Lipstick Effect In The Cosmetic Industry
We can see from the histogram that in the last 10 years Canada beauty market has grown from 4684 million US dollars to 6, 266 million US dollars in 2018. The market is expected to grow annually by 2. 3%. By using some simple math calculation its easy to get that the revenue growth rate growth by 3. 7% a year on average, with annual growth rates ranging from the lowest -0. 1% to the highest 10. 5%. However when we take a look at year 2009, we can find out that no matter profit, exports or the productivity were all in negative rate due to the downturn in 2009 which was called the “Lipstick Effect”.
Because of the economic depression in 2008, people were more willing to spend money on small luxury products like lipsticks. However, the downturn is seeing companies trying to preserve their resources and protect their market shares but there is no doubt many will be weakened by the unfavorable economic conditions. Companies had cut as many costs as they can; downsizing production at factories and decreasing media spend. In order to recover from this worst recession in decades, companies used the strategy “Buying up and selling on” to exceed industries expectations in a bid to strengthen their portfolio across all sectors and expand branches into different areas, like Asia. If the whole market can maintain this trend, the market is expected to grow annually by 2. 3%.
The cosmetic industry is broken down into six main categories; skin care being the largest one out of them all, reaching the amount of 2626 million US dollars which accounting for more than 30% of the whole revenue. Since the idea towards skin care has increasingly rising in these two years, people are more care about their living standards which leads the current trends to focus on using organic or natural ingredients in skin care products and this is also a new way to gain consumers’ attention and make larger profits which can seen as profits pressures lead to new product.
A new focus may lead to the development of new products that claim better or longer lasting benefits. And what’s more, men are more likely to buy skin care products and use traditional female products like face cream compare to previous time. In fact, major beauty retailer Sephora has a section in its stores and on its website specifically dedicated to the male consumer. Moreover Canada-based industry operator Groupe Marcelle launched CW Beggs, a men’s skin care line, in 2015.
