This is the detailed porter five forces analysis of Cosmetic and Skin Card Industry. The companies operating in the industry having range of products which are being commonly used by the customers. The top brand in cosmetic and skin card industry are Procter & Gamble , L’Oréal, Unilever, Avon, Beiersdorf, Estee Lauder, Shiseido, Kao, Johnson & Johnson, Henkel, Coty, Limited brands, Mary Kay, Natura, Alticor, Kose and Oriflamce.
Threat of New Entrants – High
Cosmetic and skin care are competitive industries and thus attract new entrants striving to capture market share. This leads to a drop in the profitability of the existing companies. There are a number of entry barriers in this industry. There are high economies of scale by the existing players. The capital required to establish a manufacturing setup is high. There is a strong brand identity. Gaining access to distribution and expected retaliation is also a moderate level barrier. The access to required inputs for manufacturing is not very hard.
Threat of Substitute – Low
There are mainly two substitutes of skincare products which are home remedies and other skin products made at home with natural ingredients such as herbs and oils to protect and rejuvenate the skin. Such products are more used at rural areas. Some women also think of these substitutes as old fashioned and ineffective. The switching cost and the buyer propensity to substitutes, both are low.
Competitive Rivalry – High
The degree of competition amongst rivals in the industry is high. Competitors include brands such as Elemis, Espa, Clarins, and local companies. The number of spas is limited and many spas have their own products. So supply is greater than the demand. The degree of differentiation is medium. There are negligible differences amongst products of different brands. The exit barriers are also high.
Supplier Power – Low
The number of suppliers in this industry is large. There are many manufacturers of the products required by the industry. There is low differentiation of inputs. There is a certain switching cost and a threat of forward integration also exists. The presence of substitutes of the inputs and the impact of inputs on cost is low. Overall, the bargaining power of the suppliers in this industry is low.
Buyer Power – High
Increased competition and availability of the products have given the buyers of this industry high power. They are in no position to influence the prices of the products. This makes it difficult for the companies to maintain long-term profitability. It may also force the company to reduce product prices as buyers can easily switch to other brands.