Cosmetics price composition
To figure out the above issues, we must first understand what the retail price of a bottle of cosmetics consists of, and the popular point is that consumers buy a bottle of cosmetics, where the money is spent. Everyone generally thinks that cosmetics are a profit-making industry and their profits are relatively high. However, careful analysis of the financial data of some publicly traded companies' cosmetics reveals that the profits of cosmetics are not high. Why do consumers have such an impression? This is closely related to the characteristics of the cosmetics industry.
Cosmetics is a business that sells beauty and dreams. When consumers choose cosmetics, emotional factors play a decisive role. In order to create a beautiful dream for consumers, businesses will invest a lot of advertising costs and hire celebrity spokespersons, build relationships with consumers and promote sales. Advertising and promotion costs account for about 30% of the price. Another big piece of cost is administrative expenses, which account for about 20% of the price. The two pieces together account for 50% of the price, and these costs are not related to the product itself.
Production costs account for about 20% of the price, and some brand ratios may even be lower. However, it should be noted that the production costs here include raw materials, packaging materials, manufacturing, logistics, transportation and other costs, and the use of raw materials directly related to the cost, the proportion of even lower. Another sad fact is that some products are more expensive to package than the raw materials inside, and these packages only satisfy consumer illusions and have no effect on the results.
That is to say, the raw material of cosmetics that really determines the effect of cosmetics is not a determinant of the price of a product. What really determines the price of a product is brand positioning. The effect of cosmetics and the selling price are not necessarily positively related.
Of course, the vast majority of products in modern society are composed of such costs, but the cosmetics performance is more prominent, giving people the illusion of profits, in fact, the real profits of cosmetics are not high.