Enjoy "Buy → Try → Sell" Online! Cosmetics Consumption Behaviors Diversify Further During the Pandemic

As the online shift accelerates across all industries, bringing significant changes to consumers' values and purchasing processes, there is now a demand for a new purchasing experience where online and offline are seamlessly connected.

In February 2021, the Dentsu Group in Japan launched the "dentsu SX" project (*1) to design new "shopping experiences" for the OMO (Online Merges with Offline) era. The name SX embodies both "Shopping Transformation" and "Shopping Experience," offering one-stop support from strategy to implementation and operation for shopping experiences tailored to the future.

The theme of this second installment is the cosmetics industry. Focusing on insights revealed through in-depth interviews with consumers, Ms. Yumiko Yasuda of the dentsu SX project team at Dentsu Digital Inc. explains the changes occurring in shopping experiences within the cosmetics industry and the actions that should be taken moving forward.

Part 1: Future Shopping Experiences Beyond Merging Stores and E-Commerce

*1 dentsu SX
A project by seven domestic Dentsu Group companies designed to create integrated online-offline shopping experiences aligned with the OMO era from the customer's perspective, contributing to business growth in the retail sector. It integrates the Dentsu Group's accumulated business expertise with the insights of its strategic partner, frog design inc. By combining Dentsu Inc.'s proprietary customer behavior data and cutting-edge technologies like AI and cloud computing with creativity that captures customer insights, it creates unique shopping experiences for brands from the customer's perspective. ( See the release for details )

 

The cosmetics industry faces challenges due to stay-at-home requests and travel restrictions

Although the cosmetics industry has traditionally been considered "recession-proof," the COVID-19 pandemic has brought a series of challenges: restrictions on social activities, voluntary stay-at-home measures, shifts in consumer values and spending habits, and travel restrictions for foreign visitors to Japan. These factors have dealt a significant blow to the market.

Even before COVID-19, a certain number of people purchased cosmetics on e-commerce sites or compared products on review sites. However, even those who absolutely preferred buying in-store or purchasing from their favorite beauty advisor (BA) have been forced to use e-commerce sites during the pandemic, accelerating the shift in consumer behavior.

In response to this shift, brands are attempting to recreate the detailed services and experiences previously offered offline within the online space. Among these efforts, some examples are emerging that aim to provide entirely new or exciting experiences, rather than simply replicating offline services online, such as skin diagnosis apps.

On the other hand, it's also true that many organizations struggle to create integrated online-offline customer experiences. Reasons include being unable to break free from traditional siloed departments—"e-commerce is the e-commerce department, marketing is the marketing department, stores are the sales department..."

It's widely recognized that the pandemic has drastically changed consumer behavior, making rapid DX advancement imperative. However, we need to delve deeper into understanding exactly what changes have occurred and what actions brands should take.

Therefore, dentsu SX conducted qualitative research on cosmetics among women in their 20s and 30s, segmenting the consumer insights revealed from "N=1" by shopping style. Here are some highlights.

Enjoying the online cycle of "buy → try → sell"

 

■Pioneer Group: Pioneering Their Own Online/Offline Usage Patterns

This group traditionally preferred testing cosmetics in-store before purchasing. However, the pandemic led them to use e-commerce more frequently, gradually reducing their resistance to online shopping.

While they might occasionally get a "bad buy" online, they see it as no big deal since they can just sell it on a flea market site if it doesn't work out. They enjoy the gamble of buying online and the thrill of discovering new, previously unknown products, even if it means taking a chance. On the other hand, those with sensitive skin reportedly continue to purchase essential items like skincare products in-store, where reliability is paramount.

Furthermore, as people increasingly gather information online, they've become more wary of "stealth marketing" than ever before. Some now prefer mega e-commerce malls, perceiving them as offering more impartial opinions than review sites. While they would ideally seek advice from beauty advisors (BA), who are highly trustworthy and knowledgeable, they express frustration at the current situation where social distancing and temporary store closures make it difficult to meet them in person.

COVID-19 creates distance from BAs, eroding the unique value of physical stores

■The "Onboard Waiting Group" wanting to shift from offline to online

This segment, consisting largely of authentic department store users, finds the distance created by COVID-19 from BAs to be a major pain point. They also express skepticism towards the recent trend of online BA consultation services, saying, "Even if someone I've never met in person recommends something... they can't grasp my overall vibe, and the skin type check is just not quite right."

While some use reviews on major e-commerce sites for negative checks before purchasing on official sites, they seem to feel a gap compared to the shopping experience at department stores.

