Cosmetics industry undergoes “paradigm shift” through hyper-personalization

22 Nov 2023 --- Long touting a one-size-fits-all approach to skin care and makeup, the beauty sector is getting a makeover thanks to hyper-personalized product design. The emergent trend involves tailoring beauty products to an individual’s unique needs and preferences. 

Introducing this concept to existing lines is not without challenges though, according to a report from Sia Partners.

This trend is revolutionizing the way cosmetics are marketed with a host of launches this year designed to “evolve with consumers.” Sai Partners states that 72% of consumers are willing to pay more for customized cosmetic products. 

An IFOP study found that 42% of consumers are interested in personalizing cosmetics, up from 30% in 2016. In an ultra-competitive world, personalization has become a right rather than a privilege for consumers. 

“Hyper-personalization is a trend that is reshaping the beauty industry by offering consumers a high level of customization and personalization. By using advanced technology to analyze customer data, companies can create products that are uniquely tailored to an individual’s needs and preferences,” notes Thomas Graffagnino, managing director of Transport, Manufacturing and Retail at Sia Partners.

Hyper-personalized beauty is attracting significant investment, with Proven Skincare raising US$12.2 million to grow its AI-based beauty and fragrance solutions last September (Image credit: Proven Skincare).“This trend is leading to increasing customer satisfaction, loyalty and sales, while also enhancing brand image and reputation. As technology continues to advance, it is likely that hyper-personalization will become even more prevalent, so it’s important for companies to be supported by experts.”

New dimensions to beauty routines
This year has seen launches of technologies to analyze the skin profile of individual consumers in detail to develop customized beauty routines. For example, L’Oréal offers a device called “Perso” that instantly produces personalized skin care formulas and cosmetic products using AI. 

Allergan’s Custom D.O.S.E brand also uses AI to create personalized serums for consumers based on their skin care needs, adjustable to their lifestyle.

The space has attracted considerable investment. In September, Proven Skincare raised US$12.2 million to grow its platform of AI-powered personalized beauty and fragrance solutions.

In the hair care segment, brands such as Function of Beauty offer personalized shampoos and conditioners based on consumers’ specific needs. Ingestible beauty brand Nutrifol specializes in personalized nutritional support that targets the root causes of hair thinning.

Elevating shopping experiences
With the explosion of Big Data and the massive use of AI, cosmetic brands are taking hyper-personalization beyond the end product and introducing the theme within curated shopping experiences.

Shiseido, for instance, inaugurated its first store in Mumbai, India, for personalized skin care solutions. It was here the Japanese beauty giant unveiled the Skin Visualizer — a touch-free device that instantly measures and visualizes the current condition of beauty circulation to be showcased in the store.

In online retail, hyper-personalized shopping allows consumers to digitally preview and test products through an AR system, helping them make informed buying decisions. 

Last month, Google launched AR beauty tools enabling shoppers to try on hair color and foundations on mobile browsers virtually, while brands can promote their products with AR beauty advertisements.

Furthermore, Sia Partners cites that consumers are six times more likely to buy personalized cosmetics online than in physical stores. “Virtual try-on removes the final barriers to purchase, and allows customers to benefit from an experience like the one in store,” says Graffagnino.

Shiseido inaugurated its first store in Mumbai, India, catering to personalized skin care solutions (Image credit: Shiseido).“For instance, thanks to its Lipscanner application, Chanel allows consumers to virtually test lipstick shades or to find the color closest to their preference from the entire catalog. As for Nyx Cosmetics, consumers can test their favorite products, but also, new product combinations that will seduce them.”

Capturing new added value
Sia Partners reports that for nine companies out of ten, the hyper-personalized concept is considered to be a core strategy for capitalizing on added product value.

With a personalized product offering, companies can increase their conversion rate and sales. Consumers gravitating toward these products appreciate being able to “feel unique” and accessing products that meet their specific needs. 

In addition, hyper-personalization can help target potential consumers more accurately and encourage them to buy. In the Sia Partners’ report, 77% of consumers chose, or were willing to pay more for, a brand that offered a personalized customer experience. 

Moreover, 36% of customers are more satisfied with this new approach, and 47% are more likely to remain “loyal” to the company, according to Sai Partners.

Limits and challenges to hyper-personalization
Despite the marketability of hyper-personalized cosmetic products, this approach has presented challenges for some companies. 

“This new business model requires profound changes in organization and production for companies, which must rethink their marketing mix,” underscores Graffagnino. “The production of personalized cosmetic products can be quite expensive due to the need to use high quality ingredients and advanced technologies.”

 Function of Beauty offers personalized shampoos and conditioners based on consumers’ specific needs (Image credit: Function of Beauty).“As a result, companies may limit their custom product line or raise prices to cover the additional costs. For smaller players in the industry, the task is more difficult: they need to grow fast, without slowing down delivery times to avoid frustrating customers.”

Another obstacle is the regulation on cosmetics, which is particularly demanding in Europe, as toxic ingredient combinations are banned. 

“In addition, hyper-personalization requires the collection of sensitive customer data, such as product preferences and usage history,” notes Graffagnino. “Companies need to be transparent about how this data is used and ensure customer privacy to avoid confidentiality issues.”

Entering a new field of product design
The production of personalized cosmetic products can be complex and requires specific technologies and processes. Companies must be prepared to invest in the right systems to deliver a quality personalization experience, stresses Sia Partners. Highlighted in its report, a few French companies have begun using AI in data collection and analytics tools to meet this end. 

“The internal organization of the company is strongly impacted [when introducing hyper-personalization to its products],” says Graffagnino. “To successfully implement it, the development of personalization must be considered throughout the customer journey and constructed with the customer. 

“It is a subject that must also be supported and monitored by general management. Thus, 65% of managers consider ‘the management, quality and availability of data a major difficulty.’”

By Benjamin Ferrer