Competition in the U.S. Cosmetics Industry Essay

Exclusively available on Available only on

Table of Contents

Introduction
Competitive Landscape
Cosmetic Market Limited Growth
Cluttered Competition
Works Cited

Introduction

At the moment, the cosmetics market in the U.S is one of the fastest-growing spheres of business. In 2016, the U.S was called the most valuable beauty and personal care market in the world (“Statistics & Facts”). The annual beauty and personal care market revenue comprises about $84 billion (“Statistics & Facts”). Moreover, it is expected that by 2024 the market will be worth $85 billion (“Size of the global color cosmetic make-up market”). In addition, by the end of 2016, the U.S. cosmetic market was employing about 63,816 people (“Size of the global color cosmetic make-up market”).

LOreal, Unilever, Procter & Gamble Co, and Shiseido Companies are the most potent actors determining the further evolution of the sphere. Among the retailers working in this sphere, Ulta Salon, Cosmetics & Fragrance are the leading brands (“Statistics & Facts”). Furthermore, Maybelline, L’Oréal, and Cover Girl are the brands that enjoy the highest levels of customer recognition (“Statistics & Facts”).

Therefore, regarding Shiseidos potential entry to the U.S. market, it is critical to determine demographics key features, main motivational factors, and ways to reach the market. Specifically, Shiseido’s target customer segment is comprised of individuals (mostly women) older than 26 and characterized by a high level of income. Shiseido envisions itself as a brand that suggests exclusive and expensive products to consumers with the respective spending capacity.

The majority of individuals who belong to the target audience have a luxurious lifestyle. This category possesses an extremely high purchase potential. The brands popularity, outstanding quality of suggested products, and desire to remain attractive are the leading factors that motivate customers to buy Shiseidos products. Under these conditions, the company could carve out a niche of a luxurious and popular brand that suggests high-quality products to all customers who are concerned about their appearance and want to remain attractive. It could help Shiseido reach the market and acquire a stable income.

Competitive Landscape

The high level of rivalry peculiar to the beauty and personal care market demands an improved understanding of the competitive landscape. At the moment, Chanel and LOreal could be considered the leading rivals.

Chanel SWOT analysis

Strengths

As a brand, Chanel is well-known and widely recognized. It is also one of the pioneers in the beauty sphere. Chanel offers a wide array of suggested goods, as well as premium and high-quality products.

Weaknesses

Chanel’s products are pricy. Moreover, the brand has limited opportunities for further growth. Comparatively, high brand switching has been noted in regard to Chanel’s products. As a result, Chanel focuses on the premium category of customers who purchase its products due to its luxurious reputation.

Opportunities

Online sales could boost the company’s chances to evolve. The brand enjoys a powerful reputation and might impact the world of fashion. Innovative products represent another opportunity for the brand to attract new customers.

Threats

The main threat is the tendency towards the emergence of new powerful competitors. Moreover, the current financial crisis resulted in a decreased paying capacity of customers. Numerous cases of forgery that harm the company and its image serve as another serious threat. In general, Chanel is a potent competitor that uses management strategies similar to those of Shiseido and is focused on the same audience

LOreal SWOT analysis

Strengths

The major strength of L’Oreal is the increased innovativeness of the company.

Also, the brand holds leading positions in the cosmetics industry (LOreal). Moreover, this is a recognizable brand that considers customers culture. Finally, L’Oreal occupies a powerful position in the international market.

Weaknesses

Lack of centralization and poor control over its departments and brands in different countries are the main weaknesses of L’Oreal. The rise of rivals that operate in the same spheres adds to the inconveniences faced by the brand.

Opportunities

Potentially, numerous patents registered by the company could help it become a more powerful competitor in the future. Also, products designed for women of all ages might stipulate the companys further growth.

Threats

Since the competition in the beauty industry is very intense, there is a chance that other brands might surpass the company. Moreover, American brands tend to enjoy a higher level of popularity in the U.S. market than foreign ones such as L’Oreal. In conclusion, the analysis demonstrates that LOreal remains a significant competitor that could slow down the speed of Shiseido development and deprive it of potential income.

Shiseido SWOT Analysis – Detail Implications

Strengths

Shiseido sells high-quality products, which makes it a strong competitor. Also, the brand has a high level of customer satisfaction.

Weaknesses

One of the weaknesses is Shiseido’s dependence on technologies. Moreover, the company lacks specialized workers in retail stores. Additionally, Shiseido faces limited opportunities for the expansion of new customer segments because of the focus on customers with a high level of income.

Opportunities

The ability to enter new markets is a significant opportunity for Shiseido. Also, the environmentally friendly nature of the company makes it attractive to consumers.

Threats

The dominance of other brands at the U.S. market represents the main threat for Shiseido, a brand that has entered recently and is non-native in this country. As one could see from the analysis, the current competitive landscape remains complex as both Chanel and LOreal hold influential positions in the world of beauty and cosmetics. For this reason, Shiseido has to take into account all the above-mentioned peculiarities of the market to become successful.

Cosmetic Market Limited Growth

When it comes to growth rates in the U.S. cosmetic market, analysts report that revenues in personal care and beauty industries continue to increase throughout 2016, despite the overall economic slowdown in the country (“Beauty and Personal Care in the US”). Practically, the fluctuations in the state of the U.S. economy tend to reflect directly on the levels of growth and value sales in the beauty industry. This is the case because most of the beauty and personal care products represent the luxury segment or can be regarded as non-essential goods.

Consequently, the sales of beauty products depending on the local economy that, in turn, dictates the spending capacity of the U.S. consumers as well as their readiness to purchase. The economic recession that is known to be happening in the country for the last several years is becoming milder. As a result, many consumers find ways to adjust to it so that they no longer have to constrain their spending. However, growth rates in the U.S cosmetic market remain rather slow and limited.

Cluttered Competition

The U.S. beauty industry is also known for a highly fragmented and cluttered market and very intense competition. The intensity is also dictated by the changeable nature of consumers’ preferences and social trends to which the beauty industry needs to stay responsive. To be more precise, Millennials have grown to represent the most active and highest-spending consumer segment in beauty markets. These young and innovative customers favor unique products that support their individuality, are portable, have an excellent reputation, contain only organic ingredients, and are of high quality (“Beauty and Personal Care in the US”).

Therefore, most beauty brands have to adjust or be outperformed by competitors. In addition, apart from well-known brands with much leverage potential, the U.S. beauty brands have to compete with indie brands that constantly enter the field (“Beauty and Personal Care in the US”). The increased threat of new entries is powered by the opportunities for self-promotion available due to the popularity of social network marketing and advertisement.