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Beauty in department stores offers quite a uniform picture: the first thing shoppers smell and see, sitting on the ground floor to drive traffic and conversion. Despite this long-standing model, the category is challenged as department stores are no longer the primary channel for beauty discovery. Competition from speciality retailers, e-commerce, and social media has eroded their historical leadership. For example, only 24% of US shoppers now visit a department store to learn about new products, with 71% turning to Sephora or Ulta Beauty, showing that consumers want more than traditional brand-counter organisations. The proliferation of discounts and new brands also brings additional challenges.

However, despite that bleak situation, many department stores recently invested in their beauty floors, from John Lewis to Macy’s, to benefit from the current category momentum. Indeed, in 2023, global beauty market retail sales grew to $446 billion, up 10% from 2022. In 2025, McKinsey expected beauty to continue growing at 5% over the next five years. The outlook is still positive in 2026, and the category should reach $590 billion by 2030. In that picture, department stores have the weakest outlook, having already declined by approximately 2% annually since 2019 and facing a similar outlook in the coming years. So, is beauty still worth it for department stores, or could it go extinct? If so, what could replace it and drive similar traffic and conversion?

The new beauty floor: assortment, services and productivity 

Product categories to drive growth 

For now, beauty remains a key category, though category leadership has shifted in recent years. According to McKinsey, fragrance has overtaken colour cosmetics as the third-largest beauty category. It is expected to continue growing across price points, driven by new behaviours such as using different fragrances for different occasions. This growth is supported by masstige brands as well as prestige and niche scents, as exemplified by the recent addition of new brands such as Argentinian brand Fueguia at Galeries Lafayette Haussmann, or the renovation of Selfridges’ fragrance hall. Overall, as stated by most IADS members, there is no sign of slowing down in niche fragrances.

On the other hand, skincare is at a crossroads. With inflation and information at hand, consumers are less convinced that higher prices automatically mean better performance, as dermatologist-backed, K-beauty and dermo-cosmetics brands show customers that lower-priced offerings can achieve similar results. In parallel, as IADS members note, the traditional anti-ageing skincare promise is being challenged by the notion of longevity, a more holistic perspective that includes supplements, wellness, and aesthetic treatments.

The colour cosmetics category has been under pressure after several years of minimalist makeup trends, but now shows renewed interest in bolder makeup looks and hybrid makeup-skincare products.

In addition, IADS members mentioned that beauty is expanding into adjacent categories: hair care and specifically scalp care, supplements, sleep care, nutrition, sun care, nail care, aesthetic services, and at-home devices such as LED masks and radio-frequency tools. Finally, men’s beauty is growing across markets according to IADS members, with brands such as Nivea For Men, Biotherm Homme and Horace.

Making beauty services visible and valuable 

Access to the product categories above is a given for customers. What makes a difference is the customer experience, including services. Mostly in treatment cabins, services are hidden for obvious reasons of intimacy. Usually managed by brands, they are sometimes not even advertised in the store, making them invisible to customers. Department store executives and brands should challenge their location and visibility, as services could serve as a floor-animation tool, as shown by department stores’ wellness initiatives.

First on the trend, Harrods opened their Wellness Clinic in 2017, an appointment-only 1,000 sqm space on the fourth floor in Knightsbridge. Closed-door, yet advertised, the space was never intended to be a traditional spa or beauty salon. Harrods envisioned it as a high-end, results-driven clinic offering a curated selection of treatments designed not for pampering, but rather for measurable results. The range is unusually wide for a department store, covering everything from injectables and body contouring to cryotherapy, DNA-based personalised skincare, IV vitamin infusions, dental services, osteopathy, podiatry, physiotherapy, personal training, nutritional coaching, and more, making personalised service a reason to visit. Second, with a different approach, Galeries Lafayette opened their Wellness Galerie in 2022, with a full 3,000 sqm floor, including an unprecedented 60% space share given to highly visible services: a gym, infrared sauna, and a hyperbaric chamber, to name a few. Some services are now discontinued, though, showing how challenging it is to make those offerings successful and profitable compared to product-selling core activities.

Fewer SKUs, more cash 

In a world where discount is king, it is no longer worth carrying some brands, as department stores can never compete on prices. This is the case for premium fragrances for some IADS members, for example. Instead, shifting to niche labels can act as a footfall and growth driver. This comes down to the department store role in discovery rather than offering the broadest assortment.

For some, the game is on cash. Challenging brands to reduce quantities in each SKU (Estée Lauder’s Double Wear 54 shades of foundation are certainly not selling equally), down to individual lipstick or foundation lines, has unlocked cash savings without degrading how customers perceive assortment breadth. In that case, stores are graded A, B, C, D with quantities aligned to the grade. This is typically a beauty‑specific problem, underscoring how being an efficient merchant includes negotiating with brands to reduce the number of SKUs carried. This is no easy task, though, as department stores must ensure customers still believe they are offered a broad, diversified assortment. Department stores must manage this contradiction: “simulate” a broad yet curated brand and product assortment while rationalising SKUs and quantities.

