First Research US Industry Profile

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Cosmetics, Beauty Supply & Perfume Stores
SIC Codes: 5999
NAICS Codes: 446120
Last Quarterly Update: 6/15/2020
Companies in this industry operate physical retail establishments that primarily sell cosmetics, beauty supplies and toiletries, and perfume. Major US companies include Sally Beauty Supply, Ulta, Sephora, and divisions of L Brands (Bath & Body Works, Victoria's Secret) and Brazil's Natura Cosméticos (The Body Shop International).
The global cosmetics products market (beauty and personal care) is expected to top $800 billion by 2023, with a CAGR of 7.1% during 2018 to 2023, according to Orbis Research. Developing countries identified as ripe for retail expansion by consulting firm A.T. Kearney include Brazil, Chile, Uruguay, China, United Arab Emirates, Armenia, and Georgia. In China, where fair skin is highly prized, total retail sales of skin care products and makeup in 2017 grew by 10.3% and 21.3%, respectively, according to Euromonitor.
The US cosmetics, beauty supply, and perfume stores industry includes about 16,600 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $20 billion. The market for prestige cosmetics -- those sold mainly in department stores -- is expected to grow annually by 3.7% from 2018 to 2022, according to Statista.
Companies specializing in professional beauty products may restrict sales to salons and salon professionals, due to manufacturer policies. Salons may resell products to the public or use products for customer treatments.
Competitive Landscape
High margins, repeat purchases, easy storage, and cheap shipping all serve to make the retailing of cosmetics, beauty supplies, and perfume highly attractive -- and highly competitive. Established competitors for cosmetics, beauty supply, and perfume stores include department stores, mass merchandisers, drug stores, TV shopping networks, internet retailers, distributors, supermarkets, manufacturers, and salons. In-home sales providers such as Avon and Mary Kay also compete in the direct sales channel. In addition, some beauty stores compete with dermatologists, plastic surgeons, and spas in the high-end market for cosmetics and skin care. Subscription beauty product services such as Allure Beauty Box and Birchbox are gaining in popularity, especially among younger buyers.
The profitability of individual stores depends on the ability to generate store traffic and effective merchandising. Large companies can offer a wide selection of products, and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by selling specialty products, providing superior customer service, or serving a local market. The US industry is concentrated: the top 50 companies account for about 75% of industry revenue.
Competitive Advantages:
Touch-and-Test Format - In-store hands-on beauty bars where shoppers can discover and test new products prior to purchasing are popular with consumers. Stores may also employ cosmeticians who offer free makeovers, which helps to introduce and sell new products.
Focus on Young Women - Women ages 18 to 34 are the heaviest buyers of beauty products. Millennials are twice as likely to be heavy buyers and account for 47% of all heavy buyers, according to TABS Analytics.
Relationship with Influencers - Video bloggers (aka vloggers) are a growing trusted and popular source for product recommendations and how-to beauty tips among young women who spend much of their time online. Celebrity vloggers can spur product sales and draw customers to in-store meet-and-greets.
Omni-Channel Business Model - Successful beauty retailers, including Sephora and Ulta, operate both physical and virtual stores. Online sites can offer a broader selection of products than physical stores as well as many hard-to-find niche and foreign brands. Ulta Beauty's online sales are growing at more than four times the rate of in-store sales.
Company Spotlight:
Ulta Beauty is the largest beauty retailer in the US, selling a mix of prestige and mass market cosmetics, fragrance, and skin care products. With over 1,000 stores in strip shopping malls, the fast-growing chain has nearly doubled its store count since 2012. Ulta's online sales are growing at more than four times the rate of in-store sales.
Sephora, part of French luxury brand giant LVMH, is a global market leader with more than 2,000 stores in 30-plus countries worldwide. Sephora USA operates some 360 stand-alone stores in North America, and another 575 inside JCPenney department stores. Its touch-and-test format, focus on on-trend products, and use of in-store technology has won the company a devoted following, especially younger women.
Bluemercury, founded in 1999 and acquired in 2015 by Macy's to attract younger shoppers), operates about 120 luxury beauty products and spa stores, 19 of which are located inside Macy's department stores. In addition to upscale product sales, the stores offer makeup lessons, facials, brow styling, and waxing. Bluemercury also operates a growing e-commerce business.
Amazon is dominating the fast-growing online market for beauty products. Health, personal care and beauty products are estimated by eMarketer to be a $16 billion business for the online giant. In beauty overall, Amazon sales in 2Q2018 were estimated to reach $950 million, an increase of 26% over the year-earlier period, according to One Click Retail. 2018 sales could reach $4 billion, far outpacing rivals Sephora and Ulta.
Products, Operations & Technology
Cosmetics, face cream, and perfume make up about 75% of industry sales; other sources of revenue include hygienic products such as deodorant, hair care, ... plus:
Sales & Marketing
Finance & Regulation
Regional & International Issues
Human Resources
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Quarterly Industry Update
Industry Indicators
Business Challenges
Trends and Opportunities
Call Preparation Questions
Financial Information
Industry Forecast
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