Industry Background and Overview
The cosmetics retailing industry of the US is comprised of department stores, the sales of which have been declining in the past years, as well as “niche brand in-store boutiques”, drug or food stores, “direct merchants, and mass retailers” (Mills par. 2). The products of the industry include “retail cosmetics, perfumes, toiletries, and personal grooming products” (Carter par. 1). The major players in the US cosmetics retailing industry include “Ulta Salon, Cosmetics & Fragrance Inc., Sephora, L Brands Inc., Sally Beauty Holdings Inc.” (Carter par. 5). The known mass retailers include Walgreens, Target, and CVS, while Macy’s, Dillard’s, and Bloomingdale’s are the popular boutiques (Mills par. 2, 5). The key economic drivers of the industry incorporate per capita disposable income and the target market mostly includes adults aged 20 to 64. The related industries are the cosmetics, toiletry, and beauty manufacturing and wholesaling ones (Carter par. 3).
US cosmetics retailing industry tends to expand within the existing markets and towards the international ones as a result of the rising level of life in the developed and developing countries. Still, economic difficulties indeed tend to affect the industry as well as make customers more price conscious. Another cosmetics trend is the increasing interest towards men as consumers (“Beauty Industry Analysis 2015” par. 10-12). Apart from that, while online spending on the industry products amounts to 11.1% of the total cosmetics retail, offline channels appear to be of particular interest for the customers (“Health and Beauty Retailing in the US” par. 3-4).
The cosmetics retail industry in the US has suffered during the 2009 recession, but in 2011 is sales figures have already surpassed the pre-crisis level (Polla par. 8). As of 2014, the segment accounted for 2.5% of the retail sales in the US (“Health and Beauty Retailing in the US” par. 2). Annual revenue growth of the industry in 2010-2015 has been amounting to 5.8% (Carter par. 11).
Barriers to Entry and Exit
Given the low governmental control of the industry, the primary barrier to entry is the competition and the correlated factors including the necessity of product differentiation. At the same time, risk reduction, trust, and loyalty-building, bringing are the strategies that are used to keep customers from exiting the market (Carter par. 12; Biswas 238-241). Competition in the industry is very high, and existing companies are creating unique brands and experiences, carrying out loyalty-building programs, and innovating to retain customers (Keenan par. 1; Halzack par. 14-16).
Key Success Factors in the Industry
Key success factors in the industry are correlated to the competitive factors. An example of the recent story of success in the industry is the innovative revision of beauty retail store’s view implemented by Sephora and Ultra companies. The innovation presupposes letting the customers test exclusive products themselves. As a result, in the third quarter of 2014 Ulta increased its profit by 30 %. The success of their rivals has forced traditional retailers to rethink their policy (Halzack par. 1-14).
Outlook for the Future
Given the rates of the industry expansion, cosmetics retailing in the US and around the world is expected to grow (“Health and Beauty Retailing in the US” par. 6). For example, the sales of the US industry are expected to increase by 3% through 2017 (Mills par. 9). As defined by the growth rate as well as the innovation, change, and customer acceptance, the industry’s stage of growth is that of maturity (Carter par. 12).
“Beauty Industry Analysis 2015 – Cost & Trends.” FranchiseHelp. FranchiseHelp Holdings LLC, 2015. Web.
Biswas, Supriya. Relationship Marketing. New Dehli, India: PHI Learning, 2011. Print.
Carter, Britanny. “IBISWorld Industry Report 44612.” IBISWorld. IBISWorld, 2015. Web.
Halzack, Sarah. “How ULTA Beauty is Developing Loyal Customers.” The Washington Post, 2015. Web.
“Health and Beauty Retailing in the US – Market Summary and Forecasts; Comprehensive overview of the market, consumer, and competitive context, with retail sales value and forecasts to 2019.” ReportLinker. ReportLinker, 2015. Web.
Keenan, Joe. “How ULTA Beauty is Developing Loyal Customers.” Total Retail, 2015. Web.
Mills, Nancy. “More than Cosmetic – The New Face of U.S. Beauty Retailing.” Kline & Company. Kline & Company, 2015. Web.
Polla, Ada. “The Changing Face of Beauty Distribution.” GCI Magazine, 2012. Web.