Revenue gains have not been enough to bring the industry back to positive overall growth
Los Angeles, CA (PRWEB) February 27, 2013
The Beauty, Cosmetics and Fragrance Stores industry is largely dependent on consumer spending on discretionary products. During the five years to 2013, consumer confidence suffered due to growing unemployment, the domestic recession and weakened global economic conditions. As a result, consumers tightened their budgets and cut out unnecessary beauty purchases. “Those that did buy makeup and fragrances opted to buy these items from drug stores or mass merchandisers, which typically carry value-priced versions,” says IBISWorld industry analyst Nikoleta Panteva. Other shoppers bought fewer items from beauty stores. As a result, industry revenue fell from 2008 to 2010. Growth since 2011 has not been significant; revenue is anticipated to grow 1.3% through 2013 on the back of a slowly recovering economy. On average, industry revenue has dropped 0.1% per year from 2008 to 2013, to an estimated $1.6 billion.
Profit has also declined during this period, resulting from consumers substituting lower-priced products for premium ones. IBISWorld estimates that margins (i.e. earnings before interest and tax) have decreased from 4.7% of revenue in 2008 and 4.3% in 2013. Strong internal and external competition has defined the industry over the past five years. Internally, operators have competed on price, product selection, quality and customer service. Externally, they have faced competitive pressures from value-priced drug stores and mass merchandisers. Unprofitable participants have exited the industry or consolidated with larger, more successful players. Consequently, the industry has shrunk at an annualized rate of 2.9% to 1,470 stores expected by the end of 2013. Fortunately for the industry, consumer confidence is on the rise and is projected to continue growing over the five years to 2018. According to Panteva, as economic activity recovers domestically and internationally, consumers will feel more secure in their finances, allowing them to make more discretionary purchases, including beauty products. Moreover, with more spending money, shoppers will be better able to afford premium products like cosmeceuticals (i.e. cosmetics with pharmaceutical properties) and naturally derived cosmetics.
Concentration within the Beauty, Cosmetics and Fragrance Stores industry is low. The industry's four largest players account for well under 40.0% of industry revenue. The average operator generates $1.4 million annually, accounting for 0.9% of the industry. Over the five years to 2013, market share concentration has increased. Large companies have the means to expand, which allows them to generate more revenue. Meanwhile, smaller participants have suffered over the past five years due to declining consumer spending on discretionary beauty items. Industry revenue overall has fallen, giving major players a better chance to expand their market shares via brand recognition and product selection. For more information, visit IBISWorld’s Beauty, Cosmetics and Fragrance Stores in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry sells a variety of personal care products, including cosmetics, perfume, hair care, skin care and personal care items. Its target market includes households and professional users (e.g. hair stylists and makeup artists).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
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