Beauty Products: Inventory Management Budget

This article was written by our expert who is surveying the industry and constantly updating the business plan for a beauty supply store.

Who wrote this content?

The Dojo Business Team

A team of financial experts, consultants, and writers

We're a team of finance experts, consultants, market analysts, and specialized writers dedicated to helping new entrepreneurs launch their businesses. We help you avoid costly mistakes by providing detailed business plans, accurate market studies, and reliable financial forecasts to maximize your chances of success from day one—especially in the beauty supply store market.

What is your total current inventory value for beauty products?

Your total inventory value for a beauty supply store is calculated by multiplying the cost per unit by the quantity on hand for each product, then summing across all items.

The most common method for beauty products is the weighted average cost method, which divides total procurement costs by total units in stock. This approach works well for beauty supply stores because it accounts for frequent price fluctuations and new product launches throughout the year.

For example, if you purchased 100 lipsticks at $5 each and later bought 150 more at $6 each, your weighted average cost would be $5.60 per unit. Multiply this by your current stock of 200 units to get an inventory value of $1,120 for that product line.

Alternative methods include FIFO (First In, First Out), which assumes older stock sells first, and LIFO (Last In, First Out), which assumes newer stock sells first. However, for beauty products with expiration dates, the weighted average method provides the most accurate current replacement cost valuation.

You'll find detailed market insights in our beauty supply store business plan, updated every quarter.

What are your average monthly sales by product category?

For beauty supply stores in 2025, makeup products generate the highest average monthly sales volume, particularly in lip and blush categories.

Hair care products rank second in sales volume with steady monthly performance, while styling and treatment products show consistent demand throughout the year. The category experiences seasonal upticks during late summer months when customers prepare for back-to-school and fall events.

Skincare products typically generate lower monthly volumes compared to makeup and hair care, but show periodic spikes when new, science-backed functional products launch. Monthly sales for skincare increase when products feature targeted claims supported by clinical evidence.

Sales patterns peak significantly before major holidays and during back-to-school periods, with Q4 showing the strongest performance across all categories. To maximize your inventory investment during these periods, you should increase stock levels 6-8 weeks before anticipated demand spikes to account for supplier lead times.

What is the forecasted demand for the next quarter?

Makeup products are forecasted to maintain dominant sales in Q4 2025, with demand spiking for new launches and holiday gift sets.

The makeup category will see the strongest growth driven by limited-edition holiday collections and value sets that appeal to gift buyers. Lip products, blush, and eye makeup will experience the highest demand increase, with projections showing 25%-35% growth over Q3 levels.

Hair care demand is expected to grow moderately in late Q3 and early Q4 2025, particularly for styling products and treatments. This increase aligns with seasonal hair care needs as customers transition from summer to fall routines and prepare for holiday events.

Skincare demand will increase if marketed with targeted, science-backed functionality claims that address specific concerns like winter dryness or anti-aging. Products featuