many more places to shop, like Amazon and also TikTok shop recently have become bonafide beauty retailers. They often sell these products at quite a discount. So there's too much choice, there's too many places to, you know, in terms of the product, but also where to buy them. And I also think people are really starting to feel the effects of, you know, what's going on in the economy in their wallets. You know, people are really starting to trade down in a lot of areas of their life.

[Brian Baskin]

Does the lipstick index apply to something like an elf dupe? I mean, do people get that fun little feeling when they buy that? Or are we really only talking about the Chanel lipsticks like the real thing?

[Daniela Morrisini]

This is so interesting because it seems to be a bit of a mixed bag, right? Because on one hand, a dupe brand, I'm not saying that E L F are wholly a dupe brand, but they do offer some products that are kind of like trendy products and they're less expensive. That would seem like the perfect way to solve for this problem, right? You would think that they were going to be having a big uptick, but they still compete in the same space as all the other beauty brands. If you think about it on TikTok, on Instagram, you know, where these beauty brands live, they are all competing with each Other for views, you know, they might not be going for the same customer, but they are all sort of like putting their content out and trying to get seen. And it's really hard to get seen. So even if you have a more affordable product that more people can afford, you still have to get people to come and look at you and come and interact with you.

[Sheena Butler Young]

When you're hearing about these big prestige brands, you're thinking that they're catering to the 1%. But Daniela, that's not always the case. It seems like a lot of their customers are coming from the middle. Is that right?

[Daniela Morrisini]

Yeah, I think, you know, prestige beauty brands, generally speaking, it's not always the richest of the rich that is their customer. Oftentimes it is a more middle class or what, you know, what is referred to as an aspirational customer. And I remember when Olaplex, which is a haircare brand, when they went public a few years ago, in their IPO prospectus, they kind of touted that more than half of their customers made over $100,000 a year. Which, when you think about it, in the total wealth spectrum, you know, that household would be squarely in the middle class or kind of aspirational customer bracket. Those shoppers make up a really big part of the beauty economy. They're very, very important.

[Sheena Butler Young]

Can we talk about some of these recent results, by the way? So they run the gamut. You have Cody, Estee Lauder, and even the powerhouse that is l' Oreal, that all are seeing declines board in their earnings. Can you talk about the extent to which this is company specific or is this awe? Is everybody on the receiving end of this lipstick index being irrelevant?

[Daniela Morrisini]

I would actually say the companies that have been the most impacted so far are Lauder, Coty, and actually Shiseido, which is a Japanese conglomerate. And they have their own namesake line, which is Shiseido. They have some skincare and some makeup that's prestige. But they also own brands like nars, the cosmetics line. And they also own Drunk Elephant, which is a prestige skincare company as well. And Estee Lauderdaud, a similar thing. You know, there is Estee Lauder, the brand that we know, but then they also own so many other brands. So they own deciem, which is like the ordinary, but then they have Tom Ford, they have Le Labo, they have La Mer, and with Coty, they do own quite a few brands, I think, like they have CoverGirl, for example, but they also do a lot of fragrance licensing deals. So Coty, I think, like they make Chloe Perfume, for example. So a lot of fragrances run through Coty. They have the Gucci perfumes as well in the Gucci beauty business.

[Sheena Butler Young]

So you can't use a really broad brush to paint any of this. So there's big, big conglomerates, brand specific struggles, and also just the market as it is. But can you talk a little bit about the results that have been so bad? Just generally speaking, we see all these numbers down. Can you unpack some of that? What are the trends that you're seeing?

[Daniela Morrisini]

So obviously, because I follow this so closely, I would say even maybe three quarters ago or, you know, nine months ago, I started to see like a little bit of deceleration. And there was different things that different companies were blaming. So they might blame, we're lapping a hard comparison based because we had such a blockbuster year in the previous period. Or they might say retailer Destocking, which basically just means they're ordering less. Sometimes they would blame travel retail. The travel retail market, especially in China, has been really sluggish. So it was all kind of disjointed for a point. And the deceleration was much more noticeable. A company like Estee Lauder, who we've discussed very often before, but I think what started to change as we got into this year is pretty much every company was either swinging to a loss or if they still growing, like L' Oreal are still growing, but they're growing closer to 4%, whereas it used to be double digits. And generally they're starting to say the same things. And one thing that I've heard from pretty much every one of these companies is the US Is starting to soften. The US Is the world's biggest beauty market. China is number two. And historically it's just been so resilient and customers seem to just have this insatiable appetite for more products and more newness. And I think that is something that's really starting to come into focus is that American and specifically middle class, like American middle class shoppers are starting to buy less beauty products. And that's having big knock on effects.

