The Role of PIM in the Beauty Industry

Product Information Management

The cosmetics and beauty industry is on a strong growth trajectory worldwide: according to forecasts, the industry will grow by 6% annually until 2027 and reach retail sales of around USD 580 billion. China and the USA remain key markets, but India and the Middle East are rapidly developing into new growth hubs for the industry. Thanks to product innovations and higher demand for scientifically proven products, an increase from USD 190 billion to USD 260 billion is forecast. Over the next five years, new sales markets, mergers and acquisitions as well as growth in the wellness and self-care sector will be the key trends in the industry. These findings come from the State of Beauty 2023 Report, published by McKinsey & Company together with the industry platform The Business of Fashion (BoF). Despite these encouraging growth forecasts, we must not forget that the beauty industry is characterised by its high dynamism, diversity and dependence on trends and requires a lot of hard work. Cosmetics companies must constantly innovate and adapt to rapidly changing market conditions. Product Information Management (PIM) is a key tool that supports companies in this endeavour. In this blog article, we highlight the key benefits and applications of PIM in the beauty industry to help you keep your finger on the pulse of the latest trends.

Key trends in the beauty industry

The cosmetics and beauty industry is facing exciting changes. New growth markets such as India and the Middle East are gaining in importance, while the trend towards holistic well-being continues to gather pace. Generation Z places high demands on values and effectiveness, but remains loyal to the brand. Young companies face the challenge of scaling up in a saturated market and the market for takeovers remains active despite economic uncertainties. The following is a detailed look at the developments that the State of Beauty 2023 Report predicts will shape the future of the beauty industry:

1. New growth markets: China and the USA remain important markets for the beauty industry, but companies should expand their growth strategy to other countries. India and the Middle East are developing into dynamic growth hotspots. According to forecasts, retail sales in India will increase to 21 billion dollars by 2027, while sales in the Middle East and Africa are expected to grow to 47 billion dollars.

2. Wellness on the rise: The understanding of “beauty” has changed and now also encompasses holistic well-being. This opens up new growth opportunities in sub-categories such as sleep and nutritional supplements. The global wellness industry, which is currently worth USD 1.5 trillion, could continue to grow at an average rate of 10 % between 2022 and 2027.

3. Winning the Gen-Z: To appeal to younger generations of shoppers, brands need to adapt their product portfolios, distribution channels and marketing strategies. Values and effectiveness are particularly important for this target group. Generation Z shows surprising brand loyalty: Almost 60% of Gen Z consumers are willing to continue buying from their favourite brands, even if they want to try new products.

4. Scaling as a success factor: It is becoming increasingly difficult for young companies to scale in a saturated market. Successful scaling requires an expansion of sales channels and geographical expansion. Of 46 companies that generated global retail sales of between USD 50 million and USD 200 million in 2017, only four have exceeded the USD 400 million mark in five years.

5. Realignment of M&A: Due to the current economic environment, there will be fewer megadeals in the short term, but the market for takeovers remains active. Cosmetics brands remain attractive for potential buyers with average EBITDA margins of 15-25%.

Why a PIM in the beauty industry?

The beauty industry is characterised by a wide variety of products and fast market launch cycles. There are also strict regulatory requirements and specific needs of customers who expect detailed information on ingredients and application. Before we go into the reasons why a PIM system is particularly beneficial for cosmetics companies, let’s take a quick look at the features that set the beauty industry apart from other industries. Here are some of the most important aspects:

High product diversity and speed of innovation

• Diverse product categories: The beauty industry covers a wide range of products, including skin care, hair care, make-up, perfumes and body care. This diversity requires differentiated product development and marketing.
• Constant innovation: The industry is strongly driven by innovation. Manufacturers are constantly launching new products and formulations to meet changing consumer trends and needs. This speed of innovation requires flexible and responsive production and logistics.

Strict regulations and safety requirements

• Regulatory requirements: Cosmetic products are subject to strict legal requirements to ensure safety and efficacy for the consumer. These regulations vary from country to country and include labelling requirements, safety assessments and lists of ingredients.
• Safety and quality controls: Companies must carry out extensive safety and quality tests before products are launched on the market. This also includes testing for allergic reactions and long-term effects.

Consumer behaviour and expectations

• High expectations of transparency: Consumers expect detailed information about the ingredients and origin of products. This transparency is crucial for trust in the brand and the purchase decision.
• Individualisation and personalisation: Customers increasingly prefer personalised products that are tailored to their specific needs and skin types. This has led to the development of tailor-made care products and customisable make-up ranges.

Marketing and brand loyalty

• Strong brand presence: Branding plays a central role in the beauty industry. Strong brands with a high level of recognition and loyalty have a competitive advantage.
• Influence of influencers and social media: Influencer marketing and social media are crucial for product marketing. Influencers play a major role in introducing new products and influencing the purchasing decisions of their followers.

Sustainability and ethical aspects

• Sustainable products: There is a growing trend towards sustainable and environmentally friendly products. Consumers are increasingly favouring cosmetic products that are packaged in an environmentally friendly way and are made from natural, biodegradable ingredients.
• Ethical production: Issues such as animal welfare (no animal testing), fair working conditions and ethical sourcing of raw materials are crucial for many consumers. Companies must adapt to these expectations in order to remain competitive.

With all these special features, the question arises as to how beauty companies manage to be successful at all.

What characterises successful beauty companies?

In the fast-moving and highly competitive cosmetics industry, there are three key factors that characterise successful companies: Market knowledge, agility and a strong data culture. These elements are crucial to asserting oneself in a dynamic environment and achieving sustainable growth.

Why PIM is indispensable in the beauty industry

You have seen that one of the key success factors is the data culture. It includes not only data-driven decisions, but also product data. Product data is particularly indispensable in online business, because even if the retail trade continues to be an important sales channel, it is also essential to have an online presence. But online business needs product data. And with the increasing variety of in-house communication channels as well as third-party platforms such as marketplaces and online shops of retail partners, the communication of product data is becoming ever more complex. A PIM is therefore indispensable if you want to supply the individual touchpoints with convincing product content that is always up-to-date. This includes not only the provision of basic product details, but also the integration of marketing content, such as application tips, videos and customer reviews.

1. Centralised data management: A PIM system enables the central management of all product-related information. This reduces errors and ensures that all departments and sales channels have access to up-to-date and consistent data. This is particularly important in an industry with a wide variety of products and rapid market launches.

2. Consistency and accuracy: Consistent and accurate product information is crucial for consumer confidence. A PIM system helps to ensure this consistency across all channels, which increases customer satisfaction and protects brand integrity.

3. Faster time to market: By automating and standardising processes, beauty companies can bring their products to market faster. This is particularly important in an industry that is strongly characterised by seasonal trends and innovations.

4. Fulfilment of regulatory requirements: The cosmetics industry is subject to strict legal requirements, particularly with regard to ingredients and safety standards. A PIM system makes it easier to meet these requirements by organising the necessary information and making it accessible.

5. Optimised omni-channel strategy: Beauty products are sold via various channels, from online shops to physical retail shops. A PIM system ensures that all sales channels are supplied with consistent and up-to-date product information, which improves the customer approach and increases sales opportunities.