Top 5 Beauty Trends of 2020 and the Companies Driving Them
As stay-at-home orders and remote work have kept many Americans inside during the pandemic, many speculated that beauty routines would go out the window, along with formal work attire and underwire bras. However, many consumers have used this as an opportunity to redistribute that their beauty spending instead of cutting it out of their budget altogether. An August report on 2020 beauty industry trends from the NPD Group found that consumers were spending 25% less on beauty products compared to last year. However, this effect has varied significantly across the industry, as prestige brands in particular saw a 55% drop in cosmetic sales and a 75% drop in fragrance sales, according to a May report by McKinsey and Co.
On the other hand, many sectors found themselves on the other side of customers’ changing priorities. Here are some of the hottest trends in the beauty industry over the past year, along with the standout companies leading the quarantine beauty movement.
Plastic Surgery
Although heightened unemployment rates have put many Americans through financial instability and hardships, cosmetic surgery procedures have actually been on the rise over the past few months. Some sources attribute this increased demand to the convenience of attending appointments through video call, as 64% of plastic surgeons saw a rise in telemedicine patient consultations, as well as the ability to stay home during recovery. Others also suggest that Zoom and other video calls have forced us to look at ourselves more often than usual, forcing us to fixate on our flaws, which are only worsened through lens distortion and the angle of your camera.
And despite the economic downturns in the US, many have actually found themselves with more disposable income, as they’re spending less money on entertainment, travel, and dining. An article from PR Newswire even drew a link between stimulus checks and a rise in breast augmentations at Seattle Plastic Surgery, as $1,200 covers a surgery deposit for the procedure.
InMode
InMode produces medical devices using radiofrequency technology, allowing customers to undergo minimally-invasive treatments. The company specializes in face contouring, body contouring, hair removal, and women’s wellness treatments.
According to its earnings report, InMode generated record revenue of $59.7 million in Q3 this year, which marked a 49% increase from Q3 in 2019. The CEO Moshe Mizrahy said that this growth was driven by demand for its “hands-free proprietary electrosurgical bipolar RF platform,” which he said is becoming the standard for many procedures. Mizrahy also speculated that in light of heightened precautions and social distancing measures, clinic-based technologies will likely win out over more invasive hospital procedures.
InMode (INMD) shares saw strong growth of 52.95% in about the last six months, from $28.86 on June 11 to $44.14 on December 11. This jump significantly overshadowed the market, with the turbulent NASDAQ rising 30.69% during the same time period.
Establishment Labs Holdings
Establishment Labs is a medical device and aesthetics company that designs, develops, manufactures, and markets silicone-filled breast and body shaping implants under the brand name Motiva Implants. It also allows customers to register their implants and purchase an extended warranty with Motiva Imagine.
Establishment Labs reported Q3 revenue at $22.8 million this year, matching last year’s Q3 revenue of $22.9. “We are seeing country-to-country volatility as COVID-19 flares up in some places, but sales in more than 80 countries has given us some stability to manage our business throughout this period,” said CEO Juan Jose Chacon-Quiros in the earnings call. He also assured shareholders that patient demand has been high, with surgeons across the world having to work through their backlogs.
The company also reported meeting rigorous safety standards for their technology, with a complication rate of under 1% for capsular contracture and implant rupture, which the CEO said are the two most important safety metrics associated with breast augmentation procedures. Additionally, in the past five years, under 1% of the 12,500 women who purchased extended warranties required coverage for reoperations.
Establishment Labs shares (ESTA) has seen growth over the past six months from $16.99 to $31.26, an increase of 83.99%. The stock reached an all-time low of $11.66 in mid-March of this year, just over a week after the World Health Organization declared COVID-19 a global pandemic on March 11. However, it’s climbed pretty steadily since early April, probably because Establishment Labs’ focused product offerings correlate the company’s revenue with the rising number of breast augmentation procedures.
Skin Care
According to a survey by the NPD Group, 71% of women wear makeup less often due to COVID-19 lifestyle changes. With work-from-home and lockdown restrictions, many are left with fewer occasions to wear a full face of makeup, which has inadvertently freed up some grooming time. As a result, consumers have shifted their beauty spending from makeup to skin care products, from face masks and serums to skin care tools like the GloPro and NuFace.
