The Rise and Expansion of DIY Across Market Categories

By: Ryan Larson, Annalee Rice, Susy Sanchez, Samantha Schafer, and Allyson Trayah

As the Beauty Industry’s Think Tank, one of CFMM’s missions is for students to research new societal trends and bring their learnings back to the work environment. Each year, students focus on senior-management level strategic marketing and decision making and work in groups to develop a trend analysis. This is the third in a series of four trend predictions.

Let’s take a journey back in time to the pre-COVID-19 days, the good old days we might call it, but let’s not be too hasty. Many significant events and changes over the past 20 years – not just the pandemic –led to our current economic and social climate. Recessions and financial troubles marked the early 2000s. Millions of people lost their homes and jobs during the housing crisis and subsequent Great Recession, which followed on the coattails of the post-9/11 recession and the devastations of hurricane Katrina.

Moving into the late 2000s, we saw the world becoming more eco-conscious. Social media continued to accelerate at unprecedented rates. An excellent outcome of this was ride-sharing, which positively impacted the environment and to this day saves time for millions of people through an app. We also saw the birth of two major social platforms, Facebook and Youtube, and a marketplace for independent sellers, Etsy.

In more recent years, China has emerged as the #1 economy and kicked off a period of trade wars, which encouraged many people, especially in the US, to shop locally to support local businesses. But, perhaps the most prominent theme throughout this time has been the lack of control consumers felt over the products they purchase and an increased need to trust products, brands, and marketers. In addition, with social media making access to goods more accessible than ever, consumers demanded products that better met their needs, including products that were inclusive of all body types, skin tones, and ages.

We conducted a deep dive into consumers’ mindsets to understand this trend better and to extrapolate key behavioral trends.

Consumers began shopping small (supporting small businesses) over a decade ago. The rise of digital platforms like Etsy, increased the impetus to shop small and local, supporting consumers’ desire for a value system that reflected their own. Before COVID, consumers began to shop small because of increased customization options and distinctive products. During COVID, and we predict, well beyond it, consumers shopped local due to perceived safety reasons and also to help give back financially in order to contribute to the economic preservation of their neighborhoods.

The demand for representation and inclusivity is perhaps the most important trend impacting the beauty industry. When the market does not reflect consumers’ needs, consumers experiment with readily available raw materials. Consumers now have access to Etsy/Amazon as raw materials suppliers.

Anecdotally, we can extrapolate that consumers pursue relaxing and creative activities from the comfort of their own homes in times of duress. During COVID-19, there has been a sharp purchasing spike in puzzles and crafting materials. The proliferation of rainbows in neighborhood windows reflects this trend.

Consumers also looked to boost their employment relevancy and skill sets during this pandemic. We have seen the average cost of undergraduate education balloon by over 260% since the 1980s – consumers are fully aware of the tech revolutions and learning skills needed to maintain a job.

During COVID, consumers read more personal finance articles, applied to graduate school, and pursued digital certificates at record rates. According to Forbes, this trend will continue and e-learning is expected to grow to 325B by 2025.

Finally, consumers are reporting a total lack of trust in major institutions and demanding additional transparency.

The Current State of the DIY Market

DIY or Do It Yourself is defined as “the act of producing product for one’s consumption using raw or semi-raw material possessions.”

Two contingents comprise the DIY marketplace:

1. The Consumer – interested in buying components/ingredients for their own DIY projects, or interested in buying a DIY product made by and independent seller
2. The Seller – a DIY producer who makes products at home to sell for financial revenue

The DIY Consumer

Most DIY consumers are age 25-34 and are digitally savvy. About half of DIY consumers are first-time home owners, and 76% have a household income of less than $100K.

After evaluating the marketplace, we discovered that this consumer is either not satisfied with commercial product availability or quality, wants more customizable options, or is not comfortable with the price point. This consumer is looking for craftsmanship, to feel empowered, to partake in a community, or for unique goods.

The DIY Seller

Etsy is the #1 DIY platform in the United States and the #4 e-commerce platform. There are approximately 3.1 million sellers on Etsy, and 87% of them are women. The average age is 39, about 11 years younger than the average age of a U.S. business owner, which is 50 years. Etsy helps sellers manufacture through Etsy manufacturing programs and provides resources. Small Etsy business owners contribute $4.7 billion to the US economy.

DIY Market Categories

Home improvement projects, at-home fitness, and cooking comprise three major categories of the DIY marketplace.

Home Improvement

Home improvement is the largest and most well-known DIY market. As the virus spread worldwide, mandatory quarantines forced people to stay at home. As travel stalled due to the pandemic, homeowners reallocated their summer vacation funds to outdoor and other improvement projects. Around 57% of homeowners made an improvement between March and May of 2020.

As the coronavirus surged homeowners were reluctant to risk allowing professional contractors into their homes. This concern shifted homeowners’ perspectives, and they learned how to do the projects themselves.

Fitness at Home

For many regular gym-goers, community and social experiences are the top motivators for going to the gym. However, even as the world opens up again, a consumer report by Harrison Co. indicated that $10 billion annually could move from the fitness club sector to home fitness options such as equipment and online memberships.

In these uncertain times, 67% of our survey respondents said they feel very anxious. Working out has become a significant source of relief for people – particularly working out in the comfort of their own home.

Food & Sourcing

The top motivator for DIY in the food category is the joy of cooking. It entices exploration.

In a Nielsen survey, 42% of shoppers impacted by COVID-19 cook at home vs. 35% of non-impacted respondents. People have turned their backyards, windows, and fire escapes into vegetable-growing gardens, increasing sustainability.

DIY Beauty

There was an exponential spike in how-to and tutorial content in the digital beauty space in late March 2020 via YouTube and Google. Consumers increasingly consume educational content to fill their beauty gaps from the comfort of their homes.

 

Post-lockdown, we expect more experimentation due to a need for creativity and stabilized financial situations. There will be a heavy emphasis on educational content on social media from influencers and brand ambassadors. Consumers will trust this content the most when it comes directly from the brand.

Case Studies 

Amazon

In 2019, Amazon’s health and beauty sales represented 44% of all online sales in this category. Amazon has played a strategic game of chess to position itself

here. Whenever Amazon identifies a threat, its strategy is to conquer it – via acquisition or a partnership. The goal is to cover 100% of consumer’s needs.

 

 

Etsy

In 2020, this business platform exploded. By the end of the second quarter, Etsy reported a 93% increase, equating to a $1.9 billion increase in sales driven by growth in the face masks, home, and beauty categories.

In addition, there were 18.7 million new buyers on the platform. Consumers recognize that Etsy is the destination to purchase the latest trend.

Etsy Beauty

While Etsy’s beauty business is relatively small at around 2% penetration, the category is experiencing triple-digit growth and is the platform’s fastest-growing category.

Industry Predictions

We predict a dynamic sequence of events over the next five to six years that will forever change the beauty industry – from how consumers shop to how brands sell.

ETSY EXPANSION – A New DIY Beauty Marketplace

Our first prediction is that Etsy will develop a new DIY BEAUTY category on its platform.

Figure 2. Etsy website rendering with New DIY Beauty Category

During our last recession, 18% of all beauty business launches in the United States were DIY focused. Experts at McKinsey estimate that moving forward, 52% of beauty purchases will be online.

TRUST THE ARTIST – A New Spokesperson and Source of Credibility

A Nielsen report states that only 30% of Gen Z consumers rely on influencers for CPG purchase recommendations, a 30-point departure from Millennials. Brands can leverage credible sellers and makers as their models and influencers, a sharp departure from traditional influencers who function as classic spokespeople.

BRANDS LAUNCH EXCLUSIVE PRODUCTS ON ETSY – Two New Categories

Brands will launch kits with the necessary components and materials in collaboration with DIY sellers. The kits will provide detailed instructions to curate beauty products at home. Consumers trust brand content, so kits will include QR codes that link back to brand channels to educate consumers and build consumer trust.

Brands will launch their storefront on Etsy to accelerate e-commerce personalization and become a vehicle for consumers to unlock creativity. Many beauty brands have experimented with personalization. However, there isn’t one brand that has owned the space in person or online. Brands can rely on their tech expertise to accelerate e-commerce personalization and become a consumer outlet for creativity and inclusiveness by utilizing Etsy.

BIG BUSINESS GETS BIGGER

We predict that Amazon will identify this growing space and see Etsy as a threat. In true Amazon fashion, it will seek to land a deal. We’ve estimated that Etsy could have a possible valuation of $50 billion in five years, based on its historical growth rates and current enterprise value.

DIY sellers and beauty entrepreneurs will have increased access to well-oiled supply chains and entirely new market exposure. In addition, the shopping experience will become easier for Etsy’s consumers. Consequently, locality will become scaleable. Beauty entrepreneurs will have a platform that increases their financial control and stability.