[Brian Baskin]

And they're really this, this applies across categories, right? I mean, as you described before, these conglomerates are, they're playing in fragrance, skin care, hair care, makeup. And with a few exceptions, they basically said across the board sales are softening, right?

[Daniela Morrisini]

Yeah. No one is safe. I mean, fragrance seems to be this quite well insulated category. So for example, Pooj, which is a Spanish company, and they, they do own Charlotte Tilbury and they own Dr. Barbara Stern. But They' predominantly a fragrance company. They are still doing quite well. They've only been on the public markets for a year. So again, comparison bases can't directly compare. So that category does seem to be quite well insulated. But generally speaking, it's across all categories. Yes.

[Sheena Butler Young]

What about retailers like Sephora and Ulta and like emerging platforms like Amazon and TikTok, how does this trickle down to them? Can we unpack that a little bit?

[Daniela Morrisini]

Yeah, absolutely. I think what was interesting is in lvmh, so Sephora's parent company, in their last quarter earnings, they house Sephora under this division with a couple of other stores, but it failed to grow as a division. And Sephora, I think, is still seen as like the premier beauty retailer in many countries across the world or in many markets. So the fact that they weren't able to grow Ulta has had some quite well documented struggles. You know, they've, they've switched up their C suite, they rolled out this big kind of immersive event called Ulta Beauty World. You know, they're all trying different things to get people in store. And I think nobody likes to admit it, but if you go back. So let's go back to 2008, right, you had this big shift where department stores stopped being the primary place for beauty shopping and it became your specialty retailer. So your Sephora's, your Meccas, your Ultas. Now I think we're seeing not a complete departure, But Amazon and TikTok shop are really becoming quite a competitive threat for a lot of retailers. And the retailers are no longer in a strong position where they can say to brands like, hey, if you go on Amazon, we won't sell you anymore. Historically they were able to do that, but I think that's starting to break down. A lot of the Prestige Lauder brands are on there. You know, it's really hard to stop brands from going on there because it's such a good volume game for them.

[Brian Baskin]

It's been remarkable to see because on the fashion side, Amazon and TikTok are nowhere when it comes to the prestige side of the business. And yet in beauty, they've convinced, as you said, Lauder, to list most of their top prestige brands on Amazon, right?

[Daniela Morrisini]

Yeah. And I think this is one of the differences. And I was thinking about this earlier, it's around replenishment, right? If you think about how often you buy a new pair of jeans versus how often you'd buy a new tube of mascara, Brian, I know you go through a lot of mascara, but for most much so Much mascara, you know, the replenishment is so much higher. Right. And so if you know that you like, you know, X mascara and you just don't want to go all the way down to Sephora and get it, or you don't want to go onto the website and have to log in and what have you, like the idea of just going on to Amazon and having it delivered in the UK you can get it in one day, right? So one day delivery, one click, like, oh, that's pretty appealing.

[Brian Baskin]

And it seems like customer loyalty is also something that's been undermining the lipstick index. As you said, replenishment has gotten so easy, but there's also so much selection that it's seems like customers are just as happy to move on to the next brand.

[Sheena Butler Young]

As you were talking about the Lipstick index, I was thinking about the decline of department stores. So like around the 2008 recession when you would go to have that experience and you would want to feel good about yourself in a recession, part of it was probably not just the $35 Chanel lipstick, but also the experience of the Chanel counter and being courted and walked around by the sales associate and having a full on prestige experience. The decline of that probably also plays in here as to why the Lipstick index isn't relevant. Most people are not looking for that experience anymore. They're going to Amazon.

[Daniela Morrisini]

I think. Yeah, that's true. And if you think about it like basically everything that helped the beauty industry like swell to the heights that it did, you know, in 2021, 2022, a lot of that was things like social media and like the ease of TikTok shop, all those things that really helped it get super bubbly and super frothy, is now kind of choking it out. Because there was this point where there was just constant new brands being launched. Every investor I know, even if they historically only invested in fashion or food and Bev was now like, we're going to invest in beauty. There was all this dynamism flowing into it and now it's kind of at this gridlock point where it's just so hard to stand out. It's so saturated and people are just kind of to your point, like they're very flighty. They'll try something one time and they'll be like, yeah, that was okay. What else is there for me to try? And it reminds me of. So when I was still working in consumer press and I would be working on magazine pages about trans, my editor might give me an assignment and it could be Something as specific as, like, find me eight cleansers that have, like, goat's milk in. Right? So I would go and I'd find her the goat milk cleansers and they'd come back and they'd say, but they have to be new. They have to be launched in the last three months. And I always thought that was really weird because I was like, if I know this brand makes a great one and it fits the brief, why can't we include it? But in the beauty industry, there is such an obsession with newness, just like constantly launching new products. And I've heard before that most beauty companies, about 30% of their earnings comes from new launches, right? So constantly churning out all this newness, new products all the time. Well, I see it. But it's also a missed opportunity, right, Because. Because beauty is a high replenishment category. Wouldn't it be better to recruit people into hero products and convince people to use one thing time and time again rather than fanning out 20 new launches in a year?

