The beauty market isn’t in decline but its era of easy growth is fading, says a new industry outlook report by McKinsey & Co. and The Business of Fashion.
As a result, brands will need to prove their value, adapt to fragmented consumers, and find growth in wellness and aesthetics, according to the report, State of Beauty 2025.
The global strategic study draws from executive surveys, consumer research, and market forecasting to help beauty companies, executives, investors, retailers, and brands understand how the global beauty market is changing and how to alter their strategies for future growth.
Its central argument is that the beauty industry's rapid post-pandemic growth is cooling down worldwide — and that while North America isn’t a “slow” beauty market, it’s a demanding one.
The opportunity is still great, McKinsey says, but brands and professionals need to prove value, sharpen expertise, and meet consumers where they are: more informed, more skeptical, and more segmented than before.
Here are the seven biggest takeaways from the report:
1. Beauty Sales are Still Growing, But the Boom is Waning
After growing about 7% annually from 2022-2024, the global beauty industry is expected to slow to roughly 5% annual growth through 2030.
In the U.S., shoppers are cutting back on spending, especially in the hair-care category, as wealth gaps squeeze the mid-price tier for products and services.
And while the use of salon and spa services in the U.S. has grown, the report says, some clients have started trading down or extending time between appointments.
The market remains attractive, but brands can no longer rely on post-pandemic momentum or price increases alone.
2. Consumers are More Value-Conscious and Skeptical
The report says more and more shoppers are investigating whether products are worth their price. In its executive survey, consumer scrutiny of perceived value was identified as the biggest industry theme.
This leaves wide-open opportunity for professional expertise. Salons, hairstylists, estheticians, and other licensed beauty professionals can play a stronger role as trusted educators and product recommenders to consumers increasingly questioning value and efficacy.
The report cites social media influencers as losing their influence in beauty sales, while the opinions of everyday users and licensed beauty experts are becoming more and more valued.
3. Growth Will be Driven Less by Price and More by Relevance
Beauty executives are still focused on sales growth — 75% are doubling down on it — but they expect future gains to come less from price hikes and more from proving product performance, significance, and points of difference.
In North America, the report says, growth will have to come from smarter innovation, strategic positioning, and clearer proof of benefits.
The study advises legacy brands to continue producing new and cutting-edge products to stay relevant, while prestige brands should create accessible price points such as entry-level items or mini sizes.
4. The Definition of Beauty is Expanding Into Wellness and Aesthetics
Beauty has gone beyond skincare, makeup, hair care, lashes, brows, and fragrance. Consumers are increasingly folding in wellness, personal care, and aesthetic treatments.
In North America, consumers are blending beauty with health, longevity, dermatology, medspa services, scalp care, body care, fitness, and sexual wellness. That creates opportunities for brands that can credibly connect beauty to these broader self-care subsets.
To appease high-spending customers, luxury brands should group beauty and wellness experiences with other high-ticket categories attractive to their consumer base, the report advises — such as travel, design, and packaging that's unique, artistic, and collectible.
5. Brands Need to Recalibrate by Consumer Segments
The report frames the next phase in beauty as a “shifting growth puzzle.” The consumer base is fragmenting into specific sub-communities, needs, and identities such as age, ethnicity, lifestyle, location, cultural values, income level, and beauty philosophy.
To meet that challenge, the report says, companies should personalize and tailor product and service offerings and multifaceted market strategies in order to stay ahead.
6. The Beauty Market is Crowded and Super Competitive
In North America and elsewhere, beauty brands face saturation across categories, especially as indie brands, celebrity brands, retailers’ private labels, and legacy players all compete for buyer attention.
Beauty shoppers in North America are still spending, but they’re more selective. They want products that clearly justify their price through performance, efficacy, ingredients, experience, and/ or emotional payoff.
Plus, the report says, consumers are moving away from products by prominent founder-led and premium brands in favor of mass market lines, as belt-tightening in the U.S. continues and as affordable brands increasingly produce products that mimic prestige lines.
The report advises beauty players to rethink how they sell, market, and communicate value to increasingly discerning and savvy consumers besieged by brand claims, influencer content, and viral products.
Brands will want to rely less on celebrities, popular founders, and influencer hype and more on credible storytelling, stronger education, and clearer reasons for the buyer to believe.
7. Retail Disruption is a Big Factor
The U.S. beauty market is shaped by a complex retail landscape that includes specialty beauty, mass platforms, direct-to-consumer sales, department stores, salons and spas, and social commerce.
The report advises brands to adopt retail strategies that feel tailored to specific channels, rather than one-size-fits-all. That also means taking creative risks with marketing that feel fresh, imaginative, and unexpected.
Physical shopping still remains the most popular beauty discovery channel, the report says, with pop-ups, events, and locations becoming increasingly important.
Retailers should experiment with tailored promotions, the study says, including subscribe-and-save options, loyalty programs, targeted exclusives, and gifts with purchase (for brands who do not want to be seen on discount).
Mass retailers, even those who don’t specialize in beauty — such as grocery stores, big-box stores, and pharmacies — are actively expanding their offerings in beauty and wellness, with many adding private-label beauty lines.
Meanwhile, online retailers should create compelling virtual shopping experiences, the report says, such as AI personalization and exclusive cyber-offers.