The cosmetic industry sells traditional cosmetics such as make-up and perfume, as well as products of personal hygiene such as tooth-care products, shampoos and soaps. Today, the cosmetic market is driven by innovation including new color pallets, treatments targeted to specific skin types and unique formulas concentrating on different needs. Most cosmetic types have a lifespan of less than five years, and manufacturers reformulate 25% of their products every year.
L’Oreal’s competitive advantage is product differentiation, requiring the company to have strong marketing abilities, product engineering, creative flair, strong capacity in basic research, corporate reputation for quality and technological leadership, long tradition in the industry, …show more content…
The only substitute that has arisen today is plastic surgery, which could replace their cosmetics and aging products. However, the performance of surgery as compared to cosmetics may be a threat to L’Oreal. Nevertheless, the switching cost (money-wise and health-wise) is very high, and most customers are unlikely to switch to surgery. Another potential substitute is a trend towards ‘no makeup’ and natural looks. That trend usually goes hand in hand with that of anti-consumerist group that view cosmetic products as …show more content…
Some include, but are not limited to, Avon Products, Inc. and Alticor Inc. Moreover, most of L’Oreal’s competitors are specialized in a certain type of cosmetic, giving them an expert image advantage over L’Oreal. The industry growth rate is also relatively high, as we make constant improvements in aging and other product innovation. However, fixed and storage costs are also high, but not as high as in other industries: products are relatively small and easy to store. Moreover, L’Oreal caters to higher end customers, producing its products in lower quantities. Product differentiation for L’Oreal is also quite high because of its brand image; however in the cosmetic industry, such as the perfume industry, it is often difficult to differentiate yourself from competitors.
Buyers
Bargaining power of consumers/buyers - MEDIUM to LOW
Customer profile of the luxury cosmetic industry:
• Age 16 to 60 years old
• Middle to upper class
• Higher education, and cultural knowledge
• Higher income level
• Influence on the world in general
• Man and woman, the majority of women
• Have leisure
L’Oreal’s competitive advantage is product differentiation, requiring the company to have strong marketing abilities, product engineering, creative flair, strong capacity in basic research, corporate reputation for quality and technological leadership, long tradition in the industry, …show more content…
The only substitute that has arisen today is plastic surgery, which could replace their cosmetics and aging products. However, the performance of surgery as compared to cosmetics may be a threat to L’Oreal. Nevertheless, the switching cost (money-wise and health-wise) is very high, and most customers are unlikely to switch to surgery. Another potential substitute is a trend towards ‘no makeup’ and natural looks. That trend usually goes hand in hand with that of anti-consumerist group that view cosmetic products as …show more content…
Some include, but are not limited to, Avon Products, Inc. and Alticor Inc. Moreover, most of L’Oreal’s competitors are specialized in a certain type of cosmetic, giving them an expert image advantage over L’Oreal. The industry growth rate is also relatively high, as we make constant improvements in aging and other product innovation. However, fixed and storage costs are also high, but not as high as in other industries: products are relatively small and easy to store. Moreover, L’Oreal caters to higher end customers, producing its products in lower quantities. Product differentiation for L’Oreal is also quite high because of its brand image; however in the cosmetic industry, such as the perfume industry, it is often difficult to differentiate yourself from competitors.
Buyers
Bargaining power of consumers/buyers - MEDIUM to LOW
Customer profile of the luxury cosmetic industry:
• Age 16 to 60 years old
• Middle to upper class
• Higher education, and cultural knowledge
• Higher income level
• Influence on the world in general
• Man and woman, the majority of women
• Have leisure