Hair Color Business Demand and Challenges

Hair color demand is a complicated and rapidly changing market. When hair color demand goes high, it can create a negative feedback loop, making the demand go higher. When it goes low, it typically means that there's a surplus of hair care ingredients which will lead to lower prices and less consumer interest.

When any company wants to enter into the hair color industry, they need an ample supply of raw materials — including chemicals like ammonia and hydrogen peroxide. Ammonia may seem like an unlikely ingredient for hair dye but it is in many formulas.

care constrained by a limited set of available ingredients. The sources for those ingredients can also be limited and unstable. If a particular industry grows too fast it can put pressure on available resources and cause shortages. Although, it is possible for the raw materials prices to rise unboundedly as China is known to produce the largest quantity of everything from synthetic dyes, to major organic intermediaries, and even intermediates used for the pharmaceuticals.

The hair color industry is fueled by several factors which can be broken down into five different categories: price, demand, substitution, regulation, and supply. Price: Hair color demand has gone down over the last couple of years, specifically for hair dye. This could indicate that less people are coloring their hair compared to years past. As a result, consumers will buy less dye and its ingredients will be more available as the supply chain decreases from high demand. On the other hand, prices can also rise when relative demand is constant or increases.

Demand: Demand for hair colors are higher in almost all regions in the world: Europe, North America, South America, Africa and Asia Pacific except in Japan and China which suffer from low demand. Demand in countries like Russia and China is lower than premium alternatives – below those companies who offer their services at a very attractive price. This is due to the fact that in many countries, people still perceive hair color to be an unnecessary luxury and are often unaware of its benefits.

In North America, demand for hair color is mainly concentrated in young women and middle-aged mothers for home usage while Asian countries are following the western trend in hair color consumption with more young people coloring their hair.

The main competitors of the industry are related industries: cosmetics, perfume, food, and pharmaceuticals. The consumer wholesale market is valued at a high level. In this industry the most potential consumers and purchasers of hair color products are women, more than 80% of worldwide sales coming from them (also because men generally dye their head less frequently). The situation is thus quite different from the dye industry, in which, generally speaking, women are less consumers of hair dye products than men.

The hair color accentuates beauty and self-confidence. From this point of view, the hair color is a cosmetic product.

Personal use is not the only market segment in the industry: another big part represents its professional use – hairdressers and other professionals related to beauty. The market is also segmented according to geographical regions: North America, Latin America, Europe, the Middle East; Asia Pacific – Southeast Asia and China; Africa/Mideast – Africa and Middle East.

The big players of the industry are two French companies L’Oréal and Procter & Gamble.

On the one hand, hair coloring is a relatively cheap purchase. Many people don’t consider it as an essential purchase, but rather one of pure luxury. On the other hand, it is a good and quick way to add some extra style to yourself and improve your self-confidence. It can also save you more expensive visits to the hairdresser or beautician – with professional hair dyes you can simply do it by yourself at home. Price plays one of the biggest roles in people’s decisions when they want to buy some product.

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