Académique Documents
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Table of Content
Executive Summary 3
Factors 4
Industry Future 11
Conclusion 12
Reference 13
Competitive Analysis 3
Executive Summary
According to a recent article from Forbes, by the end of the year 2018, the U.S. Beauty
Retail Market is estimated to be worth $56 Billion. (Danziger, 2018) With an industry that is
accelerating by the economic growth, product innovation and market expansion for the Beauty,
Cosmetics and Fragrances Stores industry will increase over the next five years. (Cohen, 2018)
Many consumers of beauty, cosmetics and fragrance products have realized the importance of
self-image and presentation and this has help increase the demands of cosmetics products across
the world. There is great innovation in this industry which has also led to the growth within this
This paper will analyze three of the top competitor companies within the Beauty,
Cosmetics and Fragrances Stores industry. The Porter Five Forces and a SWOT analysis will be
used to help analyze the three competitors companies within the industry.
With more than ever, beauty, cosmetics and fragrances trends are starting to grow into
something far more mainstream. Over the last few years, the distribution of beauty and personal
care items have quadrupled and as new trends evolves it will it will increase. (The Nielsen
Company, LLC, 2018) With more people wanting to follow new trends or find products to make
them younger and look a certain way, companies are expanding and creating new products to
meet the growing demands. According to Cohen (2018) the number of industry establishment is
expected to rise at an annual rate of 3.4% over the next five years to 2018. Furthermore, the
growing economy shows that consumer’s income will increase and make them more able to buy
Competitive Analysis 4
high-end products that results in thick margins. (Cohen, 2018) This will results in revenue to
increase and is anticipated to grow an annualized 1.2% to $23.7 billion as consumers continues
to buy more cosmetic products. This industry is also increasing due to the fact that it will open
Three of the top companies in the Beauty, Cosmetics and Fragrances Stores industry are
Ulta Beauty, Inc., Sephora Inc., and Sally Beauty Holdings, Inc. Each of these companies offer
consumers a variety of Beauty, Cosmetics and Fragrances options to choose from. Ulta Beauty is
the leading company in this industry with 29.8% of the market share and reported to have made
$5.9 billion in total company earnings. Sephora comes in after as one of the leading company in
the industry holding 18.4% of the market share and reported to have a $4.1 billion in revenue.
The third leading company in this industry is Sally Beauty Supply which holds 8.4% of the
market share and reported to have made $3.9 billion in total company revenue. (Cohen, 2018)
Factors
There are several factors that drive the Beauty, Cosmetics and Fragrances Stores industry
in regards to growth and innovations. This is driven and influenced by emerging social trends
In the recent study from Consumer Insights, it was reported that 80% of consumers were
being more aware of the importance of cosmetic products and especially their positive impacts
on improving self-image, confidence and self-esteem. They are also aware of the importance of
first impression both at the workplace and in society in general. (Cave, 2017)
Competitive Analysis 5
Another factor is the emerging of technology which has made an impact for this industry.
In the article from Hoover’s database, it mentioned how Sephora retailers had launched a mobile
payment system that allows for easier checkout for their customers, very much like Apple stores.
However, there are certain factors which affect the entry to the Beauty, Cosmetics and
Fragrances Stores industry. These factors can be analyzed using the Porter Five forces analysis.
The Porter Five forces were developed to help analyze internal and external factors and help
develop effective marketing and competitive strategies. They include the, threat of new entry
threat of substitutes, bargaining power of buyers and suppliers as well as rivalry in the industry.
(Porter, 2008) It is important to understand these factors, which plays a crucial role to generate
profits for the industry. The Porter’s five forces are as follows:
1. Threat of new entrant: This factor analyze new firms that may enter into an industry. In
order for firms to enjoy long term profitability, they should develop customer loyalty
2. Threat of substitute: this factor arises when a substitute performs the same or similar
3. Bargaining power of buyers: The bargaining power of buyers analyzes the changes in the
industry in which consumers have manipulating price changes due to shifts in demand.
(Porter, 2008) Not only can that but buyers also have the power to demand for lower
4. Bargaining power of suppliers: The bargaining power of suppliers analyzes the power
which suppliers have regarding making price changes for their products. (Porter, 2008)
Competitive Analysis 6
The threat of new entrant is low because in the three companies, Ulta Beauty, Sephora and Sally
Beauty Supply. They all have develop loyalty rewards for their customers who shops at their
stores to keep a long term relationship with their customers. Ulta Beauty have their “Ultimate
Rewards” where costumers sign up and shop and earn points on every dollar spent on products,
beauty services where they can redeem it on any products. The best part about their loyalty
rewards is that it is free. (Ulta Beauty, n.d.) Sephora “Beauty Insider” loyalty program, is similar
to Ulta’s rewards program, you shop and earn points and can use the points to redeem on certain
products that Sephora offers. Their loyalty program is also free. (Sephora, 2018) For Sally
Beauty’s rewards program is very similar to Ulta Beauty and Sephora, but costumers can earn 10
points for every $1 spent, and for every 500 points earned, customers can redeem a $5 rewards.
