The $441 billion beauty industry, seen as a perennially dependable cash cow with virtually limitless growth potential, is now proving to be slightly more vulnerable to market shifts than some may have thought.

As global consulting firm McKinsey & Company worded it in its new “State of Beauty 2025” report (compiled in partnership with Business of Fashion), the global beauty market is “showing signs of cooling.” With the effects of economic uncertainty and market saturation, it’s expected to grow at an annual rate of 5% through 2030 — a bit lower than the the 7% yearly growth it experienced between 2022 and 2024.

This means brands will have to work harder than ever to compete for consumers’ dwindling disposable income — especially those selling products at higher price points. In the last 12 months, 24% of consumers traded down to cheaper beauty products, the report found. (With the normalization of dupes, it’s never been easier.)

More than half of the beauty executives McKinsey surveyed expect “increased consumer scrutiny on perceived value for money” to be the biggest theme to shape the beauty industry in the next few years; a similar figure identified either “uncertain consumer appetite” or “restricted spending” as the greatest risk to the industry’s future growth. At the same time, costs of raw materials and digital marketing are expected to rise.

It’s a tricky predicament, particularly as brands face higher sourcing and manufacturing costs amid tariffs and global supply chain uncertainty. Below, find five pricing insights brands should consider as we continue down this road of economic and geopolitical chaos.

Beauty spend is expanding beyond products

Consumers are broadening their beauty routines to include things like aesthetic and wellness treatments, diverting some of their spend from products to spas. In the U.S. specifically, the percentage of consumers who use beauty and spa services grew from 22% in 2023 to over one-third in 2025, even as overall beauty spending decreased, the report found. Still, some of them are trading down to cheaper options or extending time between appointments to save money.

Don’t rely on the ‘lipstick effect’

The beauty industry’s much-discussed “recession-proof” nature has its limits. When it comes to products, consumers are more knowledgeable and discerning than ever thanks in part to social media, especially now that the market is so crowded. Per the report, 83% of consumers said they thought hair care was affordable, while only 67% said the same for fragrance.

As they tighten their purse strings, consumers may not stop buying beauty items, but they are expected to pay even closer attention to whether products perform, especially in relation to price.

Mass brands are well positioned to capture more market share

The report also found that “64% of consumers do not think premium beauty products are higher-performing than mass beauty ones,” as accessibly priced brands like The Ordinary and E.l.f. are “raising consumer expectations across the market” with online virality, efficacious products and quick innovation. Plus, affordable brands have become increasingly accessible by entering non-specialty retailers like Amazon, Target, Walmart and various drug-store, grocery and off-price chains — not to mention TikTok Shop.

Mass brands have also proven to be more appealing to “newer beauty consumers,” per the report, including Gen Zers and men. Inflation is expected to be a continued boon to affordable brands “as shoppers seek novelty at low price points.”

Dupes are here to stay

Relatedly, the dupe phenomenon seems unlikely to wane anytime soon, and will make it even more difficult for premium brands to prove that their products, original or not, are worth the price. While 28% of consumers surveyed said they’ve consciously bought dupes, 53% said they’re open to buying them in the future. That said, 50% are still “concerned about the quality of dupes,” meaning it will be increasingly important for premium brands to emphasize quality as a point of differentiation.

Premium brands must increase value, not prices

Across industries, the obvious solution to tariffs, rising material costs and complex supply chain issues is to raises prices; but in beauty, that strategy has a decent chance of backfiring. Per the report, beauty brands that raise prices “do so at their own risk. Based on survey results, few of their peers expect to do the same, meaning products with elevated pricing could stand out for the wrong reasons.”

Instead, the report advises high-end brands to increase the value of their products, or at least consumers’ perception of it, in order to compete. But how?

For the skin-care category, it suggests emphasizing efficacy through “increased transparency around claims, clinical trials around superior performance or new ingredients.” In hair, consumers may be motivated to spend more for targeted solutions around hair loss or scalp care. Cosmetics brands will want to focus on social virality and innovation, like “skin-care-infused makeup.” In fragrance, premium brands are still well-positioned, since perfume shoppers “have a natural affinity for prestige, luxury, fashion and niche fragrance brands,” but they should watch out for dupes.

In addition to performance and ingredient transparency, McKinsey found that consumers may also be willing to shell out for special sensorial elements (application, texture, smell) and elevated packaging. It highlights Merit as a brand that “has made design a core element of its identity.”

“Even simple elements of functionality are paramount,” the report adds. “Pumps that get clogged, packaging that shatters or text that rubs off bottles are common pain points that can undermine a product.”

Another proposed strategy: introducing more entry-level products like lip balm or hand cream, or travel-size versions of existing items. “All the while,” it says, “existing customers should be retained through high-touch client care like targeted promotions and excellent customer service.”

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