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Nail Polish Industry Analysis

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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 positive trend. Industry revenue grew at an average annual rate of 2.3% since 2007. As the economy continues to recover, industry revenue is projected to increase by 4% (Panteva).

Although the general trend is positive, in 2009 the industry suffered a minor setback when disposable income per capita decreased 3.2% and the industry revenue decreased 0.6% (Walker). This is caused by a shift from visiting nail salons to purchasing cheap nail polish from drugstores, which caused a low-priced purchase of nail polish between $1-$5. As a result of decreasing purchase price, nail polish manufacturers suffered decreasing profit margins. Profit margins for nail polish used to be 10.8%, but decreased to 9.2% during 2009 (Panteva).

As the effects of the recession are diminishing, consumers are purchasing higher priced nail polish and profitability increased. However, profit margins are still below pre-recession margins. With disposable income growing at 2.3% annually for the next five years, consumers will be able to visit nail salons; industry revenue will experience an increase (Wendlandt). Regardless of a minor setback, the factors that are driving the industry are strong and with the economy recovering, the outlook of the industry is promising.

Industry Life Cycle

The nail polish industry is in its maturity phase. The industry’s growth rate and contribution to the economy is growing at a constant and steady rate. In addition, the growth rate of the industry is almost consistent with GDP growth rate. There is also minimal change and innovation to the nail polish itself, another characteristic of a mature industry. Most changes were centered on color, range and effect of the nail polish.

In the US, nail polish manufacturers are almost at market saturation and demand is expected to decline at an average rate of 1.3% per year (Panteva). Acquisitions are becoming common among key industry players, such as Revlon and Coty. Revlon acquired Sinful Colors in 2011 and Coty acquired Sally Hansen, NYC New York Color and OPI. By acquiring smaller companies, Revlon and Coty are able to reduce competition and increase their market share within the industry (Panteva).


The industry has two main players, including Revlon and Coty with a combined 63.6% share of total industry revenue in 2012. The remaining 36.4% of the industry revenue is attributed to other small nail polish companies that caters to a niche or produce a specialized nail polish (Barbalova). To increase market share and revenue, major players acquire smaller companies. Coty was able to achieve the highest market share in the industry by acquiring Sally Hansen and OPI.

Companies in the nail polish industry are highly competitive with companies attempting to attract consumers with lower prices, style, variety and quality (Walker). Price is one of the most important competitive factors, especially in low-priced nail polish because they offer the same price and quality. While in the premium nail polish market segment price is not as important, firms compete on the basis of style and color. Intense competition remains among large firms in the industry through acquisitions of smaller firms.

The larger companies have the resources to satisfy different markets and demographics with the smaller firms they acquire. 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, they must cater to markets that is not currently being served by Revlon and Coty and must have sufficient resources to comply with federal regulations.


OPI Products is a nail polish manufacturer located in North Hollywood, California and was one of the first companies in the industry to limit sales to professional salons (Hoovers). OPI is associated with luxury and professional manicures and has a catalogue OPI manufactures premium quality nail polish that is strong and durable and is used in most nail salons. In addition, OPI has a variety of colors and product lines and the colors have fanciful names, such as Comet Loves Cupid or I’m Indi-a Mood for Love (Hoovers).

Marketing is a key success factor for the nail polish industry, which is highly competitive and saturated. Therefore, advertising and brand awareness is essential to maintain and gain market share. To gain awareness and sales, OPI came up with a plan to promote the brand through word of mouth. OPI partnered with SheSpeaks, which is the leading word of mouth marketing network to target female consumers. The marketing campaign involved 9,000 SheSpeaks members sampling OPI nail polish (Maffin).

The word of mouth campaign generated approximately 800,000 conversations and 120,000 units were sold (Maffin). OPI also employs celebrity endorsement to boost brand awareness. OPI collaborates with celebrities and release a celebrity nail polish collection, such as collaborations with Mariah Carrey, Katy Perry and Justin Bieber. OPI celebrity collections are a success since consumers hold celebrities in high regard and when a celebrity collaborates with OPI, consumers’ trust in the brand will increase.

Industry Summary 2012|
Revenue| $1.1 bn|
Profit| $118.4 m|
Avg. annual growth 12-17| 3.3%|
No. of companies| 45|
Source: http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=4962

Predicted Revenue Outlook|
Year| Revenue $ million| Growth %|
2013| 1,138.00| 3.8|
2014| 1,177.90| 3.5|
2015| 1,217.10| 3.3|
2016| 1,252.60| 2.9|
2017| 1,286.90| 2.7|
2018| 1,317.00| 2.3|

Source: http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=4962

Barbalova, I. (n.d.). Nail Polish Brings New Affordable Luxury . Euromonitor International. Retrieved December 3, 2012, from http://euromonitor.com/2012/04/nail-polish-brings-new-affordable-luxury.html Maffin, T. (n.d.). OPI Grows Word-Of-Mouth . Case Studies Online. Retrieved December 3, 2012, from http://www.casestudiesonline.com/opi-grows-word-of-mouth/ O P I Products, Inc. . (n.d.). Hoovers . Retrieved December 3, 2012, from http://www.hoovers.com/company-information/cs/sales-preparation. O_P_I_Products_Inc.a61e6d6a80a041f8.html Panteva, N. (n.d.). Market Research Reports & Analysis . Ibisworld. Retrieved December 3, 2012, from http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=4962 Sole-Smith, V. (n.d.). Toxic Nail Polish: Lies Found on Beauty Industry Labels. Slate Magazine . Retrieved December 3, 2012, from http://www.slate.com/blogs/xx_factor/2012/04/13/toxic_nail_polish_lies_found_on_beauty_industry_labels.html Walker, R. (n.d.). State of the Industry . GCI Magazine. Retrieved December 3, 2012, from http://www.gcimagazine.com/marketstrends/regions/world/156321685.html?pag

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