During the Covid pandemic, when nobody was leaving the house and life was happening over Zoom, a lot of people reduced their spending by virtue of having no place to go. But one category remained strong even as consumers were cutting back elsewhere — beauty.
The beauty category has proven remarkably resilient today, even as consumers pull back on other categories of discretionary spending.
Beauty products are expected to constitute a $590 billion market by 2030, according to McKinsey.
And it’s not just major players like Sephora that stand to benefit from this trend.
Now, two of America’s largest retailers, Walmart and Target, are making aggressive moves to become beauty destinations in their own right.
Walmart and Target expand their beauty offerings
Both Walmart and Target highlighted beauty as a bright spot during recent earnings reports, signaling that the category is becoming increasingly important to their long-term growth strategies.
Target reported that in its most recent quarter, more than 50% of the company’s current sales came from prioritized assortments that included beauty. Target also said the beauty category is poised for further growth with the introduction of the Target Beauty Studio in more than 600 locations by fall.
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“In categories like Fun101, beauty, and food and beverage, we’re seeing mid-single-digit compound growth on a two-year basis,” Target CEO Michael Fiddelke told investors.
Cara Sylvester, executive vice president and chief merchandising officer for Target, said the company is excited to keep “building on the momentum we’ve been seeing in the beauty category.”
Target will also test new staffing and operating models to free up more time to focus on guests shopping for beauty products.
Walmart, meanwhile, has introduced Beauty Expert associates in stores and is investing in merchandising and customer engagement.
During the company’s most recent earnings call, Walmart CEO John Furner specifically highlighted beauty sales.
“Another category that was a standout in the quarter was Beauty. There have been a number of investments in the experience, both online and in stores that are making a difference.”
Beauty remains resilient when consumers cut back
The timing of these investments is no accident.
Historically, beauty has benefited from what economists often call the “lipstick effect” — the tendency for consumers to continue spending on relatively affordable indulgences even during periods of economic uncertainty.
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Recent industry performance supports that theory. Ulta Beauty recently reported first-quarter sales growth of more than 11%, with comparable sales increasing 5.3%.
That resilience helps explain why Walmart and Target are prioritizing the category. Beauty products generally generate higher margins than many traditional retail staples and can drive repeat visits from loyal customers.
This push also comes at a time when both Target and Walmart are trying to reinvent themselves as shopping destinations.
Target, in recent years, has fallen out of favor with consumers due to inconsistent inventory and unkempt stores.
Walmart has seen steady foot traffic due to its perpetually affordable prices. But it’s also trying to position itself as a trendier shopping destination, as evidenced by its investments not just in beauty but also in fashion.
By honing in on beauty, Target and Walmart could win over budget-focused customers who might love retailers like Sephora and Ulta but struggle to afford the premium prices they tend to charge.
And for consumers, Target and Walmart’s beauty push could be a huge win, allowing them to stretch their paychecks further in the beauty aisle without having to sacrifice quality.
Maurie Backman owns shares of Target.
