How the Blockchain Technology will Change the Beauty Industry Forever
As of 2020, the beauty industry has been valued at over $569.4 billion dollars. And it is predicted to reach new heights by growing to $758.4 billion by 2025. We have seen over the years that digital transformation is a key factor for the steady growth. In fact, social media, big data, digital payment, AI are only a few examples that helped to reach an annual growth rate of 4.75%.
With the help of technology, the beauty industry was able to stay resilient even during a global pandemic. In order to overcome future challenges, the beauty industry has to keep up with the constantly evolving technological advancement and changing consumer demand.
By now, almost everyone has heard of cryptocurrency at least once before. Cryptocurrency is not new to the beauty industry. Brands like Lush Cosmetics have been accepting cryptocurrency as a payment since 2017 and more brands followed. Differently, the platform Lolli operates like traditional cash-back platforms but rewards are given in the form of bitcoin. In other words, after consumers purchase beauty products on different merchants’ websites, Lolli, installed as a Chrome extension, gives portions of bitcoin to customers as online shopping rewards. Currently, Lolli has partnered with over 1000 merchants, including Sephora, Ulta, Amorepacific, Ebay and more.
However, what is even more fascinating to the beauty industry lately is the technology behind cryptocurrency, which is blockchain technology.
One of the examples for blockchain can be seen for the French Chinese Cosmetic Brand YI ZHI JI partnering with VeChain to launch their first blockchain powered lipstick in 2021. Customers could not only customize the lipstick shade on WeChat, which was all recorded on the blockchain, but they could also further personalize it with emotional and personal messages, information or documents like pictures all securely safed on VeChain.
What is blockchain?
In summary, blockchain is a public digital ledger system of recorded information. These blocks of information are duplicated and distributed across the entire network of computer systems. This complex process makes it difficult or impossible to change, hack, or cheat the system. Applying blockchain technology to the beauty industry opens new innovative dimensions for beauty brands to connect with customers. Here are some ways:
Data and personalization have been up and coming in the beauty industry. From makeup to skincare, consumers can customize everything according to their interests and needs. Personalization is connected to data, often also personal data. However consumers want to benefit from personalization without neglecting privacy. This is where blockchain technology can help.
Through blockchain technology, data can be recorded, secured and give consumers control over usage. Hacking or altering would be immediately detected. For instance, within the healthcare industry, blockchain technology has secured patient health records, and gave patients the ability to decide about their data and possible sharing with health care providers, pharmacists, insurance providers, and other stakeholders.
The same can be applied to the beauty industry to protect consumer data. EpigenCare and COSBALL are both personalized skincare startups. New York based startup EpigenCare analyses epigenetic tests and South Korean skincare startup COSBALL uses AI diagnosis for facial scans to extract quality indicators like aging, elasticity, moisture, pigmentation, and more. To protect consumers’ privacy, both startups implemented blockchain technology on their digital platforms. Consumer data is anonymized and consumers are designated with a blockchain transaction ID rather than with any personally identifiable information.
Another way blockchain technology can be beneficial to beauty brands is the trackability of the supply chain and production of beauty products. Consumers have been more and more curious about where and how products are produced. Especially, consumers of beauty products have been skeptical about ingredients and origin.
Consumers want more sustainable and cruelty-free, ethically sourced beauty products. Nielsen reports that 66% of global consumers and 73% of millennials are willing to pay more for sustainable goods. With this, the supply of green products and accompanying claims for clean beauty has been increasing. However, there is a market challenge to show visibility on ethical sourcing, origin of ingredients and packaging or organic and sustainable production methods.
Blockchain technology can be the possible solution to this challenge. The recording of time stamped and verified data give full transparency to the supply chain from the sourcing of the raw material to production, shipment, warehouse until the shipment to the end consumer. Beauty brands that leverage blockchain technology can showcase tangible evidence of credibility, certifications and more. They will have a competitive advantage through increased trust and consumer confidence.
The London-based startup Provenance works with different brands and industries to offer this solution. Its mission is to empower “brands to take steps towards greater transparency”. Their blockchain platform allows companies to show consumers the entire journey a product takes. Beauty brands like Cult Beauty or Tropic Skincare have teamed up with Provenance to be fully transparent and back-up their claims regarding social and environmental impact. By doing so, the brands establish long-term brand trust with consumers.
Related to the supply chain, one way blockchain traceability can be beneficial is combating fake products. We can see this method already in use within the luxury industry. Just recently in April of 2021, LVMH teamed up with competitor brand Prada and Cartier to launch Aura Blockchain Consortium, the world’s first global luxury blockchain. A collaboration between competitors to find a solution to shared challenges of communicating information on authenticity and sustainable sourcing. It works by first creating a unique identifier for each product at the point of manufacturing. A record of each transaction is made into a product certificate, which is handed to the customer when purchasing. The customer can then directly track all past interactions and transactions without the need of a third party.
But not only the luxury industry is affected by counterfeit products. The beauty industry has been struggling with more and more fake high end beauty products containing harmful ingredients. Particularly due to the closure of physical shops during the pandemic, consumers turned to the internet to make purchases. For instance, fake products of brands like Mac cosmetics, Kylie cosmetics or Fenty Beauty have been all over the internet. In 2016, the international counterfeit makeup trade was estimated to be worth $5.4 billion. This number has increased ever since. In Europe alone, the counterfeiting of perfumes and cosmetics causes an annual turnover loss of about €4.7 billion. The distribution of such products will cause damage to consumer health and brand reputation respectively. As a study has shown, 41.5% of consumers that have bought fake products will stop buying from the actual brand.
To counteract fake beauty products, startups like Authena offer their blockchain solution to brands of various industries. The Swiss startup operates with NFC tags that leverage encrypted tamper-proof blockchain technology to create a unique digital identity. Each single item can then be tracked from production to product opening and Authena even features refilling protection and anti-peeling. They have established an interactive, end-to-end communication between manufacturers and end-users. Brands like Masque trust in the blockchain technology of Authena to ensure authenticity of their fragrances.
Besides blockchain, another buzzword related to cryptocurrency is NFT (non-fungible token). It is a certified digital asset that is completely unique and can never be duplicated or be interchangeable. NFTs can be photos, videos, audio files and other types of digital files. Brands like Clinique, Nars, Shiseido, Givenchy Beauty, and E.l.f. are among the recent beauty brands that have launched NFTs to create exclusive brand marketing and awareness. In a collaboration, Givenchy Beauty launched and sold out on a NFT campaign with animated portraits symbolising diversity, the assertion of identity and the fight for equal rights. The NFTs aimed to express Givenchy’s commitment to a more diverse, more inclusive, in short, more universal kind of beauty.
Blockchain and Beauty
Many industries have greatly benefited from blockchain technology. This article has stated some ways blockchain technology can be applied and improve the beauty industry in regards to trust, honesty and sustainability. Brands that recognize and understand the opportunity can build a greater relationship and engagement with consumers and customers.
However, blockchain in the beauty industry is still very niche. At this stage, it is still an emerging trend that is hard to scale. It will still take some time to integrate blockchain technology and make it a standard in the beauty industry. But the benefits have been identified and brands are slowly catching on. This is only the beginning of a great future for the beauty industry.