PESTEL analysis is a framework used to evaluate the macro-environmental factors that can affect a company. The PESTEL analysis of Cosmetics industry is conducted to evaluate the political, economic, sociocultural, technological, environmental, and legal factors that can impact the industry. Understanding these external factors can help Cosmetics industry identify opportunities and challenges in its operations and strategy development.
Background and Introduction
The cosmetics industry is a vast and dynamic sector that includes a range of products, such as makeup, skincare, fragrances, and hair care. This global industry is worth billions of dollars and is expected to continue to grow in the coming years.
The cosmetics industry plays a significant role in personal care, self-expression, and enhancing one’s appearance, which has led to its continued growth and popularity. The industry is highly competitive, with both established and emerging brands competing for market share.
The cosmetics industry is also subject to various trends and changes, such as evolving consumer preferences, technological advancements, and sustainability concerns. To keep up with these changes, companies within the industry must continuously innovate, adapt, and offer new products that cater to evolving consumer demands.
The cosmetics industry is not without its challenges, including regulatory requirements, concerns over product safety, and ethical issues related to animal testing and environmental impact. To address these challenges, the industry has increasingly focused on sustainability, transparency, and ethical production practices.
Overall, the cosmetics industry plays a crucial role in the global economy, driving innovation and contributing to personal care and self-expression. With its continued growth and evolution, the cosmetics industry is poised for continued success in the future.
Industry information
| Name | Cosmetics Industry |
|---|---|
| Type | Consumer Goods |
| Industry | Beauty and Personal Care |
| Scope | Global |
| Key Players | Established and emerging brands |
| Products | Makeup, skincare, fragrances, hair care |
| Market Size | Estimated at $532 billion in 2020 |
| Growth Rate | Expected to grow at a CAGR of 5.9% from 2021 to 2028 |
| Trends | Evolving consumer preferences, technological advancements, sustainability concerns |
| Challenges | Regulatory requirements, product safety concerns, ethical issues |
| Focus Areas | Sustainability, transparency, ethical production practices |
| Future Outlook | Continued growth and innovation, increased focus on sustainability and ethical practices |
Political Factors
Product safety is one of the main concerns in the beauty and cosmetic industry across the globe, mainly because of the skin-to-skin contact of products. In the US, there is a bill called “the Personal Care Product Safety Act” that is very strict with laws that allow FDA to consider more strict rules and policies regarding products safety. The companies need to report their products ingredients and are required to be registered manufacturers.
Moreover, many companies import ingredients or products and sell them in other countries. They all have to follow the legal requirements as per the country’s policy. For instance, Canada and European Union have the policy of mentioning ingredients and over 500 companies have been banned for not following the rule (Buscher, 2021).
Economic Factors
The beauty or cosmetic industry is highly resistant to the economic recession, unlike other industries. the industry successfully survived the 2008 Great Recession. However, consumers became price-sensitive and carefully decide the necessary item. The cosmetic industry in the United States has generated more than $56 billion in revenue in 2015.
Not only women but men are also involved in spending more on skincare and haircare. In addition to this, the cosmetics industry comprises more than 14% of the market share. Nowadays, people are spending more on the skincare and cosmetics industries (Frue, 2018).
Social Factors
There are many companies like Loreal, Bodyshop, etc who perform their CSR activities very carefully over the years. Recently Loreal has distributed millions of lotions and sanitisers to be donated for local and front-line workers. People nowadays are beauty conscious than ever before when it comes to social media platforms. Skincare and makeup are now the ultimate fashion trend. When the brand is famous like Mac, Loreal, Bodyshop, etc, companies need to be careful in choosing what and how to promote. Bodyshop has marketed itself as one that does not test its product on animals. Loreal had to remove “whitening” products or words from their products as people are getting more morally sensitive (Momin, 2021).
Technological Factors
Popular cosmetic brands like Maybelline, Loreal, Mac, etc identified the importance of brand image for positioning itself in the global market. Cosmetic companies are now investing more in virtual and real technology for providing consumers with aesthetic products. Advanced technology reigns supreme and helps businesses in widening the spectrum of the public eye. Cosmetic companies use various online tutorials and content and influencers to create more demand for products. The influencers create videos with products that are visual content enjoyed and shared by many women across the globe. NYX professional makeup developed an application making use of augmented reality called ModiFace (MBA Skool, 2019).
Environmental Factors
Cosmetic companies are facilitating their goals for creating sustainable and environmentally friendly businesses in terms of business innovation. They have developed, designed and also implemented multiple measures for reducing greenhouse gas emissions at manufacturing facilities like plants, distribution centres etc. Maybelline has crafted the measurable target for reducing CO2 emissions by 60%.
The next program of the company is to reduce the usage of water. The company has also figured out its consumption and planned to achieve a reduction of 11%. It is claimed that 100% of the sesame and soya oil used by Maybelline is generated through sustainable methods (MBA Skool, 2019).
Legal Factors
Ingredients are a tricky part of the cosmetics industry. The companies must be FDA registered. No company can operate without FDA approvals. FD&C (The Federal Food Drug and Cosmetics Act) and FPLA (Fair Packaging and Labelling Act) are enacting laws that every company has to follow in the industry.
The FD&C also monitors the ingredients based on their usage and ensures that there should not be any misinformation. Many companies can be banned for not providing enough proof as per the policies and regulations (Frue, 2018).
Conclusion
The cosmetic industry is growing day by day, as beauty products are becoming a necessity. Not only women, but men are also investing more in skincare products. The companies make sure to market their products through social media and digital media.
References
- Buscher, N. 2021. PESTEL analysis in the Beauty industry. [Online], Available at: https://acasestudy.com/pestle-analysis-in-beauty-industry/, [Accessed on: 21st May, 2021].
- Frue, K. 2018. PESTEL analysis in the beauty industry. [Online], Available at: https://pestleanalysis.com/pestle-analysis-in-beauty-industry/, [Accessed on: 21st May, 2021].
- MBA Skool, 2019. Maybelline PESTEL analysis. [Online], Available at: https://www.mbaskool.com/pestle-analysis/companies/17994-maybelline.html, [Accessed on: 21st May, 2021].
- Momin, A. 2021. [Online], Available at: https://pestleanalysis.com/loreal-pestle-analysis/, [Accessed on: 21st May, 2021].