Introduction
The global beauty industry has undergone substantial developments over the past two decades. Lopaciuk and Laboda affirm that the “global beauty market is an extraordinary and fascinating area of global consumption and in the last two decades it has experienced dramatic changes” (1080). The changes epitomize the prevailing economic, cultural, and social changes. The beauty market is categorized into different business segments, which include skin care, toiletries, hair care, fragrances, and makeup [color].
The categorization of the beauty industry into different segments has played a fundamental role in meeting the diverse customers’ needs. Despite the growth of the beauty market, most industry players have specialized in producing petrochemical-based cosmetic products, which presents a gap in the market. In an effort to seal this market gap, a number of firms have entered the industry by specializing in the production and marketing of organic cosmetic products.
As an entrepreneur, I intend to venture into the organic cosmetic market segment by establishing an online store that will sell organic cosmetic products. This paper entails an industry and competitor analysis with the objective of identifying the prevailing opportunities and threats, hence providing insight on the likelihood of achieving optimal market performance.
Target market
The online store will target customers of diverse demographic characteristics such as age and income. With reference to age, the store’s core target market will be comprised of youth aged between 18 years to 40 years. The decision to target customers within this age group is informed by the view that they constitute the largest proportion of the total global population. In order to maximize profitability, the store will adopt diverse pricing strategies, which include premium and penetration pricing strategy.
The premium pricing strategy will aid in communicating the value and quality of the organic cosmetic product to the target customers. Moreover, the store will also segment the market based on psychological dimension by taking into account the concept of benefit sought. Thus, the firm will target consumers who are health conscious in consuming personal care products.
Industry analysis and research
The organic personal care products industry constitutes one of the key components of the personal care industry. Firms in the industry deal with diverse categories of personal care products such as skin care, hair care, and cosmetics. The industry has undergone rapid transformation over the past two decades.
A study conducted by Transparency Market Research in 2012 projected that the value of the industry would increase from $ 7.6 billion to $13.2 billion by the end of 2018, which represents a 9.6% growth rate (Yeomans par. 3). Another study conducted by Grand View Research Incorporation projected that the sales for organic cosmetic products would increase to $ 16 billion by 2020 (Penning par. 4).
The high rate of growth within the cosmetic industry is evident in different markets across the world. The European region leads with reference to demand for natural cosmetic products. In Germany, the organic cosmetic industry was valued at €920 million, which accounted for a 7% growth rate between 2012 and 2013 (Pitman par. 5). France ranks second with a total €400 million, which accounts for over 3% of the total market share in Europe (Pitman par. 5).
Other European countries characterized by high demand for organic cosmetic products include the UK, the Netherlands, Scandinavia, Italy, Switzerland, and Austria. The market for organic cosmetic is also projected to undergo remarkable growth in the Asia-Pacific region. The sales volume for organic cosmetic products is projected to increase to $ 3.77 billion by 2020 (Heinze par. 3).
The organic cosmetic market in the US is also projected to undergo remarkable growth in the future. Penning asserts that the US “demand for organic products is estimated to grow at a CAGR of 10.2% from 2012 to 2018” (par. 4). The industry players in these markets are increasingly venturing into the international market in their quest to optimize their performance. Moreover, the industry has been characterized by growth of new entrants.
Industry drivers
Change in consumer lifestyle
Growth within the cosmetic industry is expected to be driven by a number of factors. One of the major factors entails increased change in consumer lifestyle, which has been spurred by the emergence of the information age.
Heinze (par. 3) affirms that the high rate of innovation with reference to Information Communication Technology [ICT] such as the development of the Internet-enabled devices such as wireless, broadband, and hand-held consumer devices has significantly increased access to information, hence improving the consumers’ knowledge.
Consumers have become health conscious, as evidenced by the growing concern for personal health and hygiene. Currently, consumers are increasingly abandoning quick fixes with reference to personal health by adopting a more natural approach. Penning (par.5) argues that consumers are opting for organic personal care products in their personal hygiene. A sizeable number of individual consumers prefer organic products to cosmetics produced from petrochemical products.
This trend has remarkably influenced the consumers’ decision-making process. Subsequently, the demand for organic cosmetic products has increased substantially (Penning par. 5).The change in consumer attitude towards cosmetic products is expected to promote double-digit growth, which presents a perfect opportunity for industry players to maximize their profitability.
Changes in consumer behavior indicate that there is a high market potential. Thus, adopting effective marketing practices can enable new entrants to exploit the available market opportunities.
Distribution trends
Distribution constitutes one of the essential components in the success of an industry. Heinze (par. 6) asserts that the distribution mix adopted by an organization determines the effectiveness and efficiency with which products flow from the manufacturer to the consumers, hence creating place, possession, and time utilities. Thus, firms’ marketing managers have a duty to develop effective distribution network by establishing channels of distribution and physical distribution locations.
