Every company selling beauty products are liable to follow strict regulations and this PESTLE analysis of the beauty industry confirms dives deeper into these facts.
In this article, we'll use PESTLE analysis to evaluate the macro environment of the beauty industry. That means looking at the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors affecting this industry to see how it might progress over the coming years.
What is PESTLE Analysis?
PESTLE analysis is a framework used by strategic managers in business analysis. It investigates the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors that affect a company or an entire industry. It’s better explained with examples like we did here.
Beauty Industry Overview
The beauty industry is diverse, comprising more than just makeup and skin care products. You can’t forget about the small stuff, toothpaste and deodorant. But even though the products in this industry are endless, they all focus on selling one specific idea: a better you.
Beauty brands supply the tools to improve your appearance and, by proxy, your feelings about yourself. Toothpaste makes your breath smell better. Deodorant stops body odor. Makeup makes lips bigger and erases dark circles.
Beauty brands know people need products for certain occasions too, like when job hunting or when meeting up for a spicy date at that New Mexican restaurant around the corner. But what this really means is that everyone wants to impress someone – even if it’s only themselves.
But it’s not all fun and games. Every company selling beauty products is liable to follow strict regulations, and this PESTLE analysis of the beauty industry dives deeper into these facts.
Beauty Industry PESTLE Analysis
Beauty Industry Political Factors: Strict guidelines
- Product safety is a hot topic in the United States. It’s more openly discussed in the cosmetic segment of the beauty industry since these products are designed for skin-to-skin contact. A bill called the Personal Care Product Safety Act allows the FDA to have a more “hands-on” approach to ensuring product safety. Companies will need to report ingredient statements, recalls, and register manufacturers.
- Additionally, many brands in this industry either import ingredients from other countries or sell directly on foreign land. They’re required to follow all political and legal requirements in whichever country they’re in, and it can be tricky. For example, Europe and Canada have harsher ingredient requirements. Out of 1328 cosmetic ingredients, they’ve banned over 500. If the product contains any of these ingredients, they won’t be allowed across the border. The FDA has a big job to ensure the safety of all ingredients.
Although this focuses primarily on the cosmetic industry, the entirety of the beauty industry typically follows these same general guidelines set by political entities.
Beauty Industry Economic factors: A recession-resistant industry
Let's examine a few economic factors in the beauty industry.
- Unlike many others, the beauty industry is quite resistant to economic recessions. It even survived the Great Recession of 2008. Sure, customers became more price-conscious, deciding to buy only what they need for survival, but that’s the thing. Beauty products have become a necessity, like eating or having a roof over their head. People will always feel the need to have shampoo and soap in their bathroom.
- But in 2015, The United States’ beauty industry generated over $56 billion dollars, with hair care leading the way. Skincare was a close second and now expects to reach over $11 billion this year. It’s not just women; men are spending more of their paychecks on products to clear their acne and get rid of scars. Forums and subreddits are popping up over the internet, discussing the best routines for flawless skin. In third place, cosmetics comprise over 14% of the market share with oral hygiene dropping to the bottom of the list at only 5.6%.
- As for employment in this industry, nearly one million people are employed, including hairdressers, barbers, manicurists, skin care specialists, and massage therapists. The numbers are only going up from there.
Beauty Industry Social factors: Brand loyalty
Let's move into the social factors that affect the beauty industry.
- Hair removal, skin care, nail salons, hair styling, plastic surgery clinics, massage parlors, medical spas, and perfume bottles are all relevant to the beauty industry. And if you walk up into any of these aisles, you’ll find dozens of brands offering you nearly the same product. Customers will try an assortment of products until they find the one. But after that? They stop looking. They become brand loyalists. You can bet that one brand has stolen their heart and it’ll take a PR apocalypse to set them free. Brand loyalty spreads horizontally too. Someone finds their favorite shampoo from Company A and then sees a new moisturizer made from the same guys. They buy the moisturizer because they already love the shampoo. It’s not a huge leap to think they’ll love another product Company A launches. And it goes on, and on, and on.
- That’s why new beauty companies are constantly fighting to get attention in such a saturated market. They change up packaging, container sizes, and even the font on the bottles – all to maybe grab the attention of the customer for 3 seconds. But the battle to win their favor doesn’t start and end in the aisle. It expands further to the outside world, the internet, forums and reviews. One bad review is all it takes for a customer to look away in disgust.
Beauty Industry Technological factors: 24-hour access
Next in our PESTLE analysis of the beauty industry come the technological factors.
The internet really did revolutionize the beauty industry. You can buy almost any product and get it delivered to your home in a day or two. That’s good and bad for big name brands like L’Oreal and Dove. I say these two, because they’ve been in the beauty game for decades. And once upon a time, they were only fighting amongst similar brands to keep their products on the shelves.
But now?
- Any new beauty brand can sell their products through Amazon or set up a shop on Etsy. Many sell directly through their site (e-commerce) with no plans to ever put their products in stores (it’s both expensive and extremely difficult to get shelf room in retails stores). Sure, the big brands are well-known with a higher chance of keeping their customer base, thanks to brand loyalty. But these new shops offer exactly that: something new, shiny and often – niche.
- If you have Asian hair or African American hair, the big name companies typically don’t develop products specifically for them. But these smaller brands are slowly creeping out to fill that need. You can’t necessarily go to the store to pick up these niche products, but many people have no problem waiting a bit to get quality beauty products that work specifically for them (again, brand loyalty comes into play).
Beauty Industry Legal factors: Two major acts to follow
Time to investigate the legal factors that affect the beauty industry in today's PESTLE analysis.
Ingredients in the beauty industry are tricky. They can be FDA-regulated without also being FDA-approved. The Federal Food, Drug and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA) are the leading laws in which the beauty and cosmetic industry must follow.
The FD&C monitors ingredients based on their use while the FD&C ensures there’s misinformation branded on the products. If there are issues, the product may not reach shelves. They may even require a recall.
Additionally, if ingredients aren’t up to code (as deemed by the FDA) they can be banned, which is common in many countries outside of the United States.
Beauty Industry Environmental factors: An attempt is being made, but the effects are small
In the final section of our PESTLE analysis, we examine the environmental factors that affect the beauty industry.
The beauty industry is focusing more than ever to try and go “green.” Their packaging is becoming increasingly eco-friendly for less stress on the environment. But there’s still a growing issue with heavy plastic usage within the cosmetic and skin care segments.
In skin care, an ingredient called “microbeads” were sweeping headlines for a while. These beads exfoliated dead skin cells from the face. But, they’re made of plastic and horrid for the environment.
Outside of skin care, the type of ingredients used in everything from shampoo to spray deodorants can have a nasty effect on the environment. Even though brands are taking steps to improve the ill effects, there’s still a long way to go to see results.
For further reading, check out the following analysis of the beauty industry's leaders:
- PESTLE Analysis of LVMH
- PESTLE Analysis of Procter and Gamble
- PESTLE Analysis of L'Oréal
- PESTLE Analysis of Unilever
- SWOT Analysis of Estée Lauder
- SWOT Analysis of Dove
- SWOT Analysis of Nivea
