Cosmetics Industry in India – Trends, Opportunities, Challenges & Solutions


Jan 22, 2023 | E-commerce Industry

Home > Blog > Cosmetics Industry in India – Trends, Opportunities, Challenges & Solutions

The Cosmetics Industry in India has witnessed a remarkable evolution over the past few years and is projected to register a compound annual growth rate (CAGR) of 4.23% over the next five years. In this dynamic landscape, it’s crucial to recognize that the cosmetic industry isn’t limited to makeup but encompasses all beauty and personal-care products, showcasing a diverse range of offerings. With brands like Mamaearth, The Man Company, Sugar Cosmetics and WOW Skin Science rising in the industry, it is evident that consumer trends are also changing with time. 

Currently, the trends are shifting towards organic and natural products, along with an increased demand for Men beauty essentials, which underscores the new customer’s need for more personalized products. However, opportunities come with a set of challenges. Many brands have trouble coordinating the inventory across offline stores and online channels, including batching the inventory and expiry circulation of products, which leads to ineffective customer return management.

In this blog, we’ll delve into the exciting world of the cosmetics industry in India, exploring its trends, challenges, and realistic solutions in detail that would shape the future of your brand.

Trends and Opportunities in the Indian Cosmetics Industry

cosmetics industry trends

1. Growth of Natural and Organic Products

One of the most prominent trends in the Indian cosmetics industry is the shift towards natural and organic products. Consumers are increasingly seeking products with fewer chemicals and more natural ingredients. Take Mamaearth, for instance, a brand of the parent company Honasa Consumer, which progressed after the COVID-19 pandemic with a mission to provide 100% natural and toxin-free products with a blend of natural ingredients. Mamaearth’s dedication to providing customers with what they want resulted in a 400% growth amid COVID-19.

This inclination towards natural beauty has paved the way for homegrown brands that emphasize the use of herbal and organic components, which also makes the trend ever-relevant in the cosmetic industry.

2. Digital Influence on Beauty Choices

The digital age has brought about a revolution in the way consumers discover and purchase cosmetics. Social media influencers and beauty bloggers play a pivotal role in shaping consumer preferences and many brands promote their products in this way. Can you guess some of these brands?

digital influence on beauty choices

In the vibrant realm of cosmetics, titans like Nykaa and Lakmé have carved their mark, particularly in the dynamic world of social media. Here, beauty enthusiasts seek recommendations tailored to diverse skin types and tones. These brands have recognized the immense potential of social media and influencers and used this power to create beauty products that cater to customers’ individual needs.

3. Male Grooming on the Rise

 The male grooming segment is witnessing significant growth. The Man Company, among many brands, realized that men are now more conscious of their appearance and are willing to invest in grooming products. This shift in mindset has opened up a new avenue of men-centric cosmetic products that understand the difference between men’s and women’s skin types and cater to the specific needs of men. This specificity is what paved the way for The Man Company’s Success.

4. Personalization and Customization

In a market as diverse as India, consumers are seeking products tailored to their specific needs and preferences. Customized skincare and makeup solutions are gaining traction, allowing brands to offer unique, personalized experiences that cater to specific skin types, tones, and concerns, creating a unique experience for each consumer.

Challenges Faced by the Cosmetics Industry

cosmetics industry challenges

1. Seasonal Demand Fluctuations

Seasons change drastically in India, ushering in a massive shopping spree with the holiday season arriving simultaneously. The cosmetics industry witnesses a substantial surge in product orders and delivers them to customers in the shortest possible time, and the challenge arises to keep the inventory streamlined. Lack of knowing your customer preferences may lead to overstocking and stockouts, which most brands experience during these times. This not only leads to unwanted inventory in the warehouse but also cuts down revenue and results in a bad customer shopping experience.

2. Inventory Expiry Management

Cosmetics are subject to strict regulatory standards. Mishandling products with an expiry date can lead to dire consequences for your brand, from losing products before they even leave the warehouse to compromising revenue and valuable storage space. Moreover, shipping expired products not only erodes customer trust but also complicates return issues. 

3. Returns Management

Managing returns in the cosmetics industry is crucial for customer satisfaction and brand reputation. Despite best efforts, returns are inevitable. However, if not managed efficiently, it can lead to significant product waste. Inadequate processing and quality check of returned products not only result in wastage but leaves a hole in your brand’s finances and leave customers dissatisfied.

