Despite increasing competition, revenue will fare better as disposable incomes rise
New York, NY (PRWEB) March 31, 2014
The Beauty, Cosmetics and Fragrance Stores industry is largely dependent on consumer spending on discretionary products. During the five years to 2014, consumer confidence suffered due to growing unemployment, the domestic recession and weakened global economic conditions. As a result, consumers tightened their budgets and reduced unnecessary beauty purchases. Customers that did purchase makeup and fragrances opted to buy these items from drug stores or mass merchandisers, which typically carry value-priced versions. Other shoppers bought fewer items from beauty stores and as a result, industry revenue fell through 2010. However, since 2011, the Beauty, Cosmetics and Fragrance Stores industry has been recovering and on average, industry revenue is expected to grow 0.2% per year from 2009 to 2014, to reach an estimated $1.6 billion, despite an anticipated 1.2% decline in 2014.
According to IBISWorld Industry Analyst Vanessa Giraldo, “During this five-year period, profit has also declined as a result of consumers substituting lower-priced products for premium ones.” IBISWorld estimates that margins, or earnings before interest and tax, have decreased to 4.3% in 2013. Moreover, strong internal and external competition has defined the industry during this time as well. Internally, operators have competed on the basis of price, product selection, quality and customer service. Externally, players have faced competitive pressures from value-priced drug stores and mass merchandisers. Consequently, unprofitable participants have exited the industry or consolidated with larger, more successful players. Therefore, industry enterprises have declined at an annualized rate of 1.3%, with 1,160 stores expected by the end of 2014.
“Fortunately for the industry, consumer confidence is on the rise and is projected to continue growing over the five years to 2019,” says Giraldo. As economic activity recovers domestically and internationally, consumers will feel more secure with the economic outlook and personal finances, allowing them to make more discretionary purchases on items such as 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. As such, industry revenue is forecast to increase 4.6% per year on average over the next five-year period, reaching $2.0 billion.
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
The Beauty, Cosmetics and Fragrance Stores industry prepares, blends, compounds and packages beauty products and cosmetics. Products included in this industry are perfumes, make-up items, hair preparations, face creams, lotions and other toiletries. Toothpastes, toothbrushes, soaps and body washes are not included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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