Food prices going up hasn't been news to anyone for quite some time, but while shoppers keep a closer eye on the prices of a liter of milk or a loaf of bread, increases in shampoo, toothpaste or mascara prices aren't as readily apparent as these items aren't purchased nearly as frequently. Even so, more observant shoppers have still noticed that they have to spend considerably more money on basic cosmetic products than before.

Ivo Joost, the owner of Joost-Level OÜ, which operates the online perfume and cosmetics retailer Loverte, told ERR that the recent increase in Estonia's VAT rate did not impact the retail prices of their products. He did note, however, that all suppliers hike the prices of all of their prices once a year. In that regard, there has been no noticeable increase in the price of any specific product group, because the prices of cosmetics in general have gone up.

As an online store, they face stiff competition, and that means that in order to stay afloat, they have to review all of their prices again each time new products arrive.

"We have competitors that we monitor and we adjust our retail prices accordingly, because we don't want to sell anything at a higher price – [we want to sell] at the same price or slightly cheaper," Joost explained.

TKM Beauty Eesti CEO and I.L.U. executive manager Anne-Liis Ostov noted that the price of cosmetics has gone up largely in step with other price increases, caused by factors including general increases in energy, transportation and production costs as well as the rising costs of raw materials worldwide.

"Few also recognize, for example, that global warming and record hot summers reduce the length of flowers' growing seasons, which in turn drives up the price of essential oils, which are a component of perfumes," Ostov explained.

She added that price increases vary by brand, but compared with the same time two years ago have gone up 10-30 percent. Thus it's evident that people are hunting for promotions and are asking consultants for cheaper alternatives, although according to Ostov, customers also have specific go-to products that they are reluctant to give up.

The executive manager said that every merchant has their own sales campaigns and loyalty discounts, making it difficult to compare prices directly, however they monitor market conditions and competitors' movements as well.

Online retail turnover down after first pandemic years

During the first years of the COVID-19 pandemic, in which Estonia implemented periods of restrictions on retail operations, e-commerce saw turnover skyrocket – including for cosmetics.

According to the owner of Loverte, they saw their turnover grow 60 percent during two pandemic years, but after that, some customers went back to shopping at physical stores again, leading them to fall into a deficit of 5-10 percent over the past couple of years.

"We're making a real effort this year too – one month we even managed to achieve a small profit – but otherwise we remain slightly in the red," Joost acknowledged.

"Looking at our competitors – according to the latest figures, the e-commerce market has dropped by 27 percent – we've actually even been doing well," he continued. "But we also do a lot of work, and are also dealing with trends we haven't experienced before."

Asked what direction sales volumes are taking, the CEO of I.L.U. likewise admitted that they aren't growing. According to Ostov, shoppers come into the store with specific purchases in mind and are making fewer impulse purchases.

Even so, she continued, they have succeeded in bringing customers back from online shopping to their brick-and-mortar stores; I.L.U. stores saw record number of shoppers last year, and loyalty program membership increased significantly as well.

"Shopping online versus in store are different experiences, and tips for choosing the right product and the chance to test it on one's own skin are considered very important," the executive manager highlighted.

Lipstick, perfume and face cream sales are considered an economic barometer in their own right, as they tend to go up in times of crisis. Ostov said that this tracks with their experience, confirming that makeup and perfume are indeed crisis-time favorites.

"It's a small luxury that one can allow themselves to make life more beautiful," she explained. "Both the makeup and perfume categories are continuing to thrive at I.L.U."

Cosmetics prices can vary drastically between Estonia and other countries as well. For example, one particular boxed hair dye available in local stores will run buyers in Estonia €12 but costs less than €7 in Spain.

The owner of Loverte noted that if the same product costs 10-20 percent less elsewhere in Europe than in Estonia, then that could be attributed to the smaller size of the Estonian market, which in turn requires slightly higher markups in order to stay afloat than in places like Spain, Italy or France. If the difference in price reaches closer to double, however, then there is no justification for that, Joost added.

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