Switching from Department Store Cosmetics to Korean Cosmetics

■ "Ecosystem Layer": Nearly Complete Shopping Experience Online

This group consists mostly of digital natives and younger generations. Before COVID, they bought department store cosmetics at department stores, but due to the pandemic, they started purchasing lower-priced Korean cosmetics and similar products online.

They've established a modern customer journey: "Discover makeup trends on SNS → Check application feel and color payoff on YouTube → Review feedback on review sites → Purchase on e-commerce sites running campaigns." The roles traditionally filled by beauty advisors and tester samples have been largely replaced by vast amounts of user reviews and videos. They appear satisfied with this fully online experience, with one stating, "Even after COVID subsides, I don't think I'll go back to expensive department store cosmetics."

Pain points during the pandemic highlighted from an "N=1" perspective

Now, let's organize the behavioral changes and pain points revealed by qualitative research during the pandemic, along with potential solution themes to address them.

COVID-induced behavioral changes and countermeasures (I): Accelerating onboard promotion to address the shift of offline shoppers online

The rapid shift online has left traditional offline-focused users feeling they've "lost the enjoyable in-store experience." Additionally, aspects like color tones and texture sometimes don't translate well online, requiring actual testing to understand.

To address the pain point of offline users who are unable to successfully transition to online shopping, possible solutions include "redesigning the online/offline experience," such as conducting skin type checks offline only for the first visit and then combining video and real-life experiences thereafter, and "building online services that enable advanced information gathering," such as preparing color Barretts for different skin tones.
 

Behavioral Changes Caused by COVID-19 and Countermeasures (II): Lowering the Barriers to Trying New Products

With fewer opportunities to try items in stores, more people are hesitant to try new products. Even when they do decide to buy, there is a pain point in that they end up with more items they don't use because they made a mistake. In response to this, it would be effective to provide opportunities to try products at home, such as small sample services and personal styling services like the cosmetics version of air Closet, which allow people to try products that suit them easily and safely.
 

COVID-Related Behavioral Changes and Countermeasures (III): Addressing the Lack of Fair Information Sources

As more people search for and purchase cosmetics online, stealth marketing posts on review sites have also increased. Users are already sensing the suspicious nature of these posts, demanding more reliable and impartial information. Potential solutions include reviews limited to trusted individuals (like friends), sharing purchase histories, and endorsements from accessible experts like former beauty advisors.

On- and Offline Experience Needs Vary by Segment

A key point to note here is that, as qualitative research shows, shopping experience needs differ across segments. Therefore, experience design must be tailored to each segment's characteristics.

① For the "Pioneer Segment," who create their own unique journey by leveraging both online and offline channels and make their own decisions, services that satisfy their desire for knowledge and purchasing will be supported. Databases that visualize their preferences and purchase history and allow them to share this information quickly with others will also be favored.

Examples include services offering a one-stop "search → try → sell" experience, neutral makeup information content like NOIN, and makeup coordination platforms similar to WEAR.
 

② For the "Onboarding Waiting Segment," who deepen their knowledge through information and communication from other companies, then consider and purchase products while experiencing them, solutions will be needed. These include onboarding designs transitioning from in-store customer service to online, online personalized concierge services offering quality and trust equivalent to the real world, algorithm development enabling matching with compatible beauty advisors (BA), and solutions like Staff Start where familiar BAs support purchases on e-commerce platforms.
 

③ For the "Ecosystem Segment," characteristic of digital natives, the key lies in creating a central theme for an ecosystem encompassing entertainment beyond cosmetics, given their broad range of interests. Key points include providing on/offline community experiences where people with similar preferences and loyalty gather, offering highly entertaining and thematic spaces where passionate consumption can be fulfilled, and establishing mechanisms for "favorite" products.
 

To reiterate, we are no longer in an era where customer touchpoints like stores and e-commerce are viewed merely as "sales channels." It is essential to design a total customer experience based on the customer's challenges.

Startups are beginning to realize OMO (Online-Merges-Offline) by, for example, providing optimized offline spaces for customers connected through online services. Meanwhile, large corporations sometimes struggle to adopt a customer-centric perspective due to organizational silos and prioritizing relationships with traditional channels.

At dentsu SX, we aim to serve as a guide for customer challenges and latent needs, helping to realize cross-organizational customer experiences.

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At dentsu SX, we will continue researching the latest trends in the cosmetics industry while providing one-stop support—from strategy to implementation and operation—for "shopping experiences" that address client challenges and user needs.

We welcome inquiries and questions from companies at any time. If you are interested, please feel free to contact us via our official website.

Next time, we'll explore changes in customer experience within the financial industry and the actions businesses should take moving forward.

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