Australian Beauty Market

8 Min Read |

The future success of a business depends in part on its ability to continue to expand in new markets. But a bad bet can easily bog down your business in the blink of an eye. There currently isn’t a larger untapped market in Asia Pacific than Australia. The world’s largest island is also at the forefront of beauty and innovation. With over 89% of Aussies living in cities, Australia boasts one of the most botanically diverse but also harshest environments in the world. It has become one of the market leaders in skincare and cosmetics. Believe me when I say that it can offer huge opportunities if dealt with successfully: Australia’s economic resilience and steady growth prospects provide an ideal environment in which to do business.

Needless to say, the Australian business culture is unlike any other around world and to thrive in this market, new entrants will need to have a thorough understanding of the practical challenges they will face, if they want to succeed. Understanding a market is key to a successful expansion, so below we have put together a few tips that will help you and your business navigate in clearer waters and avoid pitfalls when expanding into the Australian Market.

An Overview Of Australian Beauty Market

Only twenty years ago, the beauty industry was seen as an industry that exploited women’s “unconscious anxieties” and perpetuated double standards of appearance.

Today however, the beauty market is booming, fueled by image-conscious millennials that increasingly aspire to the camera-ready perfect pout. The beauty industry is one of the few sectors that has remained impervious to the ups and downs of markets. While industry is affected by economic downturns, it can always count on the lipstick effect to maintain a certain volume overall. Since 2015, the Australian beauty market has been growing steadily amid fierce competition, with a 7% growth in natural, active and dermo-cosmetics brands from 2017 to 2018, driven by consumers desire to have a healthy natural looking skin. The Australia beauty and personal care products market is forecasted to reach USD 6.7 billion by 2025 growing at a CAGR of 4.48% during the forecast period (2020 – 2025), according to Mordor Intelligence. Australia’s relatively high level of discretionary spending and affinity for U.S. and European brands makes Australia a promising market for U.S. cosmetics and personal care products. High disposable incomes, desire to look good, availability of new markets and increasing access to a greater audience are some of the factors that are driving the growth of the Australian beauty industry.

According to Euromonitor, sun care, skin care and color cosmetics are projected to see the strongest growth rates. Sun care encompasses the entire range of products used to safeguard the skin from harmful effects of the sun, including creams, lotions, balms, gels, sprays in varying SPF (Sun Protecting Factor) with either or both UVA and UVB protection. Increasing awareness of the harmful effects of UVA and UVB rays has led to a high demand for sun care products. The skin on the face is very delicate and the most susceptible to sun damage. Australians are particularly prone to sun damage and premature aging, given the extreme levels of UV radiation they are exposed to throughout the year. Tinted sunscreens are also available which provide color to all parts of the body where it is applied. The color is not everlasting, washing off with soap and water. Tinted sunscreen is helpful in identifying areas of the body neglected in the application of the sunscreen.

The perfumes and fragrances segment are somewhat static and will remain so, due to saturated product offerings, particularly for women’s products. Hair care products will also remain stagnant, with the highest growth in colorants and hair styling products. In the next two years, natural ingredients will drive new product with consumers also seeking multifunctional benefits. Celebrity endorsements and professional hair products will be increasingly popular within the next few years. The Australian beauty market is highly competitive. However, the industry keeps seeing new entrants, often lured by high margins and a resilient growth of the sector. Retail concentration is high. Premium brands are either sold through pharmacy chains or the only two Department Stores chains (Myer and David Jones). Luxury brands, on the other hand, are sold exclusively in retail stores including Mecca and Sephora.

With consumers increasingly turning to the internet for advice on beauty and personal care products, the influence of digital channels has grown lucratively. The purchasing decisions of consumers in Australia are highly influenced by social media, as they follow vlogs, bloggers, and influencers for the information on products and application techniques.

