The Cosmetic Lens: How Product Packaging Affects Sales in the Cosmetic Industry and How it Can Be Used to Create a Competitive Advantage

White Paper to Product Designers: How Product Packaging Affects Sales in the Cosmetic Industry and How it Can Be Used to Create a Competitive Advantage

Introduction

The “glow” of the beauty world has proven to be irresistible as consumers are captivated by its flashy commercials, starstruck billboards, and premium products. The industry attracts so much attention and success that its global value in 2022 was approximately $430 billion in revenue and is expected to increase by 6 percent each year reaching a projected $580 billion by 2027. The cosmetic industry encompasses four main categories: skincare, fragrances, makeup, and haircare. Brands all across the world have three main goals in common which are to create products that stand out amongst their competitors, appeal to consumers, and ultimately produce profits for the company. 

To achieve these goals, brands dedicate thousands of hours toward cultivating the perfect formulas for their products and creating their ideal brand message. During this intense and laborious process, many companies fail to recognize the “pivotal role” that product packaging plays in influencing sales. Product packaging is incredibly valuable because it is the first interaction that brands have with prospective customers influencing their perceptions of the brand and consumer behavior. To put this into perspective, research has shown that a large percentage of consumers make judgments about products solely based on the packaging, and in a 2018 survey, nearly 72% of American consumers stated that their purchasing decisions were heavily influenced by the packaging and not by the actual product. Effective packaging can be used as an effective tool to captivate consumers, express brand messages, and leave long-lasting impressions that eventually influence sales and the overall success of the brand. This white paper will discuss the impacts of product packaging on increased sales in the cosmetic industry through specific examples of packaging design. Through this analysis, product designers in the cosmetic industry can gain a better understanding of how to leverage product packaging to create a competitive advantage. 

Problem: Competition that Overwhelms the Market 

The greatest struggle for any company in the cosmetic industry is the sheer amount of competition that overwhelms the market. After all, the cosmetic industry is one of the fastest-growing and most competitive industries in the world. As seen in the figure to the left, all four categories of cosmetics are projected to grow and increase in competition. Every year, new companies and small businesses attempt to enter the market and reach the revered success that so many dream of. However, developing products that can stand out amongst thousands of competitors can be extremely difficult. To analyze this from a broader perspective, the industry is dominated by several already established brands who make up a large portion of the overall market share. The top ten cosmetic brands share about one-third of the market size making it very difficult for other brands to compete. For example, the famous brand L’Oreal, one of the largest and most successful cosmetic brands in the world, produced nearly 38.26 billion euros in 2022 and a profit of about 5.7 billion euros. Companies like L’Oreal have an immense amount of resources to attract consumers and further develop their already successful brands. They can “invest in research, develop top-of-the-line marketing strategies, curate new and innovative products, and maintain their esteemed positions in the industry.

The figure to the left denotes the revenue of the highest-earning cosmetic brands in 2021. The ten brands listed above share a large proportion of the overall market share.

The industry is expected to become even more competitive as companies have to adapt to the ever-changing perceptions of beauty and the socially accepted beauty standards as a whole. One of the most important aspects of the beauty world is that consumer’s desires shift with the changing times and generations. For example, increased interests in sustainability, influencers, certain types of products, and so on play crucial roles in the evolving landscape of cosmetics. Companies not only need to out-perform the already existing brands but also must stay relevant which further fuels the competition. There are countless stories of well-designed brands feeling perplexed by their lower-than-expected sales even though they have exceptional products that target specific market segments. However, in today’s world great products are not enough to stand out. 

With all of this being said, how can companies attract attention amid an already saturated market? They have to learn how to leverage other aspects of their products such as the packaging design because the beauty world is a place where even the smallest of advantages “can make all the difference”. The problems that companies face with increasing competition, a saturated market share, and the ever- changing and fast-paced nature of the beauty world can be resolved by improving product packaging.

 Innovative designs, colors, features, specific niches, and more are all modes through which packaging can be improved; if consumers are attracted to product packaging, more people may buy a product which will increase sales and the overall company revenue. 

Solutions: Several Modes through Which Product Designers Can Apply Special Techniques to Product Packaging That Will Enhance the Product

To combat the competition in the cosmetic industry, companies can work to refine, enhance, and leverage their product packaging to increase sales and stand out in an oversaturated market. To create a competitive advantage, brands need to make sure that they have clear-cut intentions for their products. By prioritizing product packaging and design, companies can communicate their brand message, appeal to their clientele, and better align with customer preferences and existing market trends. Developing packaging that increases sales is the overall goal, but understanding customer needs is imperative as it is at the heart of the product and consumer relationship. At the core of all complex systems, human behavior and psychology play an instrumental role in influencing decision-making. Thus, considering the psychology behind product packaging can prove to be a “game-changer” that can provide brands with a “strategic edge” to their branding. There are a variety of ways that brands can enhance their packaging styles and the most versatile and broad option is to develop emotional triggers. One of the easiest and most successful ways to attract consumers is by tapping into their emotions. This can be done through visual appeal, functional designs, authenticity, and storytelling. For example, if product packaging can evoke feelings of nostalgia, happiness, or even a sense of belonging, consumers may become more attached to the product. They may feel a sense of connection or bond with the product which can motivate them to purchase it which increases sales. 

