Cosmetics, Beauty Supply & Perfume Stores
Description
Companies in this industry operate physical retail establishments that primarily sell cosmetics, beauty supplies and toiletries, and perfume. Major companies include Bath & Body Works, Sally Beauty, and Ulta Beauty (all based in the US), along with Natura Cosméticos (Brazil), Sephora (France), and The Body Shop (UK).
The global cosmetics market is forecast to reach about $139.29 billion by 2030, according to Statista. The anticipated growth is primarily driven by the increase in the importance of skincare products and growing disposal income of the people, coupled with the awareness about waterless beauty and zero wastage of beauty components.
The US cosmetics, beauty supply, and perfume stores industry includes about 17,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $23 billion.
Companies specializing in professional beauty products may restrict sales to salons and salon professionals, due to manufacturer policies. Salons may resell products to the public or use products for customer treatments.
COMPETITIVE LANDSCAPE
High margins, repeat purchases, easy storage, and cheap shipping all serve to make the retailing of cosmetics, beauty supplies, and perfume highly attractive -- and highly competitive. Established competitors for cosmetics, beauty supply, and perfume stores include department stores, mass merchandisers, drug stores, TV shopping networks, internet retailers, distributors, supermarkets, manufacturers, and salons. In-home sales providers such as Avon and Mary Kay also compete in the direct sales channel. In addition, some beauty stores compete with dermatologists, plastic surgeons, and spas in the high-end market for cosmetics and skin care. Subscription beauty product services such as Allure Beauty Box and Birchbox are gaining in popularity, especially among younger buyers.
The profitability of individual stores depends on the ability to generate store traffic and effective merchandising. Large companies can offer a wide selection of products, and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by selling specialty products, providing superior customer service, or serving a local market. The US industry is concentrated: the top 50 companies account for about 80% of industry revenue.
Competitive Advantages:
Focus on Young Women - Women ages 18 to 25 are the heaviest buyers of beauty products. According to Bueaty Matter, US teens spend about $375 annually on beauty products.
Relationship with Influencers - Video bloggers (aka vloggers) are a growing trusted and popular source for product recommendations and how-to beauty tips among young women who spend much of their time online. Celebrity vloggers can spur product sales and draw customers to in-store meet-and-greets.
Omni-Channel Business Model - Successful beauty retailers, including Sephora and Ulta, operate both physical and virtual stores. Online sites can offer a broader selection of products than physical stores as well as many hard-to-find niche and foreign brands. Ulta Beauty's online sales are growing at more than four times the rate of in-store sales.
Company Spotlight:
Ulta Beauty is the largest beauty retailer in the US, selling a mix of prestige and mass market cosmetics, fragrance, and skin care products. Ulta has about 1,400 stores in the US as of 2024. Ulta's online sales are growing at more than four times the rate of in-store sales.
Sephora, part of French luxury brand giant LVMH, is a global market leader with more than 2,700 stores in 30-plus countries worldwide. Sephora USA operates some 360 stand-alone stores in North America, and another 575 inside JCPenney department stores. Its touch-and-test format, focus on on-trend products, and use of in-store technology has won the company a devoted following, especially younger women.
Bluemercury, founded in 1999 and acquired in 2015 by Macy's to attract younger shoppers, operates about 180 luxury beauty products and spa stores. In addition to upscale product sales, the stores offer makeup lessons, facials, brow styling, and waxing. Bluemercury also operates a growing e-commerce business.
Amazon is dominating the fast-growing online market for beauty products. Amazon has reported that its 2024 net sales grew by 10% to about $638 billion.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include cosmetics and fragrances (more than 80% of the industry revenue), followed by personal hygiene supplies (about 15%).
Cosmetics categories include eyes, lips, and face (foundations and concealers). Facial care includes moisturizers, cleansers, and exfoliators. The hair care category includes shampoo, conditioner, and color.
While open-line stores sell to both traditional retail customers and salon professionals, professional customers typically receive a special discount. Full-service stores sell only to salons and salon professionals, and carry professional use only products for resale and use in salons. Beauty retailers offering services may rent booth space to salon professionals.
Beauty stores include national and regional chains, franchises, and independent retailers. Typical locations include strip malls, indoor shopping malls, and floor space within larger retailers. Companies consider demographics, neighboring tenants, store visibility, and traffic accessibility when selecting locations. Ulta, which offers both beauty products and salon services, generates more than $500 per square foot.
Most companies arrange store layouts by product category. Strategic product placement encourages cross-selling. New products and promotional items at the front of the store, and testers for sampling, promote impulse buying. Some companies, particularly those with strong ethnic customer bases, use localized merchandising strategies to match market demographics.
Inventory mix varies depending on a company’s target market. Prestige brands, such as Estée Lauder, Lancôme, and Clinique, are premium-priced products traditionally found in department stores. Mass market brands, such as L’Oreal, Revlon, and Clairol, tend to be lower priced, and found in mass merchandisers and drugstores. Beauty stores may carry private-label products or controlled label products (products for which a company has exclusive distribution rights). Professional or salon-only brands include Matrix, Redken, and Paul Mitchell.
The majority of beauty stores buy directly from manufacturers or manufacturer representatives, although some companies use distributors. To meet manufacturer requirements to sell salon-only products, a retailer may install a single stylist chair anywhere in the store. Agreements with suppliers may have minimum purchase requirements, particularly for relationships involving exclusive distribution rights. Some manufacturers accept product returns according to strict guidelines. Beauty supply buyers typically attend trade shows to identify the latest trends and select merchandise.
