Scaling Up Beauty: An Analysis of Economies of Scale in the Cosmetics Industry

Abstract

In this research, the cosmetics industry’s economies of scale between 2018 and 2022 were explored by examining the cost efficiencies of 20 cosmetics companies through a translog cost function model. The companies’ size was evaluated based on their total revenue and total assets. The study also analyzed the origin of cost efficiencies by considering various cost components such as cost of goods sold, operating costs, selling and general expenses, as well as administrative expenses concerning the total assets of the company. The findings revealed that, on average, larger companies had lower cost of goods sold and operating expenses. However, the cost efficiencies were not distributed equally as some companies showed considerable cost efficiencies, while others exhibited small economies of scale as their size increased.