The Future of Beauty

How AI is shifting how the world’s biggest beauty brands work.

In 1999, Professor Juliet Shor introduced the theory “Lipstick Effect” in her book “The Over-Spent American”. This theory believes that when times are tough, consumers will continue to indulge in little luxuries to give them an emotional lift, and instead forgo higher-priced luxury expenditures. The lipstick effect is one of the reasons that fast-casual restaurants and movie complexes typically do well amid recessions. Cash-strapped consumers want to treat themselves to something that lets them forget their financial problems, but still feasible within their budget.

It only makes sense that the beauty business has continued to prosper compared to other discretionary categories, even when the world economy dips here and there. Today the global beauty industry is worth over $500 billion with the United States dominating 20% of the market, followed by China (13%) and Japan (8%). While projections for growth vary, most agree it will continue to advance at a 5%-to-7% CAGR to reach or exceed $800 billion by 2025. 

Although beauty tech dates back 1998 when Cosmopolitan magazine put its name on “virtual makeover software”, beauty tech disruptions have been underwhelming, even nonexistent in most developing countries. Unlike innovations in other industries, which are typically triggered by newcomers (think Robinhood to the financial market and Airbnb to the travel industry), beauty tech innovation is often initiated by industry leaders. For established brands, beauty tech represents an opportunity to attract and connect with their consumers more personally. 

L’Oréal, Shiseido, and Estée Lauder are three of the world’s biggest cosmetics companies. They are actively leading the innovation in the beauty industry, through incubation of their own startups and even investments/acquisitions. Here are some trends that these global leaders currently focused on:

Shopping with Augmented Reality 

Notable beauty brands are now offering makeup try-on and skin-care analysis features in their in-store counters, websites, and mobile apps. Before the pandemic started, several brands have already begun offering tests to help consumers determine the right skincare and makeup for their condition. Most SK-II counters run their Magic Ring Skin test on its consumers to determine the age of their skin and the critical problems they need to address. Sephora US also partnered with Pantone to operate a Color IQ tool to help customers determine the right foundation shade for them. 

In 2018, L’Oréal purchased ModiFace, a Toronto-based tech company that specialized in augmented reality beauty apps whose clients included rivals like Shiseido, Estée Lauder and LVMH, the parent company of Sephora. Along with dealing a blow to its competition, ModiFace’s AI-powered skin diagnostic and facial analysis technology now underpins the L’Oreal’s own incubation product Perso.

Perfect Corp, which just inked deals with Snapchat and Google in December, showcased several new features. These included advancements in the accuracy of its AR makeup try-on and skin analysis, AR livestreaming, AR 1-on-1 consultations and a facial aging simulator.

Since physical product testing are no longer viable due to the pandemic, the adoption of virtual try-on technologies has surged. YouCam reported a 32% increase in use of makeup try-on in the company’s app. Several notable brands are coming up with their own beauty app where consumers can test out colors on their own complexion. As skin care has become a more popular category during the pandemic, interest in digital skin analysis is also growing. Another interesting campaign we saw in 2020 was Parfums Givenchy’s Prisme Libre powders and Le Rouge lipsticks debut in Nintendo’s Animal Crossing – the first luxury beauty brand launch in a game and hopefully only the beginning of a new era of creative advertising for the beauty industry.

Next-Level Customization

One of the earliest custom beauty products debuted back in 2014 when Grace Choi introduced the world’s first at-home 3D makeup printer at the TechCrunch Disrupt conference but it took years of experimentation until the product was finally available for purchase in late 2020. Promoted under the brand Mink, this printer allows users to upload photos into its mobile app and print over 16 million colors into the Mink makeup sheet. These printed pigments make it easier for consumers to travel with and will last them about two weeks when kept covered in its original plastic film, which comes in handy to avoid smudging.

Loreal also recently launched a similar product but for lipsticks under the Yves Saint Laurent brand, Rouge Sur Mesure Powered by Perso is a smart at-home device that allows consumers to create their own personalized lipstick color everytime they need it. The $299 device uses color cartridges filled with “ink” from YSL’s lines of red, nude, orange, and pink lipsticks. Using the companion app, users can select a shade from a picture, the color wheel or even utilize their algorithm to come up with three options based on what the users are wearing. Once a color has been chosen, the machine will dispense a single serving that you can apply with the accompanying brush. The device includes a removable compact that you can bring out with you for touchups.

South Korea’s Amorepacific’s Formularity device, meanwhile, allows consumers to mix toners at home. Users customize their type of toner by skin concern via one base toner and three ampoules. The tool the deposits the single-dose product on a cotton pad and heats or cools it for optimum skin absorption.

Smaller cosmetic brands are also offering customers other innovative customized and DIY products. US-based Function of Beauty asks their customers a set of question to understand their concern, favorite color, and favorite scent before customizing the perfect hair, skin, and body product for each person. Hong Kong-based custom drink-maker startup Lify Wellness also touted beauty benefits, showing its digitally connected herbal drink brewer that offers beauty-focused ingredients such as collagen. We are also seeing more and more brands allowing consumers to personalize the packaging of beauty products, whether it means adding their initial and images, or simply choosing the colors and patterns of said product. 

While custom beauty is still an emerging market, we expect consumer preference for products that are specialized for individual preference and personal beauty routines will continue to rise.

Machine Learning for Demand Forecasting

In this increasingly volatile economy with new beauty trends coming up every few months and stronger competition now more than ever, the ability to accurately forecast demand has become crucial. Companies need to ensure product availability, optimize stocks, and reduce obsolete inventory.

L’Oreal Tech Accelerator is working on two programs. The first, Demand Sensing is an AI program that leverages machine learning to reinvent the demand forecasting process, accessing multiple data sources via connected platforms to optimize understanding and anticipation of sales. The machine will be able to support the entire distribution network and ensure the right stock is in the right place at the right time. To pair with the Demand Sensing capabilities, they also launched The TrendSpotter, an artificial intelligence that identifies beauty trends on social media, from ingredients, textures to packaging of various beauty needs. The search engine studies recommendations from trendsetters with the most followers on the web, whether they be influencers, celebrities, beauty professionals or even scientific experts.

LVMH also recently announced a partnership with Google Cloud to explore co-innovation opportunities and launch a Data and AI Academy in Paris to accelerate their expertise and innovation in the beauty tech sector. With its mission to improve business operations, demand forecasting and inventory optimization, the company plans to integrate AI technology to every part of the value chain at LVMH, from product development to supply chain, to the interfaces with employees, partners, and customers. 

Final Thoughts

Like in any other industry, it is essential for beauty companies to keep up with current trends, including new technological advancements. We do expect product personalization to become more and more popular in the next upcoming years and brands to invest more in Artificial Intelligence in order improve their overall operations. That said, Augmented Reality has been around for a while now and yet the adoption of said technology has been rather slow in many industries, especially the beauty industry. Seeing products online compared to seeing, touching, and feeling it in person is a whole different experience. While consumers might settle for it in the pandemic world we know today, this particular trend might or might not sustain the test of time.