Beauty, Russia's Recession-Proof Industry

Despite the ruble's freefall, a shaky economy and growing international isolation, cosmetics companies and the beauty industry at large can rest easy that Russian women will buy what they're selling.

In Lipetsk, Russia
In Lipetsk, Russia
Anastasia Yakoreva, Nina Vazhdaeva

MOSCOW — Given the economic crisis and the ruble's freefall, managers of major international cosmetic brands are in a panic, fearing that the Russian beauty market will implode. And it would be an enormous loss. Researchers recently reported that the average Russian woman spends as much on cosmetics as the average Italian woman, despite earning only a quarter as much. There are also twice as many Russian women as Italian women.

But if past Russian crises are any indication, cosmetics manufacturers have little reason to worry. According to economics researchers, the cosmetics industry in Russia emerged from the 2008 global economic crisis without any losses.

"Russian women will forgo eating out, vacations and buying other products so that they can spend what money they do have on their own beauty," says Alsu Razokova, editor-in-chief of beauty magazine Les Nouvelles Esthetiques.

A recent report on cosmetic usage in Russia found that 50% of Russian women use masks and special cleansers (up from 25% in the 1990s), 40% use special eye cream (compared to 10% in the 1990s), and the number of women prepared to pay upwards of $100 for cosmetics has increased substantially. "The number of women who go to beauty salons has increased from 4% in 2000 to 40% in 2014," the report said.

Russia's chest

The future looks equally bright for those in the plastic surgery field. The industry has already grown substantially. In 2013, there were 93,000 plastic surgeries in Russia, 16% of which were breast enlargements; nose jobs followed as the second-largest enhancement category.

Counterintuitively, the crisis has actually been good for this industry. Just before the new year, the number of clients doubled at the Platinental Aesthetic Lounge, a plastic surgery clinic. "On the one hand, clients are afraid that prices will increase, so they are rushing to do surgeries that they have already planned," says clinic president Andrei Iskornev. "On the other hand, they are spending the money on themselves that wasn't enough anymore for an apartment or a car."

Iskornev also says that the client base has expanded as a result of the ruble's devaluation. Plastic surgery now costs just half as much in Russia as it does elsewhere in the world, and people fly to Moscow specifically to get these less expensive procedures.

At the Beauty Inn Lounge, management has noticed an uptick in male customers since the beginning of the economic crisis. They are particularly interested in treatment for excessive sweating.

Part of the reason that salons still have a solid client base is that prices haven't gone up, in part because of high competition and also because of the decreasing incomes of clients. Salons are afraid of raising prices despite rampant inflation elsewhere. Among the salons we spoke with, none had raised their prices more than 15%, and many hadn't raised rates at all. Which doesn't mean that all of the salons can afford to eat the difference. The director of Beauty Inn Lounge thinks some salons do risk going out of business.

One way women can stay beautiful without breaking the bank is to go to private aestheticians who work out of their homes and usually charge less. "I try to study the salon prices and charge clients at least 20% to 50% less," explains Elena Stolyarova, who offers waxing services from her home. “Now that I have women coming who used to get their waxing done in salons, I have about 20% to 30% more clients. This crisis is helping me expand my market."

Always enough for makeup

It appears that cosmetics are the very last product that Russian women are willing to give up. But the crisis in Russia is serious enough that cosmetics manufacturers also realize that they can't raise their prices too much without risking their market share.

Photo: DryHundredFear

"If our competitors raise their prices for imported products 15% or 20%, we can't raise our prices as much as the change in currency values would justify," explains the top manager at one cosmetics distributor. As a result, end-of-year sales were no less than the previous year, and perfume and cosmetics brands in general reached 150% to 250% of annual sales targets. Almost all of the market actors expect those sales figures to hold in 2015.

The crisis could give a boost to both Russian cosmetics brands and Korean brands. "During the crisis in 1998, there was a blossoming of Russian brands," says Anna Duicheva-Smirnova, marketing director for Reed Exhibition, a company that organizes cosmetics exhibitions. "On the other hand, after the crisis was over they had trouble maintaining their appeal."

The Russian brand Excellance Moscow, which is considered a luxury product despite being a domestic brand, is counting on growing its market share. "It was difficult for a Russian luxury cosmetic brand to gain market share — seven out of 10 people would immediately decline offers to test our products," explains Anna Nazarenko, the company's founder. "Now every other person who listens to our sales pitch asks questions and buys."

There are also opportunities for South Korean cosmetics, which appeared on the Russian market about a year ago and are already earning a reputation for high quality.

"Korean cosmetics are also tied to the currency exchange rates, so they have also gotten more expensive, but they started out two times cheaper than European products in the same quality category," explains Dmitri Kim, founder of an online marketplace for Korean cosmetics called SashaLab.

Prices for the products on SashaLab have increased by 15% to 30% on average — also less than the change in currency exchange rates — and Kim says he has given up part of his margins in an effort to lure new customers. He hopes that consumers who can't afford European products anymore will be drawn to his store.

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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