III. Industry Analysis
The Beauty Supply store industry has increased an annualized 2.4% due to favorable macroeconomic conditions and an increase in consumer spending. As companies expand to meet growing demand, the number of industry establishments is expected to rise an annualized 0.9% over the next five years. Larger chains are continuing to replace the small-scale stores that once dominated this industry. Consumers are increasingly opting to purchase products from beauty retailers due to their product expertise and incentivized loyalty programs.
Industry revenue is forecast to similarly trend upward at an annualized rate of 1.3% over the five years to 2025 as consumers buy more cosmetics and the domestic economy recovers. Moreover, the proliferation of environmentally friendly and cruelty-free products will likely spur growth in new markets. However, market saturation and competition from online retailers are anticipated to curb growth. E-commerce is projected to be one of the fastest-growing competitive threats to this industry, as consumers opt for the convenience and wide selection of products offered online.
As more high-end, imported products become available, industry profitability will remain high. The growing economy has enabled consumers to leverage greater disposable incomes to buy high-end products, resulting in a big margins for operators. Consequently, the average industry profit margin is anticipated to comprise 7.6% of revenue, far above the average of the overall sector. This trend is expected to continue as manufacturers increase research and development expenditures and reformulate staple products that sell at higher price points.