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Markets & trends

Cosmetics sales are among the most promising businesses for the year

The good performance by door-to-door and franchise sales of beauty products in 2015 should be repeated this year despite the economic downturn in Brazil.

The Brazilian Service of Assistance to Micro and Small enterprises (Sebrae) is pinning its hopes on cosmetic sales in 2016. The organization believes that businesses linked to the beauty industry are among those that have the best chances of succeeding in a year where Brazil faces a grim economic outlook. Other industries that should thrive are masonry, electricity and plumbing services, car and electronic repairs, manufacture and sales of clothing, accessories and food products.

The marketing thinking behind this trend is simple – if the economic crisis discourages consumers from buying a new mobile phone, the way out is to repair the old one. If it is not the right time to invest in a brand new car or travel overseas, the customer can still purchase less expensive products that bring satisfaction and wellbeing, such as cosmetics.

Products from Mary Kay's Time Wise range

Products from Mary Kay’s Time Wise range

However, the best chances to prosper in the beauty industry do not lie in traditional retail – franchises and direct sales are the key to growth. Both channels performed well in 2015 and the results look set to be repeated in 2016.

Cosmetic and fragrance franchises have been showing resilience in the current economic climate. Despite sharp falls in retail and GDP, the franchise industry grew by 7.7% in 2015. There was an increase of 5.7% in new franchise stores launched,” says Claudio Tieghi, market intelligence director at the Brazilian Franchising Association (ABF).

He believes the good results achieved by CT&F franchises are due primarily to the work of traditional brands such as O Boticário – which continues to lead the franchise market in Brazil –, where the average selling price fits the pocket of the Brazilian family. The second reason is the cooperative nature of this business model. “Our essence is based in conveying knowledge from the franchisor to the franchisee and in the sharing of resources. A new business does not start from scratch: the franchisee has access to an established brand, products and services that have been tested, pre-designed processes, as well as an operating supply and supplier chain,” says Tieghi. Figures from ABF showed that the failure rate of franchises is 10 times lower than that of a business operating independently and comes to 4% compared with 40%.

The year 2015 was also stable for the direct sales channel, which recorded revenues of R$ 41.3 billion. These figures put Brazil in the fifth position in the world ranking of door-to-door sales, behind the US, China, Japan and South Korea. Around 90% of sales are concentrated on beauty products – with giant companies like Natura and Avon – and more than 4.5 million independent sales consultants.

The direct sales channel offers an interesting business opportunity both in tough and favorable economic times,” says Roberta Kuruzu, executive director at the Brazilian Direct Selling Association (ABEVD). In addition to being a low risk investment, she highlights the eclectic nature of the industry. “Anyone can start a direct sales business, as there is no restriction in terms of age, gender or schooling. The companies usually charge low starting fees, at around R$ 100, and offer product and business management training.

Retail experts believe that the more uncertain the economic outlook, the greater the trend for growing direct sales. A good example is US-based Mary Kay, which has been operating in Brazil since 1998. The company has seen its sales force triple over the last three years as a result of the increase in unemployment and the need for extra income. It now has a team of 440,000 sales representatives. Together they have led the company to boost its revenues by 40% over 2014. Not bad for a recession year.

Renata Martins

Portfolio

© 2016 - Brazil Beauty News - www.brazilbeautynews.com

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