Assess the bargaining power on the part of buyers of cosmetics.

Question

What will be an ideal response?

Answer 1

Competitive pressures from buyers of cosmetics are low in the following areas where consumers have weak bargaining power and are not price sensitive, Buyer bargaining power is weaker when:

• The industry's products are differentiated. 
• Buyers are large in population and many in number relative to the number of industry sellers. 
• Buyers do not pose a credible threat of integrating backward into the business of sellers. 
• Buyers do not have the ability to postpone purchases. 

Competitive pressures from buyers of cosmetics are high from customers who are not price sensitive, thus tending to decrease competitive pressures, which in turn places stronger pressure on vendors. Buyer power is stronger when

• Except at the very high end where luxury brands are prevalent, cosmetics purchases represent an insignificant fraction of consumers' budgets for housing, food, or clothing. 
• Buyers' costs of switching to competing cosmetic products are low. 
• Buyers are well-informed about the quality, prices, and costs of cosmetics manufacturers and vendors. 

On balance, the bargaining power of buyers of cosmetics can be considered to be moderate to high, except for high-end luxury brands.