quick start guide to launching a business in the beauty industry
TRANSCRIPT
Helping Emerging Market (African) Entrepreneurs Launch Businesses In Tough Economies
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Beauty, Cosmetics and FragrancesThe beauty industry comprises of companies that manufacture and retail products like cosmetics, perfumes, toiletries and personal grooming products.
Niche specialty stores that retail products that treat specific conditions or target specific demographics fall into this category i.e african cosmetics stores, middle eastern fragrance stores and male grooming supply stores. Products may be sold to households, retailers, wholesalers, etc.
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Primary Focus• Cosmetics - e.g. House Of Tara
• Deodorants and shaving products
• Fragrances
• Hair care and shower products
• Nail care products
• Skin care products
• Male cosmetics
• Sun care,baby care, men’s grooming products (beard oil etc)
“You must create and sell”
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Main Characteristics• Life Cycle Stage - early stage / growth stage in emerging markets people need low cost,
domestically made, organic & hypo allergenic products. Lots of room for new entrants.
• Revenue Variability - Low to medium - revenues can be fairly predictable and constant once you’ve built a fan base of loyal customers. But purchases will always depend on the amount of disposable income the customer has.
• Capital Intensity - Requires low capital to startup a business in this space. usually from 0 - $250K (note many companies have been started with less than $3000K i.e. Madly Cazalis of Cameroun, La Fame Accouter started for $500 in Nigeria)
• Government Interference and assistance - Very low government assistance and high interference (taxes and licenses etc). You need to get all your NAFDAC (FDA) licenses in place especially since they are consumables and can cause significant public health issues.
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Main Characteristics cont’d• Technology - The industry does not rely on technological
advancements for success
• Barriers To Entry - Low to medium barriers to entry. The biggest drawback is too many fake/substandard products are imported into the market due to low regulation (corruption) hence competition is quite stiff at all spectrums.
• Globalization - The industry is highly globalized and thus there’s high level of competition. But there are very few Africa made natural products in the global markets (thats where the opportunity is)
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Implications In A Recession• Rising unemployment and decreasing purchasing power will have a
significant effect on sales of products in the middle and upper tiers. When people have reduced disposable incomes there is a tendency to significantly reduce discretionary spending. The only way to survive the challenge is to create new products that meet consumer’s budgets and enter new geographic markets or verticals with innovative product lines.
• There’s a significant threat of saturation of cheap products in the markets as purchasing power decreases. The best way to combat this threat is to create new channels where customers can easily access your products. Giveaways, Ecommerce sales, Joint ventures and business development/co-branding deals are a few methods that come to mind.
Areas Of Growth• Eco friendly hypo allergenic goods from locally sources inputs are
an area of growth
• Niche products like male cosmetics, beard oils , shaving creams and lotions, neutral scented fragrances
• Anti aging products, skin irritation solutions, organic toning and cleansing creams , baby friendly shampoos,soaps, gels, lip balms, massage oils etc
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Product Segmentation
27%
7%8%
9% 12%
15%
22%CosmeticsHair care & shower productsFragrancesNail care productsBaby care and niche productsDeodorants and shaving creams Skin care
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Profitability• Minimum profit margin in this industry for domestically produced
beauty products is 25%. In the US it is 10%
• On average markups can be as high as 200 - 700% for many beauty products .
• Perception and branding are the keys to commanding higher prices and thus higher profitability.
• Imagine a 750ml bottle of perfume is sold for $100. The cost to manufacture the perfume on a large scale is about $5per bottle.
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Further Reading
• www.cosmeticindustry.com
• www.cosmeticnews.com
• www.gcimagazine.com
• https://www.cosmeticseurope.eu/cosmetics-industry/
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Work With Me• I speak, teach and write on entrepreneurship, business growth,
marketing, personal development and online marketing
• I’m available for Strategic Marketing Consulting, Business Growth Coaching and Entrepreneurship training
• Watch out for my online courses and training videos
• Contact me at [email protected]
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