How AI is Leveling the Beauty Industry Playing Field for Small Brands

A woman with a towel on her head who has just applied her makeup takes a selfie with her smartphone. — **Thanks to artificial intelligence, small beauty brands can clear hurdles that were previously cost-prohibitive, like offering virtual try-on simulators to customers.** — Getty Images/Likoper

Why it matters:

In the beauty sector, artificial intelligence (AI) can accomplish tasks in minutes that used to take hours, from determining the right ingredients in a skin care formula to the sales of each item in a store planogram.
Even small or new brands have access to sophisticated AI that helps them compete with multinational powers.
Beauty businesses can save time and money putting AI to work in product discovery (with virtual try-on tools, for example), marketing, data insights, and more, executives from indie beauty brands and tech platforms told CO—.

The intersection of AI and beauty is having an impact on the products in consumers’ shopping carts.

For many years, big corporations such as Estée Lauder, L’Oréal, and Unilever maintained a competitive advantage through substantial investments in AI for data, marketing, and consumer research.

The proliferation of AI in the industry now yields access to these capabilities, enabling indie brands to level the playing field.

“AI is democratizing retail,” said Greg Petro, CEO of First Insight Inc., which uses AI to develop strategies for retailers and brands. First Insights harnesses the power of AI to engage consumers directly, bypassing the need for expensive big data solutions that many companies can't afford. “You can go to market with the products people really want,” he said.

Melissa Munnerlyn, Co-Founder and Chief Marketing Officer of Daash Intelligence, has helped beauty brands like Glow Recipe and Cocokind keep up with the titans of the industry. “The trend is the distillation of information to everybody. Before, it was gatekept by the retailers and brands with the biggest budgets. Now it is about how well you use the data.”

Smaller beauty brands now benefit from AI-powered virtual try-on tools: ‘Without it, our users would not have enough confidence to order our shade-specific products.’

Early applications of AI in beauty focused on virtual try-on tools that helped consumers match products — especially foundation shades — to their unique skin tones. Trying before buying addresses one of the most challenging aspects of makeup selection, particularly in self-service stores or online.

Multinational brands like L’Oréal (which acquired beauty tech firm ModiFace in 2018 to expand its digital tools), Estée Lauder, and Dior were early adopters and continue to be trailblazers in this space. Virtual try-ons have since evolved beyond makeup to encompass categories such as hair care, oral care, jewelry, apparel, personal care, and many others.

Looking to provide access to small brands, Alice Chang, CEO and Founder of Perfect Corp., a pioneer in AI and augmented reality (AR)-powered virtual try-on tech, now offers free trial programs for small businesses. Perfect Corp. offers a 30-day free trial for its self-service Virtual Makeup and Virtual Eyewear Try-On solutions, and a 14-day free trial for its AI Skin Analysis and AI Skin Simulation technologies. Flexible pricing plans are also available to support small businesses and make it easier for emerging brands to use the tools.

If we didn’t have AI, we would have to hire consultants, which can be expensive and time-consuming. It makes it even easier for anyone to start a brand. David C. Chung, Founder of Farmacy Beauty and The Rootist

One recent success story is Perfect Corp.’s collaboration with NuNorm, a direct-to-consumer makeup brand for men.

“Since men, in particular, may not be as familiar with makeup or shade matching — and might feel uncomfortable walking into a beauty store to ask for help — we integrated our AR Makeup Virtual Try-On and AI Skin Shade Finder to guide consumers in finding their ideal shade” on NuNorm, Chang told CO—. The tech paid off for the brand.

“After reviewing our store analytics, 75% of our orders are secured as a result of having our Shade Finder + Virtual Try on Tool,” Brooke Williams, Creative Director at NuNorm, said in a Perfect Corp. case study. “Without it, our users would not have enough confidence to order our shade-specific products.”

Perfect Corp.’s Chang predicts deeper integration of AI with AR and machine learning to create more sophisticated beauty shopping experiences, whether through fully immersive, virtual beauty consultations on brands' websites or AI-powered beauty advisers that learn and evolve with each interaction.

AI reshapes product development and ingredient customization: ‘You're going to save time, money, and you're going to get a better result.’