Bringing beauty to another level, or dimension: space, placement and the question of digital

The need for renewed differentiation 

With inflation and the proliferation of information, consumers are more value-conscious and knowledgeable. As a result, they are increasingly buying across price points, mixing mass and prestige products within the same routine. For example, around 20% of brands carried by US speciality beauty retailers are also sold at Walmart, illustrating how price and channel boundaries are blurring. As assortments become more similar across retailers, exclusive and differentiated products become competitive advantages. Without a differentiated assortment or shopping experience, consumers choose the retailer offering price, convenience, delivery speed or loyalty benefits, especially for replenishment purchases where loyalty to a retailer doesn’t matter. To differentiate and make a trip to the store worth the effort, department stores are creating alternative offerings through multi-brand areas selling small, niche brands or French pharmacy spaces, as exemplified by Falabella and Galeries Lafayette. 

Borrowing from Sephora: the agnostic model 

Sephora and Ulta Beauty had trained consumers to expect an agnostic experience with open shelves and independent expert advice. Even though department store beauty counters as we know them cannot replicate this agnostic model, building new experiential spaces has become a growing concern.

Falabella gives the most advanced answer to this problem with Beauty F, its own specialist beauty format, designed, built and operated fully in-house: an enclosed space with a single entry point within Falabella department stores that functions as a standalone retail business, not a collection of brand concessions. The open-shelf layout integrates testing stations and advisory zones. The sales force consists entirely of Falabella employees, avoiding competing loyalties. Falabella deals directly with brands, importing and curating the selection, including younger, trend-driven, celebrity brands and K-beauty brands, and supports CapEx costs.

One of the most commercially significant Beauty F successes is re-engaging customers who haven’t shopped in more than 12 months. Twenty per cent of the customers are aged 18-35, a cohort that has largely abandoned department stores. According to Falabella, the share of young customers and new customer acquisition have both doubled since the format launched, and new brands introduced through the format contribute significantly more than the legacy assortment.

Beauty as a vertical journey 

Another differentiating option exemplified by Galeries Lafayette is to spread beauty across three floors, a deliberate vertical journey. The -1 floor offers an updated, more realistic version of the Wellness Galerie initially launched in 2022, oriented towards care brands and beauty services. The ground floor centres on fragrance and makeup, including recent additions such as Victoria Beckham, Louis Vuitton makeup and 13 niche fragrance brands. Creating a destination within the luxury RTW floor, the +1 level brings together luxury fashion, jewellery and beauty, with high-end perfumery spaces for Loewe, Dior, Chanel, Maison Francis Kurkdjian, Officine Universelle Buly 1803 and more.

This overhaul aims to differentiate Galeries Lafayette from competitors by blending luxury and beauty and giving the luxury RTW floor a more lifestyle feel. Now accounting for about 10% of the store’s annual volume, beauty has posted double-digit growth in 2025, continuing into 2026. The beauty selling space has expanded to 3,700 sqm, an increase of 500 sqm, bringing the total brand count to 440. This demonstrates that, despite a bleak outlook, department stores can still play their cards right.

Beauty growth is moving online, TikTok accelerating the shift 

E-commerce is expected to drive most of the beauty sales growth through 2030. Globally, e-commerce already represents the biggest channel at 28% of beauty sales, ahead of grocery at 19%. The US market illustrates this. Amazon, Ulta Beauty, Sephora and TikTok together account for just under half of US beauty sales. Amazon and TikTok’s combined beauty sales could soon exceed Sephora and Ulta combined sales. TikTok is a complete commercial channel, as US beauty sales on the platform have grown at approximately 260% annually since 2023. This is not a niche youth phenomenon, as the 35-55+ bracket makes up 49% of daily users.

Department stores are not built for the content TikTok demands. The format that wins on TikTok Shop is high-frequency and creator-native, a volume and style of content most legacy retailers are not resourced to produce, and simply repurposing existing brand assets does not work. Department stores don’t have the beauty-native content muscle of Sephora (nor the lower cost structure that lets them channel more funds to online), and maintaining a content presence for every brand on the floor is not viable at department store scale. A cheaper way to close part of this gap is to translate viral discovery into physical offerings. This is what Sephora has built with their ‘hot on social media’ in-store visibly labelled spaces, a feature department stores could take cues from. With its constantly changing beauty ‘newsroom’ in-store sections, Mecca is also a beauty retailer to watch.

In that digital-first environment, department stores have steadily ceded beauty share to online retailers and speciality players with strong e-commerce operations. To defend their positions, IADS members have strengthened their online operations, resulting in modest growth in average share compared to competitors, from 14% of the beauty business in 2024 to 16% in 2025. Some, such as El Palacio de Hierro, set up dedicated beauty accounts on Instagram and TikTok, knowing social media economics remain challenging because of promotions, affiliate commissions, and high customer acquisition costs.

