INDUSTRY REPORT
Beauty market resilience in Q2 2025
Q2 2025 for the Beauty industry defied expectations. Despite economic & tariff challenges, data reveals surprising resilience and shifting priorities within the sector. While many predicted higher prices and falling conversion rates, the reality proved more nuanced - operational execution and cost management now drive success.
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Key takeaways
- Inventory Growth: On-hand inventory increased 30% year-over-year in Q2, signaling a stabilization phase after the Q1 surge
- Conversion Excellence: Beauty sales grew 11.7% year-over-year in Q2, outpacing traffic growth of 10.6%, proving that focusing on optimizing conversion rather than merely increasing visibility drives real growth
- Price Sensitivity: Average selling prices declined 4.3% year-over-year as customers actively hunt for deals and trade down in price bands, while discounting continues its 18-month decline
- Advertising Efficiency Challenges: Ad spend increased 8.8% year-over-year while Return on Ad Spend (ROAS) declined from December highs of $6.5 to $4.7, indicating growing challenges in advertising efficiency
- Supply Chain Improvements: Revenue loss due to out-of-stock issues declined 23.2% in Q2, with reported out-of-stock percentage dropping to 0.7%, showing significant improvement in operational execution
- Unit Margin Recovery: Unit margins recovered from Q4 lows to 23.5%, demonstrating effective cost management despite price pressures