(Sally Beaity, n.d.) The threat of substitute is medium, because if certain stores carries the same
products and one store sells it at a lower price, consumers will rather shop there. Because
Sephora and Ulta do have brands and products that are sold in both stores, costumers might
choose to buy depending on what sort of offers can give them a better deal. The threat for rivalry
is medium, because there are so many brands and new brands coming into the industry. But
because Ulta Beauty, Sephora, and Sally Beauty have such a presence within the Beauty,
A SWOT Analysis is used to analyze the internal and external environment of the company. The
Strengths (S) and Weakness (W) are the internal environmental factors of the company and
Opportunities (O) and Threats (T) are the external factors of the company. The SWOT analysis
for the Beauty, Cosmetics and Fragrances Stores industry is shown in Figure 1.
Competitive Analysis 7
Three major companies within the Beauty, Cosmetics & Fragrance Store in the US that
provides consumers beauty, cosmetics and fragrance products are Ulta Beauty, Inc., Sephora
Inc., and Sally Beauty Holdings, Inc. See Figure 2 for Key information about the company.
Company Overview
Terry Hanson and Dick George founded Ulta Beauty Inc., in 1990 but currently the chair
of Ulta is Charles Philippin. The company is supported by five distribution facilities in Illinois,
Indiana, Arizona, Texas and Pennsylvania but the main headquarter is located in Bolingbrook,
IL. (Hoover's Inc , 2018) In terms of products, cosmetics make up makes up for more than half
of the sales while 20% comes from Skincare, Bath & Fragrance and Haircare Products & Styling
tools. The salon services with Ulta stores makes up for 5% of the sales and 10% goes to the
company’s e-commerce business. (Hoover's Inc , 2018) As of 2018, Ulta operates more than
1,000 stores across the US and have 34,700 employees total working within all their sites.
(Hoover's Inc , 2018) Per Ulta’s financial statement, with their loyalty rewards program, the
company has about 28 million loyalty members which accounts for 90% of the company’s sales.
With the loyalty programs, it allows and encourage for repeated purchases. (Cohen, 2018)
Ulta Beauty aims for a brick-and-mortar retail for their customers. Their goal is to allow a
hands-on products that their customers can try in stores. To set themselves apart, Ulta provides
salon services and mass-market merchandise to consumer’s aestheticians and salons. Hoping to
The first Sephora USA store opened in 1998 but was originally a French-based retailer.
The current president of Sephora is Calvin McDonald and with it’s headquarter based in San
Francisco, CA. Sephora currently have more than 300 stand-alone stores in North America. As
of 2018, Sephora currently have over 5000 employees totaled in all of their sites. (Hoovers Inc,
2003) In 2006, they we able to collaborated with JC Penny and open mini-Sephora shops within
the department stores. There are currently 475 mini-Sephora is inside JC Penny, and will
continue to expand in JC Penny locations with a target of 600 stores nationwide. In terms of
product, Sephora offers a broad array of products from brands like Bare Escentuals, Clarins,
Clinique and Shiseideo. They also provide beauty services that includes makeup lessons and hair
Sephora also have their own private label which makes up for 10% of the sales. (Hoovers
Inc, 2003) In 2016, Sephora launched their subscription based service beauty box where every
month subscribers can receive five travel size beauty products that is curated to certain themes.
Sephora aims to achieve its growth by offering a distinct in store experience where
shoppers and employees and enjoy an entertaining experience. Employees are referred as “cast
members” and the sales floor is the “stage”. This is because the company have a strong focus on
Sally Beauty Holdings is known as one of the largest retailers and distributors of beauty
supplies in the US, founded in 1964 with the current chair Robert McMaster and with their
headquarter base in Denton, TX. The company have 3,700 Sally Beauty Supply stores that sells
more than 10,000 professional hair, skin and nail products and employing 29,475 employees
total in all their sites. (Hoovers Inc., 2018) About 70% of sales comes from their hair color and
Competitive Analysis 10
hair care products and skin and nail care products supply about 10% of sales. (Hoovers Inc.,
2018) Out of the three companies, Sally Beauty is the only company that is more international.
Their stores are spread throughout Canada, Mexico, Chili, United Kingdom, Ireland, Belgium,
Industry Future
Over the next three years, factors that will influence the success in the Beauty, Cosmetics
& Fragrance Store in the US industry is how much innovation the company are investing in the
digital technology as it is a trend that will increase in the newer market. Currently Ulta Beauty
have a mobile application for their customers who can download it onto their phone. With their
“Glam Lab” it allows shoppers to take a face selfie and is able to virtually apply the makeup on
their phone, this allow for customers to try on the products before having to make a purchase.
