At DSG Consumer Partners, maintaining a close connection to our continuously evolving consumers in order to unlock sharp insights is central to how we operate and think. Over the past twelve months, we have invested many hours speaking with consumers in the region. In this article, we invite you to explore the vibrant streets of Indonesia and the Philippines, where a notable transformation is taking place. Empowered by smartphones and perpetually engaged with platforms like TikTok, the dynamic Gen Z cohort is reshaping the Beauty sector. This USD 34B¹ industry stands as one of Southeast Asia's most rapidly evolving consumer landscapes, and here's what we have discovered.

This surge is not just about numbers where per capita spend on Beauty & Personal Care exceeds GNI-based expectations (Exhibit 1); it represents a shift in consumer behavior, where the beauty category and in particular, skincare and cosmetics, has transitioned from luxury to necessity. Our collaborative research with Meta and Bain & Company last year sheds light on this evolution, revealing that a majority of Indonesian and Filipino Gen Zs now consider beauty & cosmetics integral to their daily lives (a "need" rather than a "want") - 73% in Indonesia and 51% in the Philippines. 

Our findings also reveal an inclination among Gen Zs in Indonesia (37%) and the Philippines (32%) to boost their spending on beauty products in the next 6 months, contrasting with millennials, of whom only 26% in Indonesia and 22% in the Philippines indicate similar intentions. Despite these data points, a gap exists wherein only one third of executives and businesses surveyed in Southeast Asia feel fully equipped to connect with this dynamic cohort.

Driven by curiosity and a commitment to understand these consumers more deeply we relied on (1) quantitative data gathered from 9,000 consumers, (2) interviews with over 60 executives from leading consumer products companies across the SEA-6 region and (3) qualitative insights gleaned from 30+ hours of one-on-one in-depth interviews with Gen Zs from Indonesia and the Philippines.

In this article, we delve into a consumer theme that DSGCP consistently invests in: the pursuit of looking and feeling good. We explore the skincare and makeup sectors to gain a deeper understanding of their increasingly influential consumer, Gen Zs. We aim to uncover who they are, what they seek, and some tips for brands and business owners on how they can effectively cater to their preferences.

Who are Indonesian and Filipino Gen Z Beauty Consumers?

Let's start with the basics- the Gen Z beauty consumers identified in our survey were predominantly female. However, the participation of men is noteworthy, especially in Indonesia, where they account for 36% of the beauty market compared to 29% in the Philippines, signaling a changing trend (Exhibit 2). These consumers are primarily middle-income individuals living in urban hubs such as Jakarta, Bandung, and Surabaya in Indonesia, and Metro Manila and Cebu City in the Philippines. They also reside in households with 4-5 members, which influences not only their purchasing power but also shapes their buying decisions and preferences within the beauty sector.

Second, their digital behavior stands out: as digital natives, they boast the highest screen time in the region, averaging 7.6 hours in Indonesia and 7.4 hours in the Philippines. A significant portion of this time is dedicated to online shopping, where they meticulously research products and hunt for discounts. Research includes watching videos, reading reviews, and visiting physical stores, especially for high involvement categories like skincare. Once they've chosen a product, they put on their bargain hunting hat, comparing prices across various platforms to secure the best deals.

This behavior contrasts sharply with older generations, who prioritize brand reputation and often opt for direct purchases from physical stores, resulting in a shorter consumer journey.

Shifting from their demographic profile and digital habits, let's explore their skincare preferences and routines.

Skincare Insights: The Evolving Regimens of Indonesian and Filipino Gen Zs

Due to financial constraints, Indonesian and Filipino Gen Zs choose to spend more on skincare versus makeup, stating that "well-maintained skin is fundamental in achieving their desired makeup look." Their skincare journey evolves based on their life stage: (1) basic skincare during student years and (2) advanced routine later on. In the Philippines, this transition typically occurs around age 25, when job security gives them financial freedom to spend on a more advanced repertoire. Meanwhile, Indonesian Gen Zs, influenced heavily by social media, begin exploring diverse skincare products as early as age 20.

