For a beauty brand or product to be classified as luxury, an item was traditionally found to be of the highest quality with an equally staggering price tag. This definition is still relevant, and for many consumers will always be the case. But consumer brand perceptions are changing as new brands with strong value propositions enter the prestige beauty space. As such, consumers’ definition of luxury, particularly when it comes to skin care, is a moving target.

Within the U.S. prestige beauty market, the most luxurious category is fragrance. The average price of a fragrance is more than double that of skin care and continues to rise. For the past few years, the fragrance category has experienced skyrocketing sales, attributed to more consumers purchasing higher-priced brands and stronger concentrations, which are more expensive. Consumers seem to understand the value of paying more for luxury fragrances and have embraced doing so. However, this is not the case when it comes to skin care.

Luxury skin care – defined here as a product with an average price of $87, or twice the average price in the category overall – accounts for less than 10% of total skin care units sold through prestige retailers, mainly department and beauty specialty stores. Unit sales were flat in the first two months of the year, versus 2022, while the overall prestige skin care category grew by 17%. In terms of sales revenue, luxury brands grew 2% during these same two months, trailing the overall category’s 14% growth. These sales trends indicate that overall consumer demand for luxury skin care brands is softening.

The biggest hurdle for luxury skin care to overcome is the fact that lower-priced brands with prestige positioning have entered the consumer’s universe. These brands peeled back the curtain by providing consumers with a level of ingredient and formulation transparency that hadn’t been seen before. They took a cornerstone of luxury – higher prices due to more expensive and efficacious ingredients – and showed the consumer that she can pay $15 or less for those same ingredients and achieve the desired results.

Just over 50% of U.S. consumers say they avoid spending a lot on skin care and 64% report that brands at mass merchandisers are as good as higher priced brands, according to findings from NPD’s 2022 Women’s Facial Skincare Report. The lesson here is that luxury skin care brands need to show the consumer their unique value proposition. Higher-priced fragrance brands have a unique advantage that skin care brands do not, because that category lacks lower-priced alternatives. For luxury skin care to win more sales, the market will need to directly address their indirect competitors and romance consumers with the “why” behind the luxury buy.