The Ulta app, also allow customers to shop on their mobile phone. (News, 2017) Sephora also
have a similar app. Through the mobile app, it also allows shoppers to also shop online, but on
the apps it gives users the ability to experience virtual artist that helps show or demonstrate how
a to apply lashes, or eye shadows. Through their mobile app, users can also book a reservation
for their Beauty Studio, scan any items for prices and deals. (Sephora, 2018) As for Sally Beauty,
A factor that will influence the decline for the Beauty, Cosmetics & Fragrance Store in
the US industry, is more people will choose to shop independent brands. In a recent article from
Forbes, it mentions how independent brands have gone up 42.7% because brands are being
created at the speed of light. (Kestenbaum, 2017) Another factor that will influence the decline
is, E-commerce which will be one of the fastest-growing threat for this industry. As more
consumers will opt out of shopping in traditional stores as more will choose the convenience and
In the next three years, I think each of the competitors will invest in more innovations for digital
options, Ulta and Sephora is already up in the game with their mobile apps. In the next three
Competitive Analysis 12
years maybe one of them can create a feature to help choose certain styles for certain events or
have the ability to help user find the perfect shade of foundation that matches them.
For all the three companies, I think the opportunity to go global is a trend that will increase.
Ulta Beauty is slowly going towards global brands. In 2017, Ulta started to partner with Landing
International and offered Korean beauty brands from Tony Moly, Missha, and Skin Food.
(Kinonen, 2017) Just this year, Sephora also partnered up with Ecommerce Company Memebox
to create a new Beauty Line “Kaja” which means “let’s go” in Korean, that will offer 47 products
with eyeshadows and lip stains, also making this the first complete K-Beauty color cosmetics
Conclusion
Overall, the Beauty, Cosmetics & Fragrance Store in the US is an industry that will
continue to grow. Probably not as high or fast as other industries but it is won’t really decline
either. This industry would be a great industry to invest in the next three year because the
opportunities for ecommerce and globalization is very huge. After so many years, the industry
just started to partner with other global brands overseas and there will be an increase of
partnership and globalization in the next couple years. As mention due to consumer’s realization
and the importance of self0imahe, this industry will continue to grow to meet the demands of the
consumers. The impact of the Porter Five Forces on the industry discuss that this industry have a
medium competition and low supplier power and a high customer power but also have a larger
number of substitutes.
Competitive Analysis 13
References
Alcantara, A.-M. (2018, September 18). Sephora Teams Up With Ecommerce Company
https://www.adweek.com/digital/sephora-teams-up-with-ecommerce-company-
memebox-for-a-new-korean-beauty-line/
https://www.cosmeticseurope.eu/files/6114/9738/2777/CE_Consumer_Insights_2017.pdf
Cohen, A. (2018). Beauty, Cosmetics & Fragrance Stores in the US (Industry Report 44612).
Danziger, P. N. (2018, August 6). Sephora, Ulta And The Battle For The $56B U.S. Beauty
https://www.forbes.com/sites/pamdanziger/2018/08/06/sephora-and-ulta-are-on-a-
collision-course-then-there-is-amazon-where-is-us-beauty-retail-headed/#229233e855dd
Hoover's Inc . (2018). Ulta Beauty, Inc. Retrieved November 17, 2018, from Hoover's Database
Hoovers Inc. (2003). Sephora USA, Inc. Retrieved November 17, 2018 from Hoover's Database
Hoovers Inc. (2018). Sally Beauty. Retrieved November 17, 2018, from Hoover's Database
Kestenbaum, R. (2017, June 19). How The Beauty Industry Is Adapting To Change. Retrieved
beauty-industry-is-adapting-to-change/#2201ec7d3681
Competitive Analysis 14
Kinonen, S. (2017, March 3). Ulta's Korean Beauty Section Just Got a Whole Lot Bigger.
News, B. (2017, January 27). Mobile Helps Ulta Shine. Retrieved from Digital Commerce 360:
https://www.digitalcommerce360.com/2017/01/27/mobile-helps-ulta-shine/
Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business
Review.
Sally Beaity. (n.d.). Sally Beauty Rewards. Retrieved from Sally Beauty:
https://www.sallybeauty.com/sally-beauty-rewards.html
https://www.sephora.com/loyalty-program
The Nielsen Company, LLC. (2018, February 15). The Future of Beauty. Retrieved from
Nielsen: https://www.nielsen.com/us/en/insights/reports/2018/the-future-of-beauty.html
Ulta Beauty. (n.d.). About Ultimate Rewards. Retrieved from Ulta Beauty:
https://www.ulta.com/ulta/myaccount/learnmore_template.jsp?page=benefits