AI in the beauty industry has evolved beyond virtual try-ons and now plays a key role in product formulation and marketing strategies.

Developing scientific-backed skin care formulas is a complex process, according to Joshua Britton, Founder and CEO of Debut, a biotech company. He also holds the same title for Deinde, a clinical skin care line formulated with Debut's AI-powered ingredient platform called BeautyORB.

BeautyORB has already developed formulations for other brands through a partnership with KDC/ONE, a contract manufacturer. For example, Debut unveiled a vegan alternative to a common red cosmetic that is traditionally harvested from the cochineal beetle.

AI can be used to create and understand ingredients without extensive testing and trial, according to Britton. "You're going to save time, money, and you're going to get a better result," he said.

“When we need a specific ingredient to target a specific claim [like inflammaging], we can find it and almost guarantee no one else in the market has that ingredient.” There’s much potential to use AI to discover more molecules and create personalized products, he said.

AI is also sniffing out the right fragrance notes for the scent industry. “It’s helpful to develop a fragrance brief by pulling the top/middle/base notes from popular fragrances and give direction to the perfumer as guidance,” said Cosmetic Chemist Ginger King. She added that AI is a great starting point, and then experts’ knowledge is crucial to put all the puzzle pieces together for the final formula.

At Cosmoprof North America, a giant beauty show in Las Vegas, iRomaScents showed off its AI Wizard, a device that helps consumers select their perfect scent. The company claims a 90% conversion rate.

A marketing game changer for indie beauty brands: ‘If we didn’t have AI, we would have to hire consultants.’

Serial entrepreneur David C. Chung, the Founder of Farmacy Beauty and The Rootist, sees the potential in not only product creation but marketing as well. “If you are creating an eye cream, you can ask the AI software to recommend ingredients for the product,” he explained.

What’s been even more meaningful for him is using AI to craft storytelling. “If we didn’t have AI, we would have to hire consultants, which can be expensive and time-consuming," he said.

Magazine advertising can cost hundreds of thousands of dollars, too high for nascent brands. With Instagram and social media, AI can help craft a message. “It makes it even easier for anyone to start a brand,” Chung said.

Building a brand is just the beginning. Getting customer loyalty is the challenge. Daash Intelligence uses AI to estimate the performance of every stock-keeping unit, every week, in specific stores.

"This really helps them [brands] have visibility in the market — so if their sales are up or down, they don’t necessarily know how their competitors are doing,” said Munnerlyn from Daash, explaining that most companies only have access to the sales movement of their own brands, not competitors.

Daash provides the full picture. The capabilities assist brands with product development, price point strategies, ingredients, and can even predict velocity. The company recently rolled out special pricing for emerging brands.

Ground AI is helping beauty brands reach and convert consumers. It connects with apps like Shopify to help companies find new customers, bring back previous ones, and enhance marketing.

According to Kat Garcia, Co-Founder and Co-CEO of Ground AI, the company has helped brands like RMS Beauty, Violette FR, and Salt & Stone unlock up to 20% more online revenue autonomously. The technology not only observes shopper behaviors but also personalizes timing, messaging, and offers to convert traffic to purchase. Garcia said, based on the initial response, the company is doubling down on the beauty business.

Walmart is a retailer that is leveraging AI for everything from logistics to merchandising. “AI is infused in everything we do. The most useful way for us in merchandising is the ability to analyze data and trends quickly,” Vinima K. Shekhar, Walmart’s Vice President of Merchandising, told CEW Beauty News in an interview. AI can quickly analyze a shelf set and provide all the brands and sales information in seconds.

The common fear that AI is coming for people’s jobs is a misnomer, Munnerlyn said. “People think creativity is going to be replaced by data,” she said. “But data empowers creativity, you need innovation to springboard ideas. We believe in blending art and science.”AI isn’t without its hurdles, said beauty chemist King.

“It’s not always accurate, and I have to challenge it, and it will spit out ‘Yes, you are right’ and provide other suggestions,” she said, adding those recommendations aren’t always on target either. "The quality of the question can determine the quality of the answer.”

In the end, the human touch is still needed, she concluded.

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