Market Overview

Snapchat Effect Gives Booming Cosmetic Industry A Makeover

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Snapchat Effect Gives Booming Cosmetic Industry A Makeover
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Another day, another adage crushed by Wall Street. All that glitters is gold, so it seems.

Americans spent $17 billion on prestige beauty products in 2016, according to NPD Group’s market research. Led by a 12-percent pop in makeup sales, the domestic industry saw a 6-percent, $1 billion sales expansion.

Dr. Krissy Cabot, chairman of Cabot Social Media Corp and founder of Talented Blonde LLC, said social media is largely to credit.

“Bottom line on prestige cosmetics is the Snapchat Effect,” Cabot told Benzinga. “As experiences take larger precedent and share of wallet over clothing and jewelry, for example, you become the content. You are the brand. So the face, and how it looks on the ‘second screen,’ surges to the forefront of social media and along with it — cosmetics.”

Snap Inc (NYSE: SNAP), Twitter Inc (NYSE: TWTR) and Facebook Inc (NASDAQ: FB)’s Instagram have been major disruptors in the cosmetic scene.

The rise of online tutorials and development of trendy application techniques have not only transformed the cosmetic market, revolutionizing it as a democratic and plebeian function, but have enabled the emergence of unexpected market competitors.

A New Mover

“Enter Sephora,” Cabot said. “Sephora has managed to take everything we love about the makeup counter — exclusive brands we love in both cosmetics, hair, fragrance and skincare — and dispense with everything we hate about it — pushy sales people, snobby atmosphere, and barriers to experiencing the product — to create a one stop shopping mecca where we gladly part with $300.00 just as a cost of entry.”

Citing Euromonitor International, the New York Times recently reported Sephora as the No. 1 global beauty retailer, challenging the established commercial brands of Estee Lauder Companies Inc (NYSE: EL), Revlon Inc (NYSE: REV), Avon Products, Inc. (NYSE: AVP) and Coty Inc (NYSE: COTY).

The store’s loyalty programs and offering of exclusive, prestige brands compound the appeal of mobile applications for on-the-go consumers looking to virtually test product out of store.

Some traditional beauty stocks have fallen behind the trends and faded since the beginning of the year, with Avon down 32.5 percent and Revlon 31.2 percent. Estee Lauder and Coty have aged well, though, boasting 20.8-percent and 4.6-percent spikes, respectively.

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