AI Is Driving Efficiencies In The Beauty Industry — And How Brands Can Benefit

Artificial intelligence is giving the beauty industry a makeover, as it is having an impact on all stages of the beauty value chain — from research & development to supply chain management to product selection. 

For example, as consumers become more concerned with ingredient transparency, beauty companies are leveraging AI to track the flow of materials, like palm oil, throughout the supply chain.

Consumer-facing applications are also reaping the benefits of AI. In haircare and skincare, startups like JustForYou, Bare Anatomy, and Proven Skincare are using AI-powered algorithms and quizzes to offer personalized products. 

Below we look at different ways that AI is creating opportunities for beauty brands and retailers to cut costs, increase revenues, and improve margins.

Key Takeaways

• Digital olfaction is emerging to help brands reduce the cost of quality. Ensuring that products meet quality standards is costly for beauty brands. Digital olfaction captures odors using sensors and then uses machine learning software to interpret and classify them. This tech can objectively and reliably verify the quality of raw materials and finished products, which can help companies prevent spoilage and product recalls.
• Consumer demand for ingredient transparency and clean ingredients is driving the use of AI in beauty supply chains. While most startups focused on ingredient transparency and ethical supply chains operate in the food & beverage industry, ingredients like palm oil are also common in beauty products. The use of such ingredients could lead to more cosmetics players adopting AI for supply chain tracking in the near term.
• AI-powered product tagging startups help brands save time and provide more personalized recommendations to consumers. This tech automatically adds detailed metadata to online products, allowing brands to enhance search, filtering, and product discovery on e-commerce sites without having to deal with manual processes. As consumers browse and interact with tagged products, their interests become more clear, and this information can be used by brands to provide more relevant offers and product recommendations.

Why beauty?

As with many other industries, the Covid-19 pandemic was an inflection point for the beauty industry. The sudden closure of stores and factories highlighted specific weaknesses, such as supply chain rigidity. 

Additionally, the beauty industry is quite complex and fast-moving, with many SKUs to manage. For example, Sephora’s in-house makeup brand, the Sephora Collection, has 700 SKUs alone, making supply chain and inventory management that much more critical. 

Finally, the industry is quickly shifting to digital. Major industry player L’Oreal has stated that 27% of its sales come from e-commerce, and it expects this number to climb to 50%. With many beauty brands trying to manage increasing amounts of data as well as deliver exceptional e-commerce experiences in the face of disruption, AI could have a profound impact in this space.

Research & development