[Brian Baskin]

I don't know, that sounds pretty hard.

[Daniela Morrisini]

I was gonna say it's like Brian's.

[Sheena Butler Young]

Favorite phrase is like, they're the victim of the very thing that made them successful. Like one of your favorite things I think applies here.

[Brian Baskin]

We'll be back with more of the debrief right after this.

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[Brian Baskin]

Well, let's talk about how this has played out at one specific brand. Tell us about the rise and fall of Drunk Elephant.

[Daniela Morrisini]

This is really interesting. So Drunk Elephant was really one of the first brands to talk about clean beauty. So they had a very clear proposition that there was these six ingredients they weren't going to use. And the products were all going to be super fun and super playful and super eye catching, but very premium. These are quite expensive products, you know, I think over $60 for a lot of them. At the absolute like peak of their kind of fame and their excitement, they were bought by Shiseido and the brand continued to do quite well in specialty retail. But last year they had this huge uptick that I think no one could have seen coming and they really became like the poster child brand for what people called Sephora tweens. So this was people going to their local Sephora and I would say in the uk, where we have space in K, I saw this as well. You'd go in store and it would just be like overrun with pre teens and you know, they'd be like clotheslining you to get to the lip balms or whatever you. It was, it was chaos in there. And Drunk Elephant, despite not being a brand for kids, at least not in the allowance I was being given as a child, you know, a pricey brand and the products are quite strong. You know, there's anti aging, there's anti agne, just stuff that kids don't need. Kids seem to really like it and they had a lot of buoyancy because of that. So the brand started to struggle. They, their sales were down about 65% last quarter. And I remember at the end of last year, in the sort of annual earnings wrap up, the CFO of Shiseido just sort of made this comment about, you know, we need to refine our audience with this brand a little bit. And some of the analysts I spoke to sort of took that to mean that actually courting kids or sort of allowing the brand to become so popular with kids maybe had turned off their core customer, who was likely an older millennial or Gen X or Boomer woman.

[Sheena Butler Young]

So what she said exactly was, what is this brand about? What does it do for me? We need to communicate that with consumers. A lot of analysts, as you've already said, sort of interpreted that as them acquiescing to the fact that they had gone too far and courting this very well, this fickle consumer, to the extent that Gen Z is still growing up, like, what you're at 21 is not what you're going to be using maybe at 41. And so I think when brands do that, if you're not a Gen Z brand, it can be risky. And it sounded like an admission that they might have gone overboard.

[Daniela Morrisini]

Yeah, and that's actually a good point because it's also. It's not just the tweens. Right. Like, to your point, Sheena, it was also people in their 20s. Like, I think they have these bronzing drops that went super viral on TikTok. I think Alex El said she liked them, and then they just had an issue where they couldn't keep them in stock. Right.

[Brian Baskin]

Yeah. It really is that frothy sugar high you were talking about before that just has completely gone away way.

[Sheena Butler Young]

So, you know, we talk a lot earlier about this idea of being spoiled for choice, and maybe there's too many choices that consumers have and that's leading to a fatigue. But to your point, Daniela, like, innovation is important in beauty. How do you think brands can balance being innovative without overwhelming people to the point of burnout?

[Daniela Morrisini]

I think this is such a delicate dance. Right. Especially if it's a public company and they have shareholders who want to see innovation all the time and that they want to see this big blockbuster launches always coming. I think the way I would approach it is, you know, I hate to say because it's such a cliche, but there is a degree of kind of going back to basics and figuring out what was it that originally made our brand stand out and made us different? What was it that we were offering that we can say is different, even if it's only a little bit different, but different from all the other brands on the shelf. Right. Figuring out what you do that nobody else does and how you can do it better and communicate it to people better as well. And I would say, you know, really try and think about the replenishment side of things. To me, that is just like one of the greatest things about the beauty industry. It's like you have high margins, and you also have very high replenishment rates, and people form these really strong Emotional connections with products, you know, for better or for worse. Right. So I think targeting that and actually starting to refocus your messaging and your marketing more about like routine building rather than just try this new thing. Here's a flash viral trend, like I think that could be one way to approach it.

