Diversification is the winning strategy for mitigating investment risk in growing portfolios. If you’re passionate about investing in technology, you’re already familiar with rapid-growth sectors like AI and FinTech, but in the spirit of diversification across industries to minimise risk and maximise long term success, your next potential consideration could be in Beauty Tech.

The evolution of beauty

The beauty industry has evolved in parallel to cultural developments over the millennia, with a history as colourful and diverse as the wealth of products and solutions it offers today.  Many traditional industries have innovated through the integration of cutting-edge tech, and beauty is no exception, now seamlessly fused with new advancements like AI and AR. At the intersection of beauty and technology, we find Beauty Tech.

While the traditional beauty and cosmetic industries were founded and prospered on an outdated ‘one shade fits all’ product offer, today’s pioneering beauty brands promote personalisation. As a result, now more than ever, consumers have a staggering number of competing brands and products to navigate and choose from. Beauty Tech is the industry’s response to this new need for a tailored, consumer-centric and often online approach in the vast cosmetic market.

AI, AR and beauty

As beauty consumers have become used to customised, online shopping experiences, AI and AR technologies have become essential to beauty brands’ innovation and digital transformation strategies. Beauty Tech may have its origins in early desk top computer paint and photo-editing programmes, but it has flourished with the development of AI and AR technology, alongside the exponential rise of the smartphone.

Beauty Tech today offers a vast range of options and applications, from AI-driven recommendations for personalised skincare solutions to AR makeup try-on experiences with custom-blended shades. These innovations make beauty accessible to all, anywhere and at any time.

If you’re interested in investing in Beauty Tech, you should keep a close eye on companies with a strong focus on innovative technologies.

The cosmetics market

The global beauty and cosmetic market is expected to reach US$ 416 billion by 2028. Recent years have seen a massive increase in the use of AI and machine learning within this sector, and the specific global market for AI in beauty and cosmetics is expected to reach US$ 13.34 billion by 2030.

Mass-scale consumer personalisation has catalysed customer engagement and fuelled remarkable sales growth for hundreds of beauty brands, further supported by a 14% growth in the global e-commerce market. Definitely an interesting proposition for a tech investor.

Is it worth investing in beauty tech?

Financial media don’t generally show much interest in cosmetics companies, and many tech investors tend to overlook them, but this sector provides a good blend of solid growth in a mature industry with dividend income.

Social media platforms and the influencer industry accelerate demand for beauty products, shaping market trends. It’s an appealing sector for investors, and Beauty Tech is already a lucrative market with more than £1 billion of equity investments over the last 10 years in the UK alone. It’s expected that North America will dominate the growth of Beauty Tech due to the expansion of the US cosmetics market and its e-commerce giants like Amazon and Sephora.

Benefits of Beauty Tech

Beauty Tech is a key driver of customer engagement, significantly improving conversion rates and order values, while reducing product return rates. It can help brands with product development by collecting and leveraging relevant customer data to identify emerging trends and gaps in the market that represent growth opportunities.

All of these benefits enable brands and retailers to make better strategic decisions and stay competitive within the fast-moving multi-billion dollar cosmetic market.

Beauty Tech provides a number of concrete benefits to brands, while providing investors with appealing investment opportunities in exciting emerging technologies. The world’s most powerful beauty and cosmetics giants are focusing on Beauty Tech. While it may not be the first sector to come to mind, it’s definitely worth investigating.