While many public companies, like Estée Lauder and Revlon, have their own skin care product lines and brands, skin products typically only make up a fraction of their sales. Because the companies are so large, they often try to meet customer demand in all beauty categories, including fragrance and lip products, which have been seeing particularly low demand. Therefore, to isolate the trends within the skin care industry, we can look at some startups that have been successful over the past few months.
Supergoop!
Supergoop! is a Series B startup based in San Antonio, TX, specializing in sun protection products. It was started by Holly Thaggard, a former teacher who built the company after a close friend was diagnosed with skin cancer, in an attempt to create an improved version of sunscreen that people would be more excited to use.
Supergoop! brought its products to Chinese customers in February of this year by launching a store on Tmall Global, Alibaba’s cross-border e-commerce platform. The launch was hugely successful, with customers buying up all the stock in just a few weeks.
According to a Vogue Business article, Supergoop! has especially gained attention from its six blue light-blocking products, two of which are now the top two sellers in facial suncare at Sephora. Its popularity can also be attributed to the shift toward “clean beauty,” or ethically-sourced beauty products made to prioritize health and sustainability.
Herbivore Botanicals
Herbivore Botanicals is a startup based in Seattle that specializes in clean beauty products. It closed its Series A funding round in August 2019 with a $15 million investment from Silas Capital. Its products have been all over magazine shopping recommendations throughout the pandemic, from The Cut to Forbes. According to an article by Women’s Wear Daily, the company saw an uptick in sales of skin and body products in the midst of the pandemic’s rise in April. “We have definitely felt the effects of the coronavirus with our retail partners closing, but from a digital perspective, we’re seeing triple our numbers,” cofounder Alex Kummerow told WWD. Its website advertises natural products made with only the most high-quality ingredients, with best-sellers including Bakuchiol Serum, Lapis Blue Tansy Face Oil, Coco Rose Exfoliating Body Scrub, and Amethyst Exfoliating Body Scrub, which is made with crushed amethyst gemstones.
At-home beauty kits
Haircuts and nail appointments often require close contact for extended periods of time, and while many salons have been trying to institute policy changes like requiring masks and taking customers’ temperature upon entry, many have still been shut down periodically due to lockdown orders. Even among those that were still in operation, many have restricted occupancy, cutting down on the number of customers allowed at a time and leaving those who couldn’t get appointments to handle their own hair and nail care.
As a result, DIY treatments like hair dyes, hair removal, and at-home manicure kits have all gained popularity. Similarly to skin care, while some large companies like L’Oréal and Coty dabble in at-home hair and nail supplies, those categories don’t weigh too heavily on their diversified product lines. So instead, we can take a look at some startups whose products have been trending lately.
Olive & June
Olive & June is a private company based in Beverly Hills, CA with a mission to democratize nail care. While it operates three salons in California, it’s been expanding its at-home product lines since well before the pandemic. The company website not only offers nail polishes (which go for $8 per bottle), but also systems and themed sets to allow their customers to create their own salon-quality manicures and pedicures. The biggest product they offer is the $500 at-home salon, which includes 53 nail polishes, sticker sets, hand serum, dry drops, and The Complete System, which includes all the tools you need to perfect your manicures and pedicures.
Olive & June company hasn’t released any revenue figures publicly, but its products have made many appearances in gift lists and shopping recommendations, and many products on its site are already sold out, including its eagerly-awaited advent calendar.
Madison Reed
Madison Reed is a startup based in San Francisco that aims to deliver affordable salon-quality hair color to homes. According to an article in Fashionista, Madison Reed saw 12x the number of new customers as usual during the months that COVID was ramping up. The company projects that 2020 revenue will exceed $100 million, more than double what it was last year. When it had to close physical salons due to the pandemic, it transitioned its Color Bar staff, all of whom are licensed colorists, to its customer service team, where they continued to assist customers virtually.
The company even released a new product line in the midst of the pandemic, beginning its launch into the men’s hair color industry on June 30 of this year, largely due to their heightened success during the pandemic. As of July, 7% of customers were men, but the CEO Amy Errett expects they’ll eventually make up 16–20%, said a Glossy article.
