Competition Game On Cosmetic Business

Competition and Survival


Reasons for Closing Down or Selling Cosmetics Retail Shops
(From a sample of entrepreneurs closing or selling their cosmetics shops)


 Losses due to competition.
 Low returns due to competition.
 Inability to compete based on price.
 Low capitalization and thus limited variety compared to competition.
 Poor management and marketing.
 More profitable alternatives.
 Incompetent employees.
 Unrelated reasons.
 More profitable alternatives – One rebranded as a salon rather than cosmetics shop,
another converted to a movie shop, another to a water and diapers distributor. These are
profitable in light of particular locations.


Major Sources of Competition


 Supermarkets
 Other dominant players in an area
 Informal traders like hawkers


Best Place to Locate


 Where there are a large number of the target customers.
 For low income consumers where there is no supermarket or dominant shop nearby
unless you have bigger variety and lower prices.
 Where there is no cosmetics shop offering a wide variety for the target client.
 Where, if need be, you are able to compete on price due to economies in sourcing,
supply intelligence or cost management.



Where there are economies of location; like concentration of salons or in an area known
for cosmetics and people come from all over to shop there, ensuring high foot traffic of
the right kind of customer.


Major advantage of Traditional Supermarkets over Cosmetics Shops
Price – Because supermarkets purchase items in bulk directly from manufacturers they are able
to arm twist them to offer lower prices. The low prices attract customers. This is a big challenge
especially in low income areas.


Shopping Freedom – In a supermarket one is able to take their time looking at different items –
ingredients, manufacturer, smell, price, something most cosmetics shops (unless cosmetics
supermarkets) do not offer. It becomes worse if the cosmetics shop owner or his employees are
impatient, hence consider the customer who wants to try look at different items before making a
purchase decision a nuisance.


Ability To Attract Foot Traffic – Because of the many products supermarkets offer, including
food stuffs, they are able to attract high foot traffic. A customer could have come to purchase
sugar, passes through the cosmetics shelf and decides to also purchase lotion rather than go
shopping again.


Trust Regarding Product Quality - Though it’s possible to get fake products in some
supermarkets, consumers trust supermarkets more than individual cosmetics shops. They
believe the possibility of getting fakes or sub standard products in a supermarket are lower.


Competing with supermarkets


 Have a wider variety of cosmetics products than the supermarkets. Although
supermarkets will have all the ‘common’ brands they tend to play it safe going only for
the big brands and relatively well established companies. However there are many
cosmetics products which are not mainstream but which are in high demand. So have as
much variety as possible both in terms of quality and price.


 It’s possible to beat supermarkets on price by sourcing intelligently. Where the
supermarket is pulling all the customers because of price then you need to match or
better them.


 Be there to advice customers based on their challenges and needs. (Oh my skin is
getting these white things…). Traditional supermarkets have attendants but these are
not specialized and some don’t have very good knowledge of the products. Not to a level
they can give trusted recommendations.


 Where possible offer customers a way to interact with products. For instance by
smelling, reading labels, opening and looking at the color. This could be by designating a
few sample products.