If not beauty, then what?

The easy option: more products 

What could replace beauty with equivalent traffic potential? The temptation to fill the ground-floor, highly visible space with more products would be strong. Creating or expanding the number and surface area of pop-up spaces to feature commercial exhibitions comparable to what Le Bon Marché offers, or these spaces to brands for rotating product discovery, is an option. Another option is to offer larger concession spaces, especially to luxury brands, allowing them to present their full brand vision in one space, such as a free-standing store. Though both solutions would generate short-term revenue, they would transform the ground floor into a mall-like environment and compromise the store's identity. Besides, none of these options would avoid e-commerce cannibalisation unless spaces are filled only with exclusive products. Non-product-selling businesses would avoid that, though they raise the question of how to achieve the same commercial results as product selling. 

F&B as the new footfall driver 

F&B offerings present opportunities, as food experiences drive significant dwell time, repeat traffic and purchases for food replenishment. Harrods measured that when customers engage with the store’s restaurants and bars, they spend twice as long in the building and twice as much money. Department stores already have F&B options, but the goal here would be to make it a true destination for meals and food purchases, such as the La Grande Épicerie de Paris store in Paris, or the food floors at KaDeWe in Berlin and at Isetan in Tokyo Shinjuku. But it raises the question of how to push customers to other floors for cross-category shopping. So, replacing beauty with F&B would probably require more than repurposing a floor. It would require an entire store reshuffle to include more food offerings across floors.

Selling entertainment over products 

Paid experiential and entertainment concepts could fit, as The Cinema at Selfridges or The Selfie Experience at El Palacio de Hierro in 2022. Made up of several striking backgrounds for visitors to take selfies, The Selfie Experience drew large crowds from its inception. In 2023, El Palacio de Hierro renewed the initiative, in collaboration with Mattel, for a new Barbie Selfie Experience in their Polanco store. An average of 900 visitors per day could also purchase dolls and accessories at the end of the tour. The third edition in 2024 consisted of a tribute to David LaChapelle. In 2025, two editions were launched, one about Tokyo and one for Christmas. Repeat editions show the initiative's success in attracting customers at least once a year, but it also implies a constant renewal of concepts.

Community and membership  

With their central urban locations and historic architecture, department store ground floors would be natural candidates for community spaces. Monocle makes a clear case for stores functioning as third spaces, lounges, community hubs, or destinations rather than purely transactional environments. Merci in Paris is a realistic, successful example of combining a café, second-hand books, fashion and home retail and cultural events. From that perspective, a department store’s well-designed lounge floor with books and magazines, beverages and comfortable seating could draw a loyal daily community of urban professionals in exchange for a fee. But again, this option raises the question of how to push customers to buy something besides enjoying the space. A more relevant option is to use the freed space to build a private members' club, such as Selfridges’s 40 Duke club. With tailored spaces, F&B offerings, exclusive services and concierge, a private club demonstrates an attempt to further increase loyalty and customer engagement. The freed floor space could also allow different options catering to different levels of VICs.

The beauty floor becomes a diagnostics hub 

Tech and medical services could replace beauty. The freed space could house diagnostic technology such as Zoi body scanning checkups. Malls have started leasing anchor space to clinics, as exemplified by Simon's Smith Haven Mall in Lake Grove, NY, now having a hospital-system clinic where a Sears store used to be, or the Mediclinic at the Dubai Mall. That's a new category for the mall format.

Though some of these ideas already exist, the IADS doesn’t think beauty will disappear from department stores. Its replenishable nature drives repeat purchases. As a category that includes low prices, it draws traffic and sales thanks to the ‘lipstick effect’ when other product sales are slowing in difficult times. Without a radical retail overhaul, the challenge is to reinvent the beauty department while maintaining profitability. Department stores are already launching projects to build renewed beauty floors, be it through massive renovations, wellness services, or new multi-brand formats.

Alternatives to beauty could generate foot traffic, but they would require a floor-plan rethink, constant refreshing of entertainment concepts, or entering healthcare's unknown territory. In any case, it would imply giving up on product selling. By contrast, beauty is a replenishable category department stores already know how to run, and the ground-floor logic still stands. The question department stores are tackling is ‘how to change beauty’, rather than ‘beauty or not’. Department stores are already making distinct choices that don't all point in the same direction. Increasing fragrances is only a category adaptation. Assortment strategy means smart brand portfolio and SKU-refined management, both skills department store executives have. Space strategy means whether services stay hidden or become visible floor activity, understood as a customer draw, not just a treatment room. Alternative formats mean deciding whether to keep the counter model or completely change the beauty business model, trading brand partnership for full control. This is the bolder and riskiest choice of all. Here, Mecca is a beauty retailer to watch: beautiful, service-led, experiential spaces, 200 exclusive brands, and "best beauty friends" guiding customers across the whole store regardless of brand, a service model with no rigid brand-dedicated sales spaces.  
 

Credits: IADS (Christine Montard)