What are the basic economics of the industry? How do companies make money? What are their costs?

The need to stay clean, groomed, and healthy all contribute to America's spending on household and personal products. Everything from shampoo to cleaning products represent the desire of people to present their best at all times. Although the two industries offer different (but sometimes related) products, their industries are largely the same in terms of market domination and volatility.

On the side of personal products, which includes cosmetics, hair products, lotions, and toothpaste; large companies such as Proctor and Gamble, Kimberly-Clark, and Avon Products have a particularly big hand in the US. Their sales are driven by wide-distribution and brand name recognition. This industry also has the benefit of being somewhat stable. Personal care is so ingrained in US culture that there is a strong consumer base. The advent of the internet also allows companies to reach new consumer bases. These companies also highly automate their manufacturing process in order to cut costs as the automation removes the need to hire more workers and it keeps costs down. This means more productivity for less money.

But on the contrast, although this industry tries to keep costs down, they can't always be successful. Many of these products rely on various natural resources in order to continue large scale production. However, the output of these products can vary from year to year, making costs volatile. In addition, a good portion of what keeps this industry moving is advertising, so companies need to spend a lot to ensure that their sales will remain high. But even that can't be guaranteed. Economic hardship shifts demand away from these products towards generic brands that may not cost as much.

On the household part of the spectrum, I have narrowed it down to specifically the soap and detergent industry to keep this blog simple and understandable. This industry is dominated by giants such as Colgate-Palmolive, S.C Johnson & Son, and The Clorox Company. Like the personal products industry, this industry relies largely on wide product distribution and a large consumer base. Other industries such as the hospitality industry, food service industry, and the healthcare industry are also big drivers in sales. By doing market targeting, this industry can increase sales.  

But once again, the household industry has its own challenges separate from the personal products industry. While the personal products consumer base is fairly consistent in decent economic times, the soap and detergent industry has to adapt to changing consumer bases. New parents largely contribute to their sales, so if people are having fewer children, they need to adapt to that. Soap and detergent companies also come under fire for not being environmentally conscious, which can affect how these companies make and distribute their products.

Although both industries sell largely different products, there is fairly significant overlap in how companies make money and rely on cost management. Both industries are dominated by giants and have the challenge of keeping prices down so that consumers don't switch to cheaper generic brands. They also have to rely on brand names and heavy advertising to ensure that they keep their consumer base. 

Sources: http://subscriber.hoovers.com/H/industry360/overview.html?industryId=1170

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