Navigating Acne

During their high school to early college years, many Indonesian and Filipino Gen Z consumers identified acne control as their primary skincare concern. The challenge of accessing dermatological care, primarily due to high costs and limited parental support, compels many to take acne management into their own hands. They recognize acne triggers like oily skin, humidity, diet, and hygiene. With a rising awareness that skin dryness can also contribute to acne, there's a growing preference for gentle cleansers and hydrating moisturizers (such as Rosé All Day's Butter Be Gone Cleansing Balm and Rose Biome Gentle Cleanser). In the Philippines, skincare enthusiasts favor ingredients like niacinamide and BHA, with a minority exploring glutathione supplements. Meanwhile, Indonesian Gen Zs prefer natural ingredients like heartleaf, mugwort, and Centella Asiatica (Cica) for their soothing properties, although they are also receptive to stronger ingredients.

Advancing Beyond Basics: The Shift to A Comprehensive Skincare Routine

As Indonesian and Filipino consumers mature and gain more financial freedom, their skincare regimen expands significantly. The transition from basic foundational products (cleansers, moisturizers, and sunscreens) to a more elaborate routine — including micellar water, toners, serums, essences, night creams, ampoules, eye creams, — marks a shift in focus towards more specific skincare goals and tailored routines.

The diminishing concern over acne paves the way for addressing residual scars, pore size, and surface irregularities, with exfoliation and brightening becoming central to their skincare goals. Brightening efforts concentrate on reducing discoloration and hyperpigmentation, particularly targeting post-inflammatory pimple marks and lightening dark spots, with Vitamin C and tranexamic acid emerging as popular choices.

While a more diverse skincare regimen is the aspiration, Gen Z's prioritize versatility due to their busy lifestyles. Interestingly, face masks are not as popular among Filipino Gen Zs as they are viewed as time-consuming.

The Onset of Anti-Aging Consciousness

While anti-aging remains a seldom-discussed topic among Filipino Gen Zs, some Indonesian Gen Zs begin their anti-aging routine as early as age 20, influenced by KOLs and increasing awareness of UV exposure effects. Consumers noted that their initial venture into anti-aging products aimed to address under-eye concerns, wrinkles, and smile lines, with products containing retinols and collagen being particularly appealing.

It's worth noting a nuanced difference in the perception of certain ingredients, likely shaped by localized marketing narratives. For instance, while Filipino Gen Zs recognize retinol and peptides for their exfoliating and collagen-boosting properties, Indonesian Gen Zs value them more for their anti-aging benefits. Based on our interviews, Indonesian consumers seem to have a slightly more advanced understanding of skincare compared to those we spoke with in the Philippines. We noticed a similar takeaway when it came to makeup.

Decoding Makeup Choices: Emotion, Identity, and Inclusivity

The consumer journey and decision-making process for selecting makeup differ significantly from skincare. While skincare focuses on researching efficacy and ingredients, makeup decisions are more emotionally driven and subjective. Factors such as 'how cool the brand and products are' and 'what the brand evokes and represents' become key considerations for consumers.

For instance, in Indonesia, consumers readily distinguish between brands based on their identities and target audience. Rosé All Day is associated with feminine allure, ESQA with glamour, MakeOver with professionalism, and Emina with youthful vibrancy. These brands have not only carved out a distinct place in consumers' minds but also built a strong emotional connection through their brand imagery.

In both Indonesia and the Philippines, consumers consistently highlighted the significance of beauty inclusivity when discussing their brand preferences. They value brands that present relatable, diverse, and authentic portrayals of beauty over unrealistic standards of perfection. We believe platforms like TikTok have fueled this shift towards authenticity and this emphasis on authentic representation is important as consumers seek to identify with the brands they support.

Additionally, offering expanded shade ranges for diverse skin tones is crucial for inclusivity. Consumers in both markets often struggle to find the right shade. This is primarily due to (1) limited color options from international or incumbent brands not catering to diverse Southeast Asian skin tones and (2) young consumers' limited understanding of their undertones. Issues like oxidation, which can change foundation color due to oily skin, humidity, and heat, further complicate the search. In response, consumers turn to new, local insurgent beauty brands that provide a broader range of shades tailored to their needs and at much more affordable prices.

Affordability and Value for Money, the #1 driver of purchase:

Despite our insights into Gen Zs advanced preferences for skincare and makeup, both Indonesian and Filipino Gen Zs prioritize value for money at the point of purchase (Exhibit 3). 