[Brian Baskin]

What are some brands that are doing that right now?

[Daniela Morrisini]

Oh dear.

[Brian Baskin]

This is an ominous pause right here.

[Daniela Morrisini]

I think there are some brands that are thinking about things quite creatively and you might be surprised to hear me say this given the conversation we had last time I was on here. But like, let's look at Mac Cosmetics for example. They are really trying to re engage with their customer base and definitely trying to bring in younger customers. And one way that they did this is they brought out a new iteration of a lip gloss that they've had for a very long time and they brought out like a kind of like a lighter version of it that kind of speaks to the current trend. And they did this campaign about Nepo babies because they were saying that this lip gloss is the baby of the old edition. And oh, you know, the lip gloss was born famous. And I thought that was quite an interesting way to keep that product, the lip gloss that a lot of customers probably will have used for a very long time and then also bring in like a newer element to it as well. The other one that I think is interesting is Kiko, which is not a brand that's super well known in the us it's really big here in Europe. This is an Italian cosmetics brand. And over the years, in the last two years, they've been very slowly but surely doing a bit of a premiumization strategy. So it's quite an affordable brand brand. But they've been actually increasing their prices, getting rid of promotions. They used to do a lot of their sales on promotion and they've replaced the promotions with in store services. So okay, you can't get the product 70% off anymore, but you can get a 15 minute makeover for free. And I think that's been quite interesting to kind of just increase the touch time with the customer a little bit and keep people in store and keep them engaged for a bit longer.

[Brian Baskin]

Charlotte Tilbury seems like another good example. I was thinking about that campaign from earlier this year. You're legendary for a reason, you know, targeting dupes. And to me that that's very similar to what you said before about how brands have to remind people about why they're special rather than saying here's something new, here's something new, here's something new.

[Daniela Morrisini]

Yeah, I thought that was great, and I thought it was wonderful because she was really tackling a problem head on. I think Charlotte Tilbury is probably one of the most duped brands, partly because their products are quite innovative, but also the packaging and everything. Like, I've seen so many brands try and knock them off. And I thought it was interesting that rather than try and explain away, like, oh, this why we're so expensive, and look at this formula versus this formula, they kind of just, like, took another approach to it, and they were like, yeah, we are expensive. We are this. But, like, we're legendary for a reason. You're paying for my artistry because, you know Charlotte, the founders and makeup artist of many years. You're paying for my expertise, you're paying for my artistry, and we're not going to kind of budge on that.

[Sheena Butler Young]

I also love that you mentioned Mac, because I think a lot of this is cyclical, right? Like, I think we get very excited when we see things boom and then bust, or there's so much momentum right here, and then it goes away. And it's like the department store example. Like, we moved away from that for a while, but there was some value there to the beauty counter. Now we're coming back to that or rationalizing a lot of these highs and lows. I think that's altogether not a bad thing.

[Brian Baskin]

So where do we think this is all headed? I mean, how deep is this slump going to get and what finally pulls the industry out of it?

[Daniela Morrisini]

I think it's going to continue. We're going to continue to see kind of, like, disappointing earnings for a while, just until some of those comparison bases are, like, completely lapped. I think that people are becoming a lot choosier. There was an analyst I spoke to who referred to it as considered moderation. So you might cut back on one area of your life so you can splurge in another. There's no reason that people won't pick beauty to be their splurge. And I think the conversation has become more about value. And people are really, really attuned to perceptions of value. You know, there's a luxury retailer here in London called Harrods, and they love saying that their customer is not price sensitive, they're value sensitive. And, you know, that that might seem crazy when you think that they sell so many things for, like, $10,000 or whatever, but I think think it's not necessarily about the price tag. You have to find other ways to communicate value, and brands that do that better than others. Have the best chance of sort of making it through this era and still kind of coming out on the other side.

[Sheena Butler Young]

Absolutely. Daniela, this was excellent. Thank you so much for joining us today. I think that's a nice point to end on value. I love that value.

[Daniela Morrisini]

It's all about value. Thank you so much.

[Sheena Butler Young]

All about the value. Please be sure to check out Danielle's articles, the Beauty Slowdown Explained and the End of the lipstick [e-mail] these and other stories are available to BOF Professional subscribers only and you can find the links in the episode notes. You've been listening to the debrief, produced and edited by Olivia Davies and Eric Brea. I'm Sheena Butler Young.

[Brian Baskin]

And I'm Brian Baskin. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.

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