The global cosmetics market is forecast to reach about $139.29 billion by 2030, according to Statista. The anticipated growth is primarily driven by the increase in the importance of skincare products and growing disposal income of the people, coupled with the awareness about waterless beauty and zero wastage of beauty components.
The US cosmetics, beauty supply, and perfume stores industry includes about 17,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $23 billion.
Companies specializing in professional beauty products may restrict sales to salons and salon professionals, due to manufacturer policies. Salons may resell products to the public or use products for customer treatments.
COMPETITIVE LANDSCAPE
High margins, repeat purchases, easy storage, and cheap shipping all serve to make the retailing of cosmetics, beauty supplies, and perfume highly attractive -- and highly competitive. Established competitors for cosmetics, beauty supply, and perfume stores include department stores, mass merchandisers, drug stores, TV shopping networks, internet retailers, distributors, supermarkets, manufacturers, and salons. In-home sales providers such as Avon and Mary Kay also compete in the direct sales channel. In addition, some beauty stores compete with dermatologists, plastic surgeons, and spas in the high-end market for cosmetics and skin care. Subscription beauty product services such as Allure Beauty Box and Birchbox are gaining in popularity, especially among younger buyers.
The profitability of individual stores depends on the ability to generate store traffic and effective merchandising. Large companies can offer a wide selection of products, and have advantages in purchasing, distribution, and marketing. Small companies can compete effectively by selling specialty products, providing superior customer service, or serving a local market. The US industry is concentrated: the top 50 companies account for about 80% of industry revenue.
Competitive Advantages:
Focus on Young Women - Women ages 18 to 25 are the heaviest buyers of beauty products. According to Bueaty Matter, US teens spend about $375 annually on beauty products.
Relationship with Influencers - Video bloggers (aka vloggers) are a growing trusted and popular source for product recommendations and how-to beauty tips among young women who spend much of their time online. Celebrity vloggers can spur product sales and draw customers to in-store meet-and-greets.
Omni-Channel Business Model - Successful beauty retailers, including Sephora and Ulta, operate both physical and virtual stores. Online sites can offer a broader selection of products than physical stores as well as many hard-to-find niche and foreign brands. Ulta Beauty's online sales are growing at more than four times the rate of in-store sales.
Company Spotlight:
Ulta Beauty is the largest beauty retailer in the US, selling a mix of prestige and mass market cosmetics, fragrance, and skin care products. Ulta has about 1,400 stores in the US as of 2024. Ulta's online sales are growing at more than four times the rate of in-store sales.
Sephora, part of French luxury brand giant LVMH, is a global market leader with more than 2,700 stores in 30-plus countries worldwide. Sephora USA operates some 360 stand-alone stores in North America, and another 575 inside JCPenney department stores. Its touch-and-test format, focus on on-trend products, and use of in-store technology has won the company a devoted following, especially younger women.
Bluemercury, founded in 1999 and acquired in 2015 by Macy's to attract younger shoppers, operates about 180 luxury beauty products and spa stores. In addition to upscale product sales, the stores offer makeup lessons, facials, brow styling, and waxing. Bluemercury also operates a growing e-commerce business.
Amazon is dominating the fast-growing online market for beauty products. Amazon has reported that its 2024 net sales grew by 10% to about $638 billion.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products include cosmetics and fragrances (more than 80% of the industry revenue), followed by personal hygiene supplies (about 15%).
Cosmetics categories include eyes, lips, and face (foundations and concealers). Facial care includes moisturizers, cleansers, and exfoliators. The hair care category includes shampoo, conditioner, and color.
While open-line stores sell to both traditional retail customers and salon professionals, professional customers typically receive a special discount. Full-service stores sell only to salons and salon professionals, and carry professional use only products for resale and use in salons. Beauty retailers offering services may rent booth space to salon professionals.
Beauty stores include national and regional chains, franchises, and independent retailers. Typical locations include strip malls, indoor shopping malls, and floor space within larger retailers. Companies consider demographics, neighboring tenants, store visibility, and traffic accessibility when selecting locations. Ulta, which offers both beauty products and salon services, generates more than $500 per square foot.
Most companies arrange store layouts by product category. Strategic product placement encourages cross-selling. New products and promotional items at the front of the store, and testers for sampling, promote impulse buying. Some companies, particularly those with strong ethnic customer bases, use localized merchandising strategies to match market demographics.
Inventory mix varies depending on a company’s target market. Prestige brands, such as Estée Lauder, Lancôme, and Clinique, are premium-priced products traditionally found in department stores. Mass market brands, such as L’Oreal, Revlon, and Clairol, tend to be lower priced, and found in mass merchandisers and drugstores. Beauty stores may carry private-label products or controlled label products (products for which a company has exclusive distribution rights). Professional or salon-only brands include Matrix, Redken, and Paul Mitchell.
The majority of beauty stores buy directly from manufacturers or manufacturer representatives, although some companies use distributors. To meet manufacturer requirements to sell salon-only products, a retailer may install a single stylist chair anywhere in the store. Agreements with suppliers may have minimum purchase requirements, particularly for relationships involving exclusive distribution rights. Some manufacturers accept product returns according to strict guidelines. Beauty supply buyers typically attend trade shows to identify the latest trends and select merchandise.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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