As the adage goes, you are the company you keep.
But as the distribution landscape for beauty becomes increasingly democratized, the idea of — and expectations around — prestige beauty are changing dramatically.
With consumers now demanding the convenience of being able to buy anything anywhere anytime, the distinctions between mass and prestige are becoming ever more irrelevant and codes around luxury are quickly being redefined.
Once airtight channel delineations are becoming increasingly porous, as retailers such as Ulta Beauty and Target Inc. partner to bring prestige beauty to the masses. Amazon, a hard no for top-tier brands not so long ago, is no longer dismissed as quickly as it was pre-pandemic, and the movement between high and low isn’t just going in one direction — a growing number of specialty retailers are broadening the price points of their offerings as well. At Sephora, a shopper can purchase a $3.95 1-oz. bottle of The Ordinary’s 100% Plant-Derived Hemi-Squalane in the same basket as $190 1-oz. jar of La Mer Moisturizing Cream. If any further indication were needed of how little price has to do with luxury today, both brands are majority-owned by the Estée Lauder Cos., which bills itself as the largest pure-play prestige beauty player in the world.
That blurring of boundaries is leading to a redefinition of what luxury means in beauty today across all categories, be it skin care, color cosmetics or fragrance.
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“Luxury is no longer defined by a store — it is defined by experience,” said Gemma Lionello, executive vice president and general merchandise manager, accessories and beauty, of Nordstrom. “It’s about a menu of options for the customer — be it events that are online or in-store, services, free or paid, or expert advice.
“We have our customer’s permission to sell them a $2,000 jar of cream,” Lionello continued, “because they know we’re not here to sell them, but to take care of them. Yes, we are retailers, but we are here to engage and inspire.”
Making people feel well cared for is big business today. Citing statistics from Bain, Jane Hertzmark Hudis, executive group president of the Estée Lauder Cos. Inc., noted that the entire luxury market globally is projected to grow an estimated 8 to 12 percent from now through 2025, reaching approximately 330 billion to 370 billion euros.
Overall, beauty is growing in-line with the luxury market, with Bain projecting a compound annual growth rate of 8.5 percent, far outpacing other segments of the market.
The rub, though, is that much of this is fueled by growth of the luxury market in China. In the U.S., CAGR of 2.5 percent is projected for prestige beauty.
Hertzmark Hudis noted that Chinese consumers will have an impact far beyond the borders, positively impacting the global market. Closer to home, though, it is Gen Z and Millennials who are driving the spend in the category — and creating a new dynamic.
“They are set to account for 60 percent of total luxury spending by 2026,” Hertzmark Hudis said. “If you have this percentage, then their values and what they care about is going to influence the next generation of luxury — which is about product, experience, values, sustainability, and it is also still about uniqueness and curation and making things special. In terms of product, experience, that is where the aspiration has a broader definition. It is a more expansive definition of what luxury means and it will definitely be very much in terms of experience as much as product,” she said.
What it’s not about is price. “The luxury of a beauty product is in the ritual and the results,” said Stellene Volandes, editor in chief of Town & Country. “Luxury beauty used to be about exclusivity — you could only buy it in certain places. But today, it is about knowing what’s best.”
“We don’t create a ‘luxury’ beauty product as one would create a luxury dress or handbag,” agreed Philippe d’Ornano, president of Sisley Paris. “Customers in the high-end segment of beauty want results — and quick results are even better. They also want a moment of pleasure when they use the products. Lastly, they want good service and expert advice on the best routines. There is no success in the long term without exceptional products.”
That being said, an exceptional product could be a tub of Aquaphor or a box of Dr. Barbara Sturm hyaluronic acid ampoules, Volandes pointed out. “You have an educated consumer and someone who understands the science. The status is knowing what you can only get at Bergdorf’s as well as the secret finds at Target — it is being smart,” Volandes said. “The idea that the consumer is swept away in the fantasy of it? I don’t think that holds true anymore.”
Jessica Richards, founder of the influential Brooklyn-based indie retailer, Shen Beauty, agreed. An early entrant into clean and green beauty, Richards is considered by industry insiders as someone adept at discovering emerging brands that later find mainstream acceptance. “You’re not buying luxury beauty for the marketing — you’re buying the results,” she said. “It’s the aura someone creates around a brand and the science and clinicals behind it.”
Those two aspects combined help explain why Richards can barely keep. MBR’s Liquid Surgery Serum, whose price recently increased from $1,850 to $1,925, in stock.
Still, scarcity trumps price points when it comes to luxury today. “If you think about the brands that do small runs — that’s luxury. It’s like Supreme,” Richards said, of the popular streetwear brand. “My kids go and stand in line all day for a $45 T-shirt. That’s what people want, the scramble to find something special and it doesn’t have to be price point.”
Attitudes around consumption have also changed from pre-pandemic times. Conspicuous consumption is passé today. Less is more. “There’s this idea that you don’t necessarily need a lot of stuff anymore — it’s about investment pieces that feel more special that relate to everything right now,” said makeup artist Gucci Westman of her approach to creating the lineup for her brand, Westman Atelier. “The older I get, the less stuff I want — but I want the stuff to matter and to feel special. Our line is curate. Everything has a purpose.”
Westman said that she has noticed that younger shoppers, in particular, are attuned to the “why” of a product as much as the “what.”
“Younger people seem more willing to spend money to buy into something that has a story to tell, that has craftsmanship and heritage, something tangible that makes it seem more luxurious,” she said. “You can do research so easily online, and we are attracting a younger customer because we do focus so much on that. It’s been interesting to see the evolution.”