4. Order Fulfillment across channels

 Cosmetic brands like Mamaearth and Suger Cosmetics operate through various channels, including e-commerce platforms, physical retail stores, and their own direct-to-consumer (D2C) websites. However, synchronizing inventory across these diverse platforms can pose a significant logistical challenge. This lack of inventory integration between offline stores and online marketplaces may lead to sudden stock outs or overstocking, leaving the customer hanging and losing potential sales.

5. SKU Proliferation

The cosmetics industry grapples with a diverse range of SKUs due to variations in shades, packaging, and formulations. Striking the right balance between offering a wide range of such products and maintaining a lean inventory can be quite a juggling act. This is especially challenging, considering the ever-changing trends and evolving customer preferences over time. Brands, unable to keep up with these changing trends in the industry, tend to get dissolved with the competition.

6. Limited Shelf Space

As the cosmetic industry continues to grow, warehouses may face constraints in terms of available space. Inefficiencies in storage space utilization can impede your brand’s ability to maximize its potential storage space. This limitation might be the very factor holding your brand back from reaching its full sales potential and accelerating business growth due to limited inventory in the warehouse.

Industry-based Solutions for Challenges

1. Detailed Report Snapshots to Track Demands

To achieve high efficiency during seasonal fluctuations, employing a warehouse inventory management system is crucial to map fluctuations and adjust inventory levels accordingly to maintain slim inventory. Utilize flexible storage solutions for your brand like consumer buying patterns and filter it from SKUs to geographical locations to track product success throughout the country and accommodate changes in product demand.

2. Implementing Batching

The strategic practice of ‘batching’ the inventory enables utilizing the first-expiry, first-out (FEFO) and first-in, first-out (FIFO) options to ensure that older products are used or sold before newer ones, minimizing waste and maximizing profits. 

The Man Company faced a similar challenge, batching 1,000+ SKUs across 11 warehouses. But with batch-level traceability, The Man Company is able to track inventory using important attributes, such as cost, expiry, manufacturing, vendor, etc. Additionally, the batching feature also allowed the brand to identify soon-to-expire inventory and liquidate them accordingly while achieving minimal expiry and spoilage.

3. Efficient Return Management

Returns management, being one of the most cumbersome tasks, requires rigorous visibility of stock and returns processes that include a thorough product inspection. Additionally, quality-checking the product after returns in order to appropriate disposal of damaged or expired items and restocking of acceptable returns. See how Mamaearth rose above this challenge and achieved a faster inventory turnaround while attaining a drop in returns by 300%.

4. Managing Inventory Across Multiple Channels

Implementing an omnichannel strategy would empower your brand by creating a unified inventory pool for all your sales channels, not only minimizing logistics costs but also saving precious time. Additionally, you gain access to detailed real-time reports, all from a single dashboard. So, the need to manually update inventory to online channels and physical stores would become obsolete, subsequently giving your clients a unified shopping experience.

5. SKU Management and Barcode Scanning

Implementing robust SKU categorization and management techniques can significantly enhance inventory control which includes barcode scanning and labeling technology, ensuring accurate and efficient tracking of products, making the process smoother and more streamlined. Many leading cosmetic brands, among Wow Skin Science, Sugar Cosmetics, etc., use SKU categorization and barcode scanning to manage their complex warehouse operations in an effortless manner.

6. Implementing WMS

To overcome limited shelf space challenges, implementing a comprehensive warehouse management system (WMS) would enable your warehouse’s optimal shelf capacity for specific inventory and let you efficiently store products in the warehouse. Additionally, make use of high shelves to maximize vertical space. Investing in efficient storage solutions like pallet racks and mezzanines can significantly increase your storage capacity. 

By strategically organizing your warehouse, you can unlock untapped potential for storing cosmetics and ensure seamless operations. Many leading brands among Plum Goodness have implemented a strategic warehouse management system that enables them to seamlessly track inventory and fulfill customer orders. With full visibility on the inventory, Plum Goodness was able to get detailed reports of their overall business operations and experience a 69% growth in sales.

By addressing these challenges, the cosmetics industry in India can ensure efficient warehouse and inventory management, ultimately contributing to business growth and customer satisfaction.

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