To make matters worse, there is growing competition for shelf space and consumer attention. Over the course of the last decade, the number of new fragrances launched annually has quadrupled. “It’s daunting for the consumer,” asserts Rochelle Bloom, president of the Fragrance Foundation, a New York-based trade group. “Everyone is affected by this: the suppliers, the retailers, the manufacturers, the consumer. It’s a problem.”

Across the beauty landscape, emerging brands are finding it more difficult than ever to stand out. Cheeky slogans, punchy packaging—it’s all already been done. “It’s a little bit like American Idol: Out of every 10 or 20 brands you see, one of them might be marginally successful,” says Claudia Lucas, who oversees the beauty department at New York’s Henri Bendel, which devotes over a third of its retail floor space to beauty. “When you get one of those breakout stars, it is literally like a talent contest.”

“It’s survival of the strongest, the fittest, and the people who continue to innovate,” echoes Nicky Kinnaird, whose chain of beauty boutiques, Space NK, carries niche brands like Eve Lom and Zelens. She has noticed that customers have become more savvy about their purchases, thanks in part to the abundance of information on the internet. “No doubt there will be casualties in the marketplace: those that aren’t making the progression and extra effort that the increasingly demanding customer is looking for with market conditions.”

Niche brands are proactively changing to weather a challenging economic climate. Shiseido, for example, is cutting the number of its products by nearly a third over the next two years, discontinuing less-successful lines to place emphasis on popular offerings. Skin-care line Skyn Iceland has lowered the price of its key product launch for fall to make it more appealing to potential customers.

While consumers may be watching their wallets, purchasing continues to thrive in one area of the beauty industry: corporate acquisitions. Procter & Gamble recently decided to acquire Frederic Fekkai from private equity firm Catterton Partners Corp. for a reported $400 million. “I think the Frederic Fekkai decision is a very strategic one for the P&G house,” explains NPD’s Grant. “They’ve made it very public that they’re looking to build their business in the prestige space, and the Fekkai business is the leader in hair in prestige. They’re looking at it and saying, ‘Wow, this is a huge opportunity.’”

For companies like Proctor & Gamble and L’Oréal, acquisitions like these are a means to expansion whether the economy is booming or tight. “It goes back to strategy,” explains Melisse Shaban, C.E.O. of Chrysallis, Catterton’s management company. “Big companies and big businesses have very long-term economic objectives. I don’t think they adjust those objectives, per se, based on economic times.”

And although the average consumer may be buying less overall, don’t expect women to give up their beauty regimes entirely. “At the end of the day, whether you’re employed or not employed and looking for gainful employment, you still have to look good,” Pao observes. “You still need makeup, but you don’t need as much of it. We’re all getting older, and as we’re getting older, our maintenance and our upkeep becomes less of an option and more of a necessity.”