So where does that leave the more traditional players in the luxury category, the specialty retailers and high-end brands that have built their businesses on a service-oriented model that is predicated on an in-store transaction with a highly trained sales associate. That is still essential — but it is no longer enough.
“Right now, all of the retailers have to invent what the future of luxury looks like for their customers, understanding how the customer has changed,” Hertzmark Hudis said. “I used to walk into a store and have these experiences one-on-one, and now I have to have them across every single touchpoint against which the consumer operates….They have to create that discipline of experience across all of their touch points.”
The stakes for such retailers are high. Even pre-pandemic, the higher end of the market was facing declining sales. “The fine channels, the more luxury channels, have been more challenged,” said Larissa Jensen, vice president, beauty industry adviser, of The NPD Group.
Moreover, luxury sales tend to be concentrated in larger cities, primarily in New York, California, Texas and areas in Florida.
“We call it the luxury U,” said Jensen, “and if you look at the top markets, it is the bigger cities, and those are the ones that were the hardest hit in 2020 in terms of store closures and getting people back into the cities and the stores.”
Indeed, the luxury retail landscape shifted considerably just before and during COVID-19, with stalwarts like Barneys New York shuttering and the Neiman Marcus Group filing for Chapter 11 bankruptcy in May 2020.
La Prairie used the opportunity to further refine its distribution in the U.S., closing about 25 percent of its doors. “Wherever we are is now the purest expression of the brand,” said Nicholas Munafo, president, North America. “It’s elevated and puts the client at the center of the journey with a space that has a beautiful residential feel.”
The goal is to create an experience that feels completely personalized to the client, so sampling, for example (or “brand generosity” in La Prairie speak) encompasses 25 different stock keeping units. “We want to ensure we complement and meet the needs of clients to make them feel special, because everything should feel bespoke,” Munafo said.
And that experience extends beyond the in-store experience. It is also about aligning the brand with like-minded entities. In the case of La Prairie, that means active art patronage and a sponsorship of the Frieze Art Fair, which top clients are invited to attend as guests of the brand. “Luxury is at a crossroads,” said Munafo, “and you have to make sure that you meet her very high level of expectations and that you meet her where she is.”
While Munafo reported that La Prairie’s Platinum Haute Rejuvenation Platinum range, where prices start at $985, is selling briskly, and D’Ornano said Sisley’s sales are up 20 percent for the first quarter of this year, overall, skin care has been more challenged in the luxury category.
Fragrance, though, is a bright spot. Designer fragrances from Tom Ford, Dior and Chanel are selling briskly, Jensen said, as well as niche and artisanal brands such as Francis Kurkdjian, while Sisley expects its new introduction, Izia La Nuit, to contribute meaningfully to its performance this year.
“If you look at the high-end fragrance category, they are still extremely limited and Saks is doing well because of it,” said Kate Oldham, senior vice president and general merchandise manager, beauty, jewelry and home, of Saks Fifth Avenue. “The price point is differentiating as well.”
But more importantly, she continued, the category is attracting a new customer for luxury. “There is a different customer we haven’t seen before and we love it,” she said, noting the popularity of brands like Kurkdjian, Creed and Bond. “We’ve been seeing a big uptick in the under-35 customer in particular.”
For fragrance in particular, but skin care and color cosmetics, too, the element of assistance and expertise is a key driver. “Even with our doors closed, the customer had access to associates through text, Zoom, FaceTime,” Oldham said. “It was a modernization of accessibility to the trained associates who they know and love.”
For many brand founders, the experience has been transformational. Sylvie Chantecaille, the founder of her namesake brand, used to crisscross the globe making in-store appearances every two weeks and meeting customers. Now, she holds multiple digital events, often hitting three different time zones in one day. “It’s a question of doing the old-fashioned work — which is call your customer, one-on-one, service them, follow up with them,” she said, speaking in between Instagram Live events with Harrods in London and Bergdorf Goodman in New York and readying for a Beijing-based session.
“We’re attracting everyone with these events — not just younger customers,” Chantecaille continued. “That’s what’s so interesting. Everybody has changed the way they function. Women who would never have gone on the Web before are going online now.”
The brand’s sales associates also migrated online, attracting a younger generation of shoppers, who may be more accustomed to an open-sell environment, to the concept of in-depth consultations. “The luxury is the one-on-one,” said Chantecaille, “to have someone who knows your needs really go through the products and have the details of the interaction.”
With that has come an evolved approach to accessibility, one that recognizes that for heritage luxury brands to survive, they must adapt. “As new people reach out to luxury, how do we make it in a way that is more affordable for them?” One way Chantecaille is doing that is by using Afterpay on its website. “That allows a new customer to pay for an expensive cream. It’s helping a lot of people enter the luxury market,” Chantecaille said. “You’re not as afraid to pay $300 for a cream.”
In the end, online or off, it all boils down to service. “We’ve always stood for service, but how the customer defines service is evolving,” Lionello said. “We take care of our customers across multiple channels and stores. Our customers come to us time and again because they trust our service and rely on our expertise.”
And no matter how broad distribution may become for a brand, Lionello doesn’t see that changing.
“Many of the top brands have expanded distribution in the past several years, but what is true with the majority of these brands is that we are their number-one retailer in volume,” she said. “That is a testament to how we take care of customers. They choose Nordstrom because they trust us.”
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