Beauty, Health and Wellness Converge Into One Retail Category, AlixPartners Finds

The study, conducted jointly by CEW and AlixPartners between May and June, surveyed 1,000 consumers age 18 and over, split across gender, age, income brackets and regions, as well as 127 executives in the beauty, health and wellness industries. Nearly 100% of consumers surveyed said they consider the category to be one budget item, compared with three before, AlixPartners found.

Lindy Firstenberg, co-lead of AlixPartners' beauty, health and wellness practice, told CNBC that the data shows consumers are willing to substitute across the category. "What we found in the data is a consumer is just as likely to trade off a night cream for another night cream as a night cream for a personal trainer," she said. "Anything in beauty, health and wellness is within the consideration set."

The survey also found a gap between consumer expectations and executive caution. Forty percent of consumers said they want traditional beauty companies to expand their reach in terms of the products they offer. At the same time, 42% of executives said they wanted their companies to stay in their lane. Firstenberg described that as "a fundamental disconnect," saying consumers are asking for more, for different offerings and for a new playbook, while executives say, "No, that's way too scary. That's not going to happen."

Firstenberg said companies may be hesitant to make a big bet that would not necessarily pay off immediately on a quarterly cycle. Such a move would also require lengthy research and development and consumer profiling. "They're not willing to look outside of themselves in order to see that broader beauty, health and wellness bucket, which is the exact opposite of consumers," she said.

The convergence is happening as consumers become more knowledgeable about the products they buy and take a more science-backed approach to beauty purchases, a trend AlixPartners calls the "consumer PhD." Firstenberg said people are also turning to other consumers, especially on social media, to decide which products to buy and which will have the best results, instead of relying on the brands.

Some companies are responding by teaming up with existing brands on the other side of the sector. In 2022, luxury brand Gucci partnered with wearable fitness tracker brand Oura on a specially designed ring. Last month, consumer packaged goods company Procter & Gamble agreed to acquire supplements brand Thorne for $3.8 billion in a bid to grow its health business.

Others are grouping products together in stores and online. Ulta Beauty has launched in-store wellness boutiques featuring categories such as supplements and skin and hair serums. Target launched the Target Beauty Studio on Sept. 10 after phasing out its shop-in-shop partnership with Ulta in August. Sephora now has a dedicated wellness and skincare section on its website.

Walmart has been investing in varied product assortments in its stores over the past few years, leaning into both entry-level price points and premium brands, said Silvia Kawas, who leads the consumables business for Walmart U.S. "Our customers today are actually thinking about solving problems across their health and wellness and beauty journeys more holistically than ever, and so you'll see a lot of blurring of the lines," Kawas told CNBC.

Kawas said Walmart, which is currently remodeling many of its stores, is placing beauty products in high-traffic areas to stay ahead of trends. It is also making sure store associates knowledgeable in beauty and wellness are available to help customers, in addition to leveraging the expertise of its pharmacists. She said Walmart has a "unique advantage" as an omnichannel retailer, serving customers through store assortments and being trusted for everyday low prices and consistency.

Kawas added that Walmart has seen consumers go through a trial-and-error process, so the company has found success with mini and single-serve products. "We're very intentional about creating this exploration, discovery and navigation in-store and online that gives [customers] confidence in the solutions that they're buying from Walmart," she said.

CNBC also cited Pierre Dupreelle, a global leader for beauty, as saying that while some larger players in the retail space are leaning into the trend, others may be missing the mark.