Sephora is a French-based retailer in cosmetics and perfumes that do operate in the United Arab Emirates. With over 100 stores in the Middle East market, the beauty store has been doing well in terms of performance over the past years. The beauty store is in a monopolistic competition given the immense competition between many of beauty cosmetics already in operation the country. There are many cosmetic retail store operating in the UAE with each trying to achieve some price advantages over the other. This is through differentiating their goods from other similar goods and making them desirable to their customers. As a result, the consumers in the UAE are treated to the best possible market outcome given that they have a variety to choose from.
Major Products and Services
The company retails a range of beauty products allowing its clients to have a wide range of options when making a choice on what best to purchase from the stores. As a result, the consumers in the UAE are treated to the best possible market outcome given that they have a variety to choose from. The company has a number of men’s and women’s fragrances and make-ups such as eye shadow primers and other skin care products.
The company is banking on a loyal UAE’s customer base given that they have been operating in the market for the last decade. Sephora has about 9 stores operating in the UEA with the largest being Mega Mall, 3-5, Abu Obiedah Bin Al Jarah Street, Bu Daniq, city Sharjah. The company is tasked with convincing its customers to choose the products over those of the competing retail stores. The decisions made on consumption can be described as rational with the maximization of self-interest emphasized. The consumers are out to maximize their satisfaction from the wide range of products that are in display at the retail store. Similarly, the retailer is aims at maximizing their profits through increased sales and diversification of product lines. The cosmetic consumers in the UAE are have a perfect knowledge of the range of beauty products they may need. The retail store has over the past decade spend a considerable amount of cash on advertisements given that there is imperfect knowledge of its products in most parts of the region.
Price Elasticity of Demand for the goods that Sephora sells
Price elasticity of demand can be described as the percentage of change that is observed in the amount of quantity demanded compared to the percentage changes in prices (Nocco, Ottaviano, & Salto, 2014). Under monopolistic competition, the price elasticity of demand can be described as perfectly elasticity. As such, infinitely small changes in process will result into an infinitely massive changes in the quantity of products that are demanded or are in supply in the market (Nocco, Ottaviano, & Salto, 2014). This implies that the consumers have a range of options to choose from when the products from one particular store become relatively expensive.
The income elasticity can be described as unit elastic given that when the income of a consumer changes, there will be a proportional increase in the number of products that will be demanded from Sephora by the consumers (Nocco, Ottaviano, & Salto, 2014).
Sephora’s closest competitors
The beauty retail shop is facing competition the Unilever Gulf Beauty and Personal Care retail outlets in the region that have been operating in UAE for the past decade. The company’s product also faces competition from international beauty outlets that have been in the market for a long time. The competing firm produces equally quality and reliable products as those being retailed by Sephora explaining why the competition for market control is increasingly becoming sophisticated.
Sephora’s close substitutes or complements
The products retailed by Sephora have close substitutes and complements to allow the consumers to make rational decisions concerning the types of products they are willing to consume. For instance, there are a number of hair and facial products on offer at the retail shop allowing the clients to make the best choice of preferred product. For instance, the beauty blend has a close substitute in the Cargo Bronzer and can also be used to complement other facial beauty products. The product faces competitions from rival retail outlets such as Unilever that have been in the market for a long time. The competing firm produces equally quality and reliable beauty products as those being retailed by Sephora explaining why the competition for market control is increasingly becoming sophisticated.
Demand for Sephora product
The company has the confidence of the consumers in UAE due their history of quality products and efficient customer care service. The costs of a commodity (beauty products) are determined by the market forces of demand and supply, and the firm (Sephora) can be referred to as a price taker. This make the prices charged on products to be more affordable and attractive to an expanded customer base. The regulations of the government in the UAE beauty market is under minimal control by the state explaining why the company has been operating without much externalities. As a result, the demand for beauty products from Sephora has been rising with company currently having a total of 24 stores in the whole of Middle East. For instance, the beauty and fragrance products from Sephora recorded the biggest sale in 20014, with approximately 30 % increase in sales from the previous year. The high demand for Sephora products can also be attributed to its unique shopping experiences, conducive locations and perfect customer care services.
Training on Sephora and the productivity
The company relies on a labor force that is mostly recruited from the local population to enhance cohesiveness and to reach a wider market base. However, the employees should be equipped with requisite training to enable them cope with the dynamics of a monopolistic competition (Pierret, & Beze, 2011). A well-trained workforce implies increased productivity and efficiency and therefore a reduction in production costs in the long run (Pierret, & Beze, 2011).
Due to the type of market structure Sephora is obliged to operate under, the stores have been making normal profits in the long run with super-normal profits occasionally achieved in the short run. The expansion program will enable the company to open more outlets within UAE and beyond in the process increasing their market niche and attracting more profits. The company recorded approximately 30 % increase in profits during the last financial year and a 20 % upsurge in revenue and growth due the expanded market base in the UAE.
Sephora and profit growth
With over 24 stores in the Middle East and about 9 in UAE, Sephora is undoubtedly one of the leading chain in fragrances and cosmetic products. The company is planning to open more retail outlets in Dubai in the near future to increase their market dominance. This will be a profitable endeavor given the expanded market in Dubai and the company has been experiencing an upsurge in sales. The company, in its bid to grow and develop will further diversify its production process to attract a wider range of customers and gain their confidence. As it stands, the company is valued highly in the region in terms of quality and efficiency in a market so much maligned with competition. The company should start exploring the less reconnoitered markets of Asia and Africa to further diversify their production process.
Various factors affecting the supply of Sephora beauty products
The company’s supply of products is affected by a number of market forces that sometimes influences the UAE’s economic performance (Nocco, Ottaviano, & Salto, 2014). For instance, a decline in demand can be caused cuts on public sector spending subsequently affecting the supply of products. The real income of consumers relative to the price of the company’s products may also affect the supply. Notably, most of the company’s products are categorized as normal goods and have a high income elasticity of demand (Nocco, Ottaviano, & Salto, 2014). Per se, when the real incomes of consumers rises (wage rate increases faster compared to inflation), the demand for the company’s products will increase as more consumers will be in a position to afford them. The company will be obliged to increase their supply to cope with the increasing demand.
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