Luxury soaps
As COVID precautions have increased and hand-washing has become more frequent, the soap and body wash market rose by 194%. While this includes a lot of generic companies like Ecolab Inc. and affordable brands like Unilever’s Dove and Suave, analysts have also observed this increase among pampering products like “designer” hand sanitizers, soaps, and lotions. Even through economic uncertainty, the rise in mental health conditions during quarantine, as well as an increase in disposable income for some, has left many in search of affordable luxuries and self-care treats.
This rise in demand has especially boosted performance for brands that are uniquely positioned to satisfy customer needs for hand and body products.
Bath & Body Works
Bath & Body Works is a retail brand owned by L Brands, along with Victoria’s Secret. It’s well-known for its unique fragrances, which it uses in a variety of products, from candles to body sprays.
L Brands saw a strong performance, with shares rising over 13% after posting its Q3 earnings. While part of this success was due to Victoria’s Secret’s better-than-expected performance, it was mostly driven by Bath & Body Works. According to Zacks Equity Research, Bath & Body Works “witnessed growth across categories, namely Home Fragrance, Body Care, Soaps and Sanitizers. In the stores channel, sales were up 38% to $1,201.8 million, while direct channel sales soared 132% to $446.5 million.” The CEO Andrew Menslow also told Business Insider that he expects this trend to continue as consumers develop a more germ-conscious mindset. “We expect that awareness around the importance of that category — washing your hands, using sanitizers when you’re not able to wash your hands — will continue even as the pandemic itself hopefully starts to wane away,” he said.
While you can’t make a bet on Bath & Body Works without also investing in Victoria’s Secret, the bath company still has a strong impact on the company as a whole. While shares of L Brands (LB) have fallen far from their 2016 peak of nearly $100, they’ve trended upward for most of this year. Particularly in the last six months, from June 11 to December 11, shares have skyrocketed from $15.48 to $39.54, a 155.43% jump.
Tattoos
Just like haircuts, manicures, and spa treatments, getting a tattoo in the middle of a pandemic can be a challenge. However, demand for tattoos has increased over the past few months, possibly because the time at home has driven people to manifest their stress and anxiety through art. Customers may also want to use tattoos as a form of self-expression, and many have also found that getting a tattoo can improve mental health.
An August article by Refinery29’s Erika Stalder found that some tattoo shops have seen demand double after the pandemic started in April, even with the growing wait lists from mandated closures. Stalder also said that the company Stick and Poke Tattoo Kit, which sells materials for DIY tattoos, has seen orders increase by 150% since March lockdowns began.
While many of these new tattoos are likely meaningful and well thought out, that doesn’t mean some of them won’t end in removals. According to StatisticBrain.com, as of 2016, 11% of Americans with tattoos either had one removed or plan to remove on in the future. Especially with the rise of DIY tattoo kits, there’s likely to be a rise in the number of people trying to get part or all of their new tattoo removed.
Soliton
Soliton is a pre-revenue stage medical device company developing acoustic shockwave technology that aims to remove tattoos and improve cellulite in 2–3 office visits. According to the company website, the device “uses advanced electro-hydraulics by forming a plasma arc inside a fluid chamber. The arc, produced with very high energy in the range of 3,000 volts at nearly 3,000 amps, forms a shockwave that repeats at 100 times per second.”
Its Rapid Acoustic Pulse device was cleared by the FDA for tattoo removal in March of this year, and more recently for cellulite reduction in July. In September, Soliton announced a distribution and sales agreement with Aesthetic Solutions, an independent sales distributor that will help target customers until the Soliton direct sales team is ready to roll out in the second half of 2021.
Soliton shares have taken a few hits this year, dropping significantly from their 2020 high of $15.13. From June 11 to December 11, stocks fell from $12.54 to $9.23, a 26.40% decrease. However, with its product officially launching in 2021, Soliton is worth keeping an eye on. Especially as a smaller company in a niche market (and a market capitalization of ~$195 million), some speculate that its stock may be flying under the radar of many institutional investors.
