How flexible financing is driving growth in the beauty and wellness e-commerce sector

According to Statista, online beauty sales generated around $86 billion in the United States in 2023, while personal care sales reached nearly $54 billion¹. More broadly, The Global Wellness Institute (GWI) reports the wellness economy, which includes personal care and beauty as well as nutrition, wellness tourism, fitness, and personalized medicine, has reached a record value of $5.6 trillion³.

Customer expectations are shifting towards hyper-personalization, omnichannel engagement, and buy now, pay later. Here’s how flexible payment options are helping to drive this growth, and how large beauty and wellness e-commerce enterprises can develop a more user friendly shopping experience.

The evolution of consumer preferences within the beauty and wellness e-commerce space

The cosmetics and beauty sector was the fastest-growing retail category in the US last year, with consumers spending $94.36 billion in total – and eMarketer reports that many of these shoppers also plan to increase their beauty budgets in 2024 ⁴. It is essential for brands to differentiate themselves in a shifting and increasingly competitive landscape.

These are the beauty e-commerce trends predicted to make an impact over the next 12 months and beyond.

AI is hyper-personalizing products and services

Skin analysis and individually formulated products are already demonstrating the power of artificial intelligence in the beauty industry. These AI offerings are likely to continue to evolve toward hyper-personalization. Both in-store and online, consumers may begin to have access to sophisticated algorithms to individualize their skincare routine, diagnose and prevent sun damage, and discover the right cosmetics for their specific needs.

Consumers want brands to prioritize sustainability

9 in 10 beauty shoppers think about sustainability when choosing products – 15% care more about the ethics of a product than the price, Forbes reports ⁸. McKinsey & Company has labeled these shoppers “belief-driven buyers” ⁹ and predicts this figure will increase as Gen Z and Millennial shoppers continue to dominate the market and scrutinize brands more than other generations ¹⁰.

Forbes’ research further found the majority of beauty shoppers care about nature and animal welfare, followed by waste reduction, treatment of workers, and climate change impact – however, 71% of shoppers are skeptical of what brands really mean when they use generic labels like “environmentally friendly” ⁸. Wary consumers are keen for beauty and wellness brands to demonstrate greater transparency and may reward this with trust and loyalty.

Omnichannel selling is essential for global beauty brands

E-commerce is the fastest-growing sales channel for beauty and wellness – but there’s still high demand for in-store product testing at drugstores, department stores, and even grocery retailers, as well as social selling through Instagram and TikTok ¹⁰. 1 in 3 TikTok users use the app to discover and consider new beauty and personal care brands ¹¹.

The rising consumer demand for payment flexibility in the beauty and wellness sector

The demand for omnichannel engagement extends to how customers pay too. Digital wallets and buy now, pay later (BNPL) have surged in popularity ¹². The proportion of mobile e-commerce users meanwhile is growing every year and predicted to be 66% by 2026 ¹³.

Flexible payment options are driven, in part, by consumers’ desire for financial freedom and a need to manage budgets more effectively during a cost of living crisis. Consumers want to indulge in beauty and wellness products even if they’re on a budget, and e-commerce sites can enable them to do this.

Challenges with traditional payment methods

Dynamic Yield reports that cart abandonment is around 74% in the beauty and personal care industry – common causes include slow site loading times, finding cheaper prices elsewhere, and awkward multi-stage checkouts ¹⁴. Offering alternative payment methods, including mobile payments and BNPL, allows customers to use pre-populated payment details in an instant.

The emergence of BNPL in beauty and wellness e-commerce

A PYMNTS study from 2023 shows 32.3% chose BNPL to buy health and beauty products compared to 36.8% who paid with their credit card ¹⁵. Many customers are choosing BNPL installments to make beauty products more affordable ²⁰.

After integrating PayPal's Pay in 4, Younique saw 218% growth in Pay Later sales volume with dynamic messaging and a 209% increase in Pay Later transactions in 2022 ¹⁶. Also, PayPal Pay Monthly AOVs are 400% higher than standard PayPal AOVs for retailers in the cosmetics vertical ¹⁷.

Advantages of offering flexible payment options in the beauty sector

• Boosts online conversions. Offering payment flexibility can help transform browsing into purchasing by simplifying the checkout process. PayPal consumers surveyed are 36% more likely to buy health and beauty items when they can pay with PayPal ¹⁸. Wellness brand BlendJet created a seamless checkout with PayPal and increased their conversions, which was critical for the brand’s cross-border e-commerce growth.
• Enhances customer acquisition. Flexible payments can attract new customers who may have previously hesitated due to price concerns and awkward checkouts – two of the most common reasons for cart abandonment ¹⁴.
• Customer loyalty and increased LTV. Personalized payment plans can help to build lasting relationships with customers, encourage repeat purchases, and even elevate customer lifetime value in the beauty sector. PayPal brings 9% more repeat buyers on the same health and beauty merchant website ¹⁹.

Strategic integration of health and beauty financing in the consumer journey

Optimizing the checkout process means accurately displaying products, prices, shipping costs, and available payment methods to shoppers. This transparency can help enterprises drive awareness scalably and facilitate informed purchases.

Beauty e-commerce businesses can also drive sales with PayPal's Pay Later’s intuitive payment options. This can reduce friction and encourage completion of purchases in an industry where cart abandonment is common.