So what constitutes an ideal price point for beauty brands aiming to capture the hearts and wallets of Gen Z consumers?

To uncover this, we conducted a review of major beauty brands in Indonesia and the Philippines, categorizing them into Mass, Masstige, Entry Prestige to Luxury (Exhibit 4). The Mass tier, where products are typically priced under USD 10, aligns closely with what younger Gen Z consumers are willing to spend. This tier mirrors the pricing strategies employed by a majority of local brands and consumers favor them for its affordability.

As we ascend to Masstige and Entry Prestige tiers, predominantly occupied by Korean and Western brands respectively, products here are often perceived as aspirational or luxury items, saved for special occasions rather than everyday use. Prestige brands like Dior and Chanel, where a foundation costs up to 6 times more than what a Gen Z typically budgets, remain largely out of reach. Indonesian and Filipino Gen Z's contribution to the beauty industry's growth stems from volume, whereby they make frequent purchases of lower value products rather than buying fewer, high value products.  

After making a purchase, Gen Zs assess the product based on their expectations. Interestingly, if a product doesn't meet their expectations, they often try to repurpose it rather than discard it. This might involve blending foundation shades for a better match, gifting it to friends, or swapping it online. However, consistent product performance is crucial; if a product falls short, it can greatly reduce their likelihood of buying from that brand again, highlighting the importance of product quality in building brand loyalty.

After affordability, building brand trust is the second most important purchase driver.

Gen Zs believe that trust is derived from how authentically a brand expresses itself and where the brand is made available. Here's a closer look at the 4 important elements consumers believe influences trust and brand reputation:

1. Clear claims that are not overstated: More than any other generation, Gen Zs are very critical of overstated product efficacy claims. Hence, it is important that brands remain honest and clear in their marketing communications
2. Transparent and real content: (1) Collaborating with experts such as dermatologists and makeup specialists enhances credibility, especially compared to influencers with limited beauty expertise and scripted content. (2) Influencer content that showcases product usage and experiences through videos, demos, and livestreams is essential as well
3. Omnichannel presence: While Gen Zs frequently discover and evaluate brands online, many prefer to make purchases in physical stores. However, if a better promotion is available on platforms like Shopee, value-conscious consumers will gravitate there. This seamless integration of offline and online experiences is crucial for ensuring availability and building trust, underscoring the importance of an omnichannel approach (Exhibit 5).  
4. Live Shopping: Despite the dominance of ecommerce marketplaces like Shopee, in the past two years, fueled by TikTok's aggressive expansion in the region, live shopping has risen to become the third most popular purchasing channel among Indonesian and Filipino Gen Z consumers. These live sessions, filled with product swatches and demos, provide a genuine portrayal of makeup products, from color accuracy to texture, facilitating a more transparent and informed purchasing process. This interactive approach also significantly aids beauty brands in establishing direct trust with consumers empowering them to make more informed decisions.

Final Thoughts

In conclusion, as the beauty industry in Southeast Asia undergoes a transformative phase, it's not merely about the staggering numbers or the per capita spend that exceeds expectations. It's about a profound shift in consumer behavior, where beauty has transitioned from a luxury to a daily necessity. It's about understanding the nuances of their digital behavior, their evolving skincare and makeup routines. It's about recognizing the importance of trust, transparency, and value for money at the point of purchase. And it's about adapting to the rise of new channels like live-shopping, which have become pivotal in shaping their purchasing decisions.

As we delve deeper into the psyche of Gen Z consumers, it is evident that their expectations are high, and their loyalty hard-won. The question remains: Are brands ready to meet these expectations and forge genuine connections, or will they be left behind in this rapidly evolving landscape? The future of beauty in Southeast Asia hinges on understanding and embracing the essence of Gen Z. The opportunity is vast, but the journey promises to be both challenging and rewarding for those willing to embark on it.

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Refer to Why We Partnered with Rosé All Day: Indonesia’s Insurgent Cosmetics and Skincare Brand to hear more about our insights on Indonesia’s Beauty and Personal Care Scene.

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Sources:

¹ https://www.statista.com/outlook/cmo/beauty-personal-care/southeast-asia

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