Cosmetics Industry

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MGMT 4842
Group Case 2

Retail Specialty Cosmetics
Industry Analysis

March 19, 2012

TABLE OF CONTENTS

Industry Type

Degree of Industry Concentration

Opportunities and Threats
Opportunities
Threats

Past and Projected Market Growth Rate

Competitive Analysis
New Entrants
Substitutes
Rivalry within the Industry
Suppliers
Buyers

Driving Forces Analysis

Industry Key Success Factors

Financial Analysis

Works Cited

Retail Specialty Cosmetics Industry Analysis

Industry Type, SIC and NAICS code

The Cosmetics Industry involves providing the consumer a product that will give them the ability to improve the appearance or scent of the human body. In general we usually just thing of cosmetics as “make-up” but in reality the term is used to describe a large and diverse group of products and “make-up” is just one of them. Cosmetic products include any kind of skin-care items, body and facial lotions, deodorant’s, perfumes, colognes, and even colored contact lenses. These products can be broken down into two categories called decorative cosmetics and care cosmetics. Decorative cosmetics are used to enhance ones look while the purpose of care cosmetics is to help take care of your body. Products like these are used and needed for everyday life so it is easy to see why companies such as L'Oreal, Avon, and Johnson and Johnson have become very profitable. In times of economic distress, cosmetics and other non-essential products considered a luxury will experience financial weakness.

Even through the declining economy the top companies in this industry have still been able to sell their products at a high level, they actually have been able to increase their sales profits every year over the past three years. Cosmetic products can be found at a wide variety of retailers. Common retail stores will not have the same selection as specialty stores but they will carry a few different basic products that consumer’s desire. Stores the carry only cosmetic products will have a wide variety of products with diverse group of brand names. Products that these stores will carry would include items such as hair products, nail products, face products and any items that have the ability to help someone improve their appearance. The 2007 NAICS defines this industry as “establishments known as cosmetic or perfume stores or beauty supply shops primarily engaged in retailing cosmetics, perfumes, toiletries, and personal grooming products.” The SIC code for businesses such as these is 2844. The NAICS code is 44612.

Industry Economic Characteristics

Market Size and Growth Rate

The cosmetic industry has been able to remain consistent in sales despite economic hard times. Over the past three years this industry has grown an average of 1.5% each year. In terms of money this means that the industry has grown a little more than $1 billion dollars in sales in three years. As of 2011 the major markets for cosmetic products included people from the age 18 – 65 years old. Consumers that are over the age of 65 and the ones that are under 18 contribute only 8% of the market combined. This statistic shows that these age groups do not focus purchasing products to enhance their image. The bulk of the market is targeted towards individuals between the ages of 35 and 44, which takes a total of 39% of the market. It is said that is age range has the largest market due to the fact that women are starting to purchase more make-up and anti-aging products to make them look younger. The market for these products is predominantly women even though the market for males is growing due to new products designed just for them. Number of Rivals

The cosmetic industry is dominated by 3 major companies that make up 52% of the market. Limited Brands Inc. is the largest company and has over 22% market share. Limited Brand Inc. operates under both Victoria Secret...
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