The organic cosmetic industry has experienced systematic changes over the past few decades especially with reference to distribution channels. Currently, cosmetic products are increasingly being distributed through diverse outlets such as non-store retailing firms, supermarkets, hypermarkets, drugstores, and beauty specialist stores.
The high rate at which retail firms such as supermarkets and hypermarkets are expanding has presented organic cosmetic producers with an opportunity to reach a wide market. The non-store retailing channels rank as the fastest growing distribution channels.
Lopaciuk and Loboda emphasize that companies relying on “direct sale have created strong sales network especially in the emerging markets such as Brazil, China, and Argentina” (1082). Growth within the industry has also been promoted by developments within the ICT sector. Cosmetic firms are increasingly utilizing online sales channels. It is projected that online sales will grow considerably across the world. Growth within this market will be enhanced by the high rate of Internet penetration.
Moreover, consumers have developed a positive attitude towards Internet services, as evidenced by growth in the size of the online population. Currently, over 2.7 billion of the total world population can access the Internet. It is estimated that online retail sales account for 5% to 15% of the total retail spending. Some of the market leaders with reference to online consumption include France, Germany, South Korea, the US, and the UK (Pitman par. 2).
A high rate of growth is expected to be sustained within the online market segment due to increased Internet penetration. A study conducted by the International Telecommunication Union estimates the rate of mobile broadband and Internet penetration around the world to be approximately 77%.
Governments are increasingly investing in ICT infrastructure in an effort to transform their countries into knowledge-based economies. The infrastructural developments currently being undertaken by governments will promote the rate of Internet usage.
Despite the potential for growth with reference to online transactions, it is imperative for potential investors to appreciate the existence of security threats. One of the most notable threats entails cyber crime. A considerable number of consumers around the world are reluctant to adopt online transactions due to the security threats posed by using different online platforms in conducting transactions. The threat of cybercrime is universal, which means that it exists in different markets.
A study conducted by KPMG in 2011 estimates the annual cost of cyber crime to be approximately $ 43 billion (“KPMG” par. 5). The existence of cybercrime might negatively affect the consumers’ trust with reference to using online transactions. For example, consumers might develop the perception that using online platforms in the process of purchasing products and services might lead to loss of confidential information in addition to financial loss.
In order to deal with this challenge, it is imperative for governments and investors to implement effective online security measures. For example, governments should implement effective regulatory measures that promote online purchasing. Conversely, firms that have adopted online purchasing platforms should ensure that their platforms are secure. These aspects will stimulate the Internet users’ willingness to use the established online purchasing platforms.
New product development
Firms operating in the organic cosmetic industry are progressively investing in market research and development. The firms’ motivation to invest in research and development has arisen from the need to develop competitive advantage through new product development. The rates at which firms are adopting organic cosmetic products have been spurred by the need to align with the prevailing market trends and change in consumer lifestyle.
The industry players are increasingly researching on how to utilize diverse organic products in developing new organic cosmetic products. Some of the ingredients that organic cosmetic firms have considered include herbal ingredients and other botanical products.
The high rate of new product development is also evidenced by the high rate at which firms that specialize in the production of cosmetic products using petrochemicals are jumping into the organic cosmetic product bandwagon. In order to succeed in the organic cosmetic market segment, it is imperative for retailers to appreciate the importance of new product development.
Competitor analysis
The attractiveness of the organic cosmetic industry has led to considerable increment in the number of industry players. Some of the industry players that have dominated the organic global cosmetic market include Eminence and Aubrey. The online organic cosmetic store will face direct competition from the two firms due to their market strengths as illustrated herein.
Eminence
This firm was established in 1958 in Hungary; however, it has managed to venture into the global organic cosmetic market due to its commitment to implementing effective strategic business practices. One of the areas in which the firm has developed optimal competitiveness relates to product development. Eminence has adopted green practices and sustainable farming practice. Additionally, the firm adheres to high-quality standards in the production process.
The firm has adopted the concept of the green factor in growing the raw materials used in the production of the organic cosmetic products. For example, the ingredient farms are solely powered using renewable sources of energy such as wind and solar (“Eminence” par. 1). Subsequently, the firm has developed optimal competitiveness with regard to the development of organic cosmetic products.
Eminence has also achieved optimal global market recognition since its inception. Currently, the firm has established operations in over 25 countries. Thus, the firm has nurtured a strong financial base, which plays a fundamental role in promoting the company’s capacity to invest in effective marketing activities. The firm’s operation in over 25 countries provides ah expansive market presence, which presents a considerably high opportunity to maximize sales revenue.
Moreover, the firm has nurtured considerable expertise with reference to marketing. On 26 January 2015, Eminence was awarded by the Les Nouvelles Esthetiques [LNE] & Spa Magazine as the best firm with reference to production of organic cosmetic product (Pike par. 4). The firm won the prize due to its ‘Stone Crop Serum’, which has the capacity to help customers improve their skin’s appearance.
