Cosmetics Profit Margin | Guide for Startups

The average profit margin in cosmetics is 10%-15% minimum, whereas if we talk about luxury brands, the profit margin is more than 50%.

 

The cosmetic Industry in India is a prospering sector and is expected to grow with more than 9.5% CAGR for 2022-2028.

 

Overview of Cosmetics Business in India

 

• Investment: Rs. 8 Lacs - Rs. 15 Lacs (minimum)
• Area Required: 200 sq ft. - 500 sq ft. (minimum)
• Human Resource: 4 - 7 people 
• Cosmetic Business Profit Margin: Minimum 15% in New Brands and a Minimum of 50% in Luxury Brands
• Estimated Sales: Rs. 30,000 - Rs. 35,000 per day 

 

 

Factors that Determine Profit in Cosmetics Business

 

The cosmetics industry is one of the fastest-growing industries in the world.

 

However, the growth of this industry is basically driven by factors such as: 

 

• Raw Material Prices & Availability
• Economies and Globalization
• Legal Regulations
• Mergers, Partnerships, and Acquisitions.
• Need for Innovation
• Disposable Income
• Social Media

 

These factors not only affect the growth of the business but also helps in deciding the right location and the most potential niche.

 

Expected Gross Profit in Cosmetics Business

 

In order to calculate gross profit, we need to know two things: revenue and cost of goods sold. 

 

• Revenue is what we get when we sell our products or services
• Cost of Goods Sold includes expenses such as manufacturing costs, research and development costs, distribution costs, marketing costs, etc.

 

So, if you are keeping your profit margin around 15% and your average sales per day is around Rs. 30,000 then your gross profit will be Rs. 4,500 per day.

 

As a result, you will be making approx Rs. 1,35,000 per month as profit.

 

Investment

 

No matter what type of cosmetics business you are looking to start, it needs capital to get off the ground.

 

So for starting a cosmetic business in India, you will need a minimum of Rs. 7 lacs - Rs. 10 lacs initially.

 

The investment will be put into renting a place, renovations, buying the inventory, utility bills, salaries, logistics and miscellaneous expenses.

 

So, if you already have the investment, well and good. 

 

But, if you are looking for a source, here are some:

 

• Business Bank Loans
• Borrowing from Family and Friends
• Local Investors
• Angel Investors
• Venture Capitalists
• Private Equity Loans

 

It will not be easy to get the funds, but with a good business plan and a registered business, you can make it happen. Thus, apply for company registration online as a priority.

 

No matter what type of cosmetics business you are looking to start, it needs capital to get off the ground.

 

Area

 

The minimum space required for a cosmetic store is about 200 sq ft - 400 sq ft.

 

Make sure you have enough space and light to display all your products properly so that they are easily visible.

 

Also, keep multiple mirrors in your store so your customers can try and test the products before buying.

 

This will not only help you to retain customers but also attract new ones.

 

Also, consider the following factors while choosing a place to set up your cosmetics business:

 

• Footfall
• Visibility from Ground 1
• Purchasing Power of the Locals
• Nearness to the Market
• Competition
• Security
• Shop Rents

 

Expected Average Sales in Cosmetic Business

 

According to the reports, a cosmetic business has an average sale of Rs. 25,000 - Rs. 35,000 per day and it can go up to Rs. 80,000 during the festive and wedding season.

 

It is easy to have 25 - 30 customers per day initially if you are located in a market area or a shopping mall.

 

Those customers are willing to spend a minimum of Rs. 500 - Rs. 1000 per visit on basic cosmetics like creams, lipsticks, eye makeup, hair-care products and fragrances.

 

Ways to Increase Profit in Cosmetic Business

 

There are many ways to increase profit in a cosmetic business like:

 

• Advertising through Social Media
• Opening an Online Store
• Selling on Ecommerce Platform like Nykaa and Amazon
• Membership Offers
• Give Freebies
• Marketing Strategy

 

But let's do it as an expert did.

 

Here is a live example that you have been hearing all over the internet and now on TV too - "MyGlamm".

 

MyGlamm now not only deals in its own brands but also promotes and trades in personal care brands like St Botanica, The Moms Co., Organic Harvest, Sirona and many other luxury brands as well.

 

But how did it get there?

 

MyGlamm used the Content-to-Commerce Strategy to reach where they are today. 

 

The Founders were doing well when they started back in October 2017, But when COVID hit, the founders used it as an opportunity to target the customers digitally.

 

This is where they partnered with the POPxo and Baby Chakra, two of the very popular content-creating companies.

 

From there they went from a D2C Brand to a Digital Global Brand in 2021.

 

And nothing is stopping them from flying higher and higher now.

 

In fact, they are now also a makeup partner of one of the biggest reality show of India - "Bigg Boss".

 

Thus, use this strategy to target a wider customer base and explore your potential.

 

For this purpose, you can start by approaching new influencers and then reach out to the Big Fish in the Ocean.