Visual appeal methods include colors, fonts, images, and shapes; research has proven that humans naturally associate emotions with colors, and finding ways to manipulate colors to evoke positive emotions may increase sales. One brand that evokes emotions that align with the brand message and overall brand concept is a company named Tatcha. 

Tatcha’s products are influenced by Asian Makeup culture and work to evoke feelings of harmony and create a calming nature.

Tatcha is a skincare brand whose main focus is to create products that are not only gentle and soft on the skin but also work to create “harmony from skin to soul”. The brand emphasizes the well-being of the soul and the importance of physical and mental health. Thus, the product packaging is designed using shades of calming colors such as light blues and purples that can be associated with water, the sky, or lavender which are all natural calming mechanisms. The packaging is designed with soft edges that work to create a flowing sensation of water. Overall the packaging works to evoke feelings of harmony, tranquility, and softness that can catch the eyes of consumers and increase brand sales. 

Functional design encompasses the overall structure of the product packaging. How easy is the product to open? Is it easy to carry or store? Is it resealable so consumers can continue to use the product? All of these small details can play a key role in creating perceptions of a product and the overall brand. The cosmetic brand that is very well known for its uniquely functional packaging design is Rare Beauty by Selena Gomez. 

Rare Beauty Products are packaged in bottles that are specifically designed to be accessible and inclusive. All packaging has caps that are easy to turn even for people who struggle with dexterity or disabilities.  

Rare Beauty has become a thriving brand after its launch in 2018 thanks in part to its incredible product packaging. Not only did the brand devise a clear mission (The Made Accessible Initiative) but also developed ways to study and implement product packaging that supported the company’s beliefs. Selena Gomez and her brand have taken product packaging to a new level by actually partnering with The Casa Colina Research Initiative (CCRI) to determine what makes a product more accessible and inclusive. By analyzing the research, the company has been able to create packaging that is very easy to use, hold, and apply with precision. The packaging is sleek, intriguing, and incredibly functional which has proven to not only make the brand an overnight sensation but also heavily increase the sales. Rare Beauty has not released any data on the brand’s sales or financial figures; however, the brand was estimated to have earned nearly 350 million dollars in net sales in the past year. Her brand further supports how a competitive advantage can help brands stand out in an oversaturated market and increase sales all by enhancing and leveraging product packaging. 

Authenticity is simply about communicating the brand message through the packaging. For instance, if a brand feels very strongly about sustainability and uses plastic or any other environmentally harmful materials, consumers may feel a bit confused or deterred by this which can negatively impact sales. However, by aligning brand beliefs and product packaging, consumers may be more inclined to buy the product.

The packaging design for several of Merit Beauty’s products.

There are thousands of brands that align their brand message with their packaging, but one great example of a cosmetic brand is MERIT Beauty. The company’s main goal is to develop beauty products that are clean, minimalistic, and luxurious. A key aspect of the brand is its focus on creating products that are certified vegan and cruelty-free. These goals then translate into shaping the packaging because the packaging to the left all have shiny, simple, and luxurious designs that can instill perceptions in cosmetic consumers that the company is a clean cosmetic brand. MERIT Beauty highlights how cosmetic products can be packaged in ways that work to communicate brand messages which can work to increase product sales.
Finally, discovering ways to tell some sort of  story through product packaging can add depth and value to a product. Consumers may appreciate or be drawn to such a product which, once again, makes a product stand out and increases overall sales.

All of these methods can be used in a plethora of ways and it is crucial to mention that there is not one way of going about improving product packaging. It is a process that is malleable, ever-changing, and unique to a specific brand and its goals. 

Conclusion: The Psychology And Power Behind Product Packaging Holds The Key to Success for Cosmetic Brands

The cosmetic industry is diverse, broad, ever-changing, and exceptionally competitive; and is only expected to become even more competitive. Finding ways to stand out in such an oversaturated market can be very challenging, but one of the most efficient and effective ways to do so is through productive packaging. By learning how to leverage product packaging through visual appeal, functional design, authenticity, and storytelling, product designers for cosmetic brands can create a strong competitive advantage over their competitors which works to increase product sales and the overall success of the brand. 

Bibliography

Berg, Achim, Sara Hudson, Kristi Klitsch Weaver, Megan Lesko Pacchia, Imran Amed, Anita Balchandani, Dimpy Jindal, Natalia Lepasch, Amaury Saint Olive, Alexis Wolfer, Alex Workman, and Andreas Zampouridis. "The Beauty Market in 2023: A Special State of Fashion Report." Mckinsey. Simon & Schuster. Last modified May 22, 2023. Accessed October 16, 2024.