In addition to the above aspects, Eminence has developed optimal competitiveness with reference to marketing. The firm’s strength is anchored on the fact that it has appreciated the significance associated with online marketing. Subsequently, the company is in a position to offer diverse organic cosmetic products to customers through its online store. Currently, the firm deals with over 140 organic cosmetic products that meet diverse customer needs.
Some of the major organic cosmetic products available in the firm’s online store include Exfoliants & Peels, Body Washes & Scrubs, Serum, Oils & Concentrates, Gift Vouchers, and Cleansers & Cleansing Concentrates. Thus, the firm has developed a high competitive edge in the global organic cosmetic market due to its product diversification strategy (“Eminence” par. 1).
Aubrey Organics Incorporation
The company was founded in 1967 in the US and it has been in operation for over three decades. The firm has managed to penetrate the global market by establishing diverse retail outlets across the world. The firm specializes in the production and marketing of organic cosmetic products. Over the past years, Aubrey has managed to diversify its product offering. Currently, the firm deals with over 200 organic cosmetic products.
This aspect shows that the firm has developed substantial edge with reference to product diversification. In its product diversification strategy, Aubrey has segmented its market with reference to its different customer categories, viz. the young, elderly, and children. Due to its product diversification, Aubrey Organics has improved its capacity to meet a myriad of customers’ needs.
The firm has developed significant market recognition due to the high quality of its organic product. Aubrey Organics “was the first personal care company to be certified as an organic processor according to standards set by the US Department of Agriculture” (“Yahoo Finance” par. 1).
Moreover, the firm has attained optimal market recognition, which is evidenced by the numerous quality certifications that it has received from different companies. For example, the Natural Products Association certified the firm in 2008 based on its adherence to organic and natural ingredients in the production process.
Aubrey has appreciated the importance of effective product distribution. Subsequently, the firm has integrated the concept of online distribution by establishing an online store. The online store gives customers an opportunity to purchase the firm’s organic cosmetic products based on their purchasing power.
This goal has been achieved by categorizing products based on their prices such as $ 1 to $ 25 and $25- $ 50. Through the online store, Aubrey has attained global market recognition. Moreover, the firm is in a position to reach a large number of customers, hence maximizing its profitability (“ZoomInfo” par. 3).
Competitive matrix
The above analysis shows that the online store will face intense competition from the two multinational organic cosmetic firms. These firms have successfully established online stores, hence improving the capacity to market their cosmetic products across the world. The competitive matrix below illustrates a summary of the competitive strength of Aubrey Organics and Eminence based on the critical success factors within the organic cosmetic market segment.
The rating illustrated in the competitive matrix above shows that both Eminence and Aubrey Organics have developed considerable competitiveness in the global organic cosmetic market. The two firms have managed to attain optimal competitiveness with reference to the identified critical success factors.
Conclusion
The industry analysis of the global organic cosmetic industry shows that the industry is characterized by a high market potential. The industry’s growth is likely to be driven by a number of factors. One of the most significant industry drivers relates to change in consumer lifestyles. The acceleration of the information age, which has been spurred by increased innovation of information technologies such as the Internet, has increased the consumers’ level of knowledge.
Consumers are increasingly developing a health-conscious attitude in their consumption process. Therefore, they are inclining towards consumption of healthy and organic personal care products. This trend presents a high market potential for new entrants. Moreover, ICT developments have presented the industry players with an opportunity to access wide market through the establishment of online stores.
Subsequently, online retailing has presented an opportunity for firms to maximize their profitability by accessing a large number of customers cost efficiently. In addition to the above aspects, growth within the industry is also spurred by the high rate of new product development. The greatest competitors in this industry include Eminence and Aubrey.
Despite the intense competition, there is a high probability of attaining an optimal market success by establishing effective marketing practices such as online retailing. Adopting such approaches will enable the online store to exploit the opportunities available in the market.
Works Cited
Eminence: Information for the SPA professional 2014. Web.
Heinze, Karin. Vivaness 2015; the place to be for global natural cosmetic industry 2015. Web.
KPMG: Issues monitor; cybercrime- a growing challenge for governments 2011. Web.
Lopaciuk, Aleksandra, and Miroslaw Laboda. Global beauty industry trends in the 21st century. Knowledge Management and Innovation 1.1 (2013): 1079-1087. Print.
Penning, Abby. Demand for organic beauty to grow over $13 billion by 2018, report Says 2013. Web.
Pike, Christie. Eminence wins the coveted LNE & SPA best product 2015. Web.
Pitman, Simon. Global market for organic personal care expected to continue rapid growth 2013. Web.
Yahoo Finance: Aubrey Organics, Inc. Company profile 2015. Web.
Yeomans, Michelle. Global organic cosmetics market to reach $ 13.2 billion by 2018. 2014. Web.
ZoomInfo: Aubrey Organics Incorporation 2015. Web.