The Digital Economy

E-commerce is rapidly emerging as a competitor to direct sales for all mass and premium brands. Australia has the fourth highest B2C e-commerce sales rates in the Asia Pacific region behind China, Japan and South Korea. Online purchasing is gaining popularity in Australia. In any given four week period, 8 billion Australians above the age of 14 years made at least one online purchase. Social media has played a crucial role in the Australian beauty and personal care market, allowing companies to build their brands in cost-effective ways. Companies are also engaging bloggers and vloggers for promoting certain brands on social media and other websites. This move helped the online purchasing trend to grow lucratively over years. The trend of getting inspired by celebrities and trying to look similar has become very common among the younger population in the region. This trend has been driving the growth of online purchasing in Australia, owing to the online tutorials and vlog promotions of different brands that can be purchased online.

Australian influencers on Instagram and YouTube are making significant contributions to the online content creation community, and many have become household names. Wendy Ayche is the Australian-Chinese woman behind popular YouTube beauty and lifestyle channel, Wengie. Her vlog channel, WengieVlogs, gives her audience an inside look into her life with challenges, tours, confessionals, Q&A’s and more. Approximately 60% of millennials say an influencer has changed their life or their view on specific brands, making these two bloggers big business.

Whilst e-commerce is rapidly becoming a direct competitor of brick-and-mortars, it is important to remember that cosmetics and beauty products are hard to sell in the sense that the consumers are not intrigued by the brand alone anymore and cannot feel the product, as one would do in Fashion (feeling the fabrics, the texture). Hence, experiences are essential. Through sensations, emotions and cognitions, brands must engage the customers and create memorable events connecting with consumers on an emotional level.

Luxury customer experiences need to emphasize on the “dream component/factor” and are highly influenced by the store atmosphere. The customer service should be prompt and impeccable as well as the product which should be of exceptional quality. However, this is not all. The brand should go beyond all this by exceeding all expectations. The ability to touch, smell and play with the products is part of the reason why brick-and-mortars remain very popular in Australia. Buying beauty products can be overwhelming: if consumers can try the products before they buy them, they’re more likely to shop there.

According to research by online retailer Catch.com.au, the average Australian woman spends over $3,600 on beauty products each year. That averages out to approximately $300 a month, $70 per week or $9.80 per day. In comparison, women living in the U.S. and the U.K. spend a lot less on cosmetics. As a rule, American women fork out $2,880 annually, whereas their British counterparts spend just $2,000.

In the near future, growth will be driven by new product innovations and we expect to see a shift towards more indulgent product types.

The introduction of new products has been a key driving force in the overall industry’s performance over the past five years, stimulating new demand in a relatively saturated and mature market.

The Rise of A-Beauty

Australian consumers are generally considered early adopters of international trends. This is not only due to the fact that Australia has the highest internet penetration rate in the Asia Pacific region but also to the fact that Australia is also very culturally diverse. About 30% of its total population was born overseas, with beauty trends from Europe, North America and Asia very quickly finding their way to the island. While Australia is not necessarily known for setting beauty trends, over recent years, ‘A-beauty’ seems to have caught up with J and K-beauty. Australia has always been renowned for its natural resources such as sea salt, eucalyptus and charcoal, to name just a few.

Consumers are increasingly demanding transparency and are becoming more and more conscious of what they put in and on their bodies. Consumers are becoming more conscious and aware of their health. People are interested in natural beauty products that contain ingredients such as vitamin C, seaweed, oatmeal, honey, macadamia and coconut to name just a few.

As consumers become more educated on the ingredients, they are progressively becoming reluctant to use mass-market (but not only) beauty products containing nasty chemicals such as parabens, PEGs, sodium lauryl sulphate and fragrances. According to PETA there has been a 360% increase in the number of vegans in the UK alone over the last 10 years. The demand for products certified cruelty-free is booming and driving the trend of increasing sales. A number of Australian companies have leveraged their heritage to stand out.

As large proportions of the country remained uninhabited, there is an abundance of native plants ready to be harvested and marketed as the next big thing in beauty. Established in Australia, brands with natural ingredients as their main selling point include: Jurlique, Aesop and Sukin. Moreover, as an island with large amount of exposure to the sun, skincare is high priority on Aussies agenda with SPF being a key focus point. New innovations in sun care are frequent.

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