What: Gen AI could add $9-10 billion to the global beauty industry by transforming product development, marketing, packaging, and customer experience through four key use cases.

Why it is important: As demonstrated by early adopters like Estée Lauder with 240 custom GPTs, gen AI is becoming essential for beauty retailers to maintain competitiveness, improve operational efficiency, and deliver personalised customer experiences at scale.

The beauty industry stands at a pivotal moment as generative AI emerges as a transformative force across multiple operational dimensions. Four key use cases demonstrate particular promise: hyperpersonalised targeting, which can improve conversion rates by up to 40%; experiential product discovery, enhancing both online and in-store shopping experiences; rapid packaging-concept development, which has shown to reduce development time by 60%; and innovative product development, potentially saving up to 5% on raw materials costs. The technology's implementation requires careful consideration of approach, whether through off-the-shelf solutions for smaller brands or customised platforms for larger enterprises. Success depends on maintaining human oversight while leveraging AI's capabilities to accelerate processes and enhance decision-making. Beauty players must also establish robust risk frameworks to protect brand integrity and consumer trust, particularly given the industry's emotional connection with customers. The transformation extends beyond mere automation, promising to reshape how beauty brands develop products, engage with consumers, and compete in an increasingly digital marketplace.

IADS Notes: Recent market data strongly validates the article's projections about gen AI's impact on the beauty industry. As observed in January 2025, the broader retail sector has already witnessed significant returns, with 87% of AI-adopting companies reporting revenue increases of 6% or more. The widening gap between leaders and laggards is already evident, as demonstrated by Estée Lauder's deployment of 240 custom GPTs across its brands, showcasing how early adopters are gaining substantial advantages. The urgency for implementation is underscored by current market inefficiencies, with retailers losing 4.5% of gross sales due to operational shortfalls. However, success stories like Intime Department Store's 15% boost in counter sales through AI implementation demonstrate the technology's tangible benefits. The customer experience revolution is particularly noteworthy, with a 304% year-over-year increase in AI-tool-directed traffic, indicating strong consumer acceptance of AI-powered solutions in beauty retail.

How beauty players can scale gen AI in 2025