Beauty Industry in 2013 at
a Glance
Comprised
of a diverse yet interrelated set of business lines, the beauty industry helps
us look and smell our best. Before we leave the house each day, we have likely
undergone our personalized beautification ritual. Included in this ritual is
the daily shower and shave, the weekly nail trim, and the monthly haircut. And
increasingly we are taking a more holistic view of our health, and our
beautification ritual may now include a periodic massage and trip to the spa.
But our concern with our appearance is hardly anything new; indeed the beauty
industry has been expanding and growing for all of recorded history. For the
interested entrepreneur this continuing growth and evolution offers a diverse
menu of opportunity.
The
beauty industry today encompasses far more than cosmetics and skin care
products, though they are still a significant portion of the sector. A wide
range of services and products are available to help us put our best face
forward, and the beauty industry now also encompasses hair styling and hair
removal, nail and tanning salons, massage parlors, shower and shaving products,
perfumes, colognes and more. Many people now treat their beauty ritual as an
escape from the hustle of the information age, whether it’s a few minutes
spoiling oneself with a high-end product or a full day at a luxury spa.
Lotions, Treatments and Baths: Oh my!
Beauty
industry opportunities can be broadly separated between products and services,
though many providers offer both. Within both products and services, however,
exist a wide range of business models based on target market, production
processes and location.
From
exfoliating soaps and volumizing shampoos to anti-wrinkle creams, the beauty
industry provides us with choices galore to keep us looking younger and
healthier. Cosmetics exist for every style and taste, as well as every skin
tone, texture and even allergy. Rows of toothpaste stretch off into the
distance at the local retail outlet, and it is no longer a choice only of
brand, but between whitening, tartar protection, flavor, packaging styles and
more! And a similar story is told in the aisles for perfume, deodorant and hair
coloring. Certain businesses also distinguish themselves through manufacturing
processes such as using all natural ingredients or a refusal to use animal
testing on products.
While
the diversity among service providers is not quite as extensive, there is
considerable differentiation between offerings based on price, location and
target markets. Some businesses target the inexpensive, fast hair cut market
while others focus on providing a luxury spa experience. Franchise
opportunities exist for hair salons, skin treatments, nail care, and tanning.
Niche providers offer products and services focused on children, weddings, and
fashion, among others.
Different Beauty Franchise Opportunities
Hair Care
|
Stylists, salons,
shampoos/conditioners, coloring product, styling product (gels, sprays, etc)
|
Cosmetics & Skin care
|
Make-up, moisturizing lotions,
tanning salons, sun care products
|
Fragrance
|
Perfumes, body sprays, cologne,
deodorants
|
Miscellaneous
|
Nail polish, shaving products,
massage parlors, hair removal services
|
Beauty
Industry Trends
Beauty Industry Trends
Such
diversity and innovation exists because we demand it. The beauty industry
continues to expand globally, with some projections claiming 8.5% growth by
2014; revenue growth in 2010 was estimated at 3.3%. Several trends support this
expansion and promise continued profitability into the future.
Globally,
rising per capita incomes and greater access to international markets are
increasing spending on discretionary items such as perfumes and cosmetics.
Though the recent economic turmoil had decreased spending on some discretionary
products in the United States, purchasing of beauty products has remained
strong. Consumers did tend to be more price-conscious however, with over 70% of
survey respondents claiming to give mass market products more consideration over
high-end products during the downturn.
Perhaps
not as surprising as it once was, one of the fastest growing segments of the
beauty industry is products and services aimed at men. Traditionally focused on
female consumers, men today are gaining increasing attention from the beauty
industry. Of course most of us have been using deodorant and toothpaste for
several decades already, but increasingly men are being targeted for body
sprays, specialty hair products, lotions and even nail care. Salons offer a menu
of pampering services for men, including cuts and shaves, facials, massages and
manicures.
Consumers
of beauty industry products tend to be brand loyal, and share what works for
them with their friends. 58% of those surveyed claimed that personal recommendations
weigh more heavily than celebrity marketing, and only 44% bought a particular
product for its claim of specific product attributes. Like many things, beauty
products gain a level of familiarity and comfort for the consumer, and
switching to a new product often takes some extra incentive. Popular and
successful marketing campaigns in the beauty industry often include a free
sample and discounts for referrals to lure new customers in, and loyalty
programs to keep them.
Beauty Industry Franchise Opportunities
From
product innovation, organic industry growth and continued growth into the male
half of the population, the beauty industry continues to offer a diverse set of
profitable franchising opportunities. Beauty franchises exist across the space
with dozens of strategies reaching all types of consumer.
Retail
opportunities include brick-and-mortar store locations as well as home-based
businesses, and span across cosmetics, skin care, hair care, tanning and more.
Frequently producers of beauty industry products will have a franchising
distribution system, or even have training locations for service providers.
Cosmetic and skin care entrepreneurs offer specialized services such as nail
care and tanning, a complete menu designed for the full day experience and
everything in between. Some salons offer an exclusive membership experience and
others specialize on walk-in business.
Hair
care opportunities exist for barbers and stylists alike, with a range of
different franchises available based on cost, location, and gender. Many
male-focused franchises offering everything from the basic barbershop to “the ultimate relaxed grooming experience”
have been springing up to complement the traditionally female-focused salon
offerings. Franchise chains devoted to children offer a more entertaining
environment for kids. There are also businesses focused on hair removal and
coloring. Eco-friendly salons such as the Splish
franchise offer hair care in an environmentally conscious
environment.
As we
can see, the beauty industry encompasses a wide range of products and services,
and franchising plays a major part in bringing them to the consumer. As the
industry continues to grow and evolve, profitable opportunities will abound…the
hard part is choosing which one!
Matt Sena is a former portfolio manager, research analyst and trader. He holds the Chartered Financial Analyst designation and earned his MBA in Finance from Kellstadt Graduate School of Business while working at Goldman, Sachs & Co.
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