Us Nail Polish Industry Analysis Essay

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Nail Polish Industry Analysis

Introduction and Background

The US nail polish industry has a total revenue of $1.1 billion and a profit of $118.4 million in 2012, with an annual growth of 2.3% in 2007-2012 and a projected annual growth of 3.3% from 2012-2017 (Panteva). The nail polish industry is able to survive the recession because they are sold at low prices, starting at a retail price of lower than $5 to $10 for professional grade nail polishes at drugstores (Panteva). Unlike other consumer goods, consumers are not as inclined to limit their purchase of nail polish, due to low prices.

Current Performance

Despite the recession that significantly the economy, the nail polish industry was almost unaffected and has shown a
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Nail polish manufacturers experience moderate indirect competition from acrylic nails, artificial nails and nail extensions, which imitates the effects of nail polish without applying any nail polish (Barbalova). However, there is a surge in demand of acrylic nails and could lead to a decrease in demand for nail polish.

The nail polish industry has moderate barriers to entry. Coty and Revlon dominate 63.6% of the market and both corporations compete in the global market (Panteva). As a global corporation Coty and Revlon highly benefits from economies of scale, which allowed them to acquire several smaller firms. In addition, both firms have existing marketing and promotional activities and the public recognized the acquired firms. The manufacturing process of nail polishes requires a high level of capital and is extremely technical. The industry is also facing increased regulations from the Food and Drug Administration (FDA), Federal Trade Commission (FTC) and the Environmental Protection Agency (EPA) (Sole-Smith). The chief concern from the regulatory agencies is protecting consumers from harmful substances in nail polishes. A recent investigation by the California Department of Toxic Substances Control discovered that 80% of nail polish tested contains harmful substances that is linked to birth defects and asthma (Sole-Smith). As a result, the industry is facing increased scrutiny from the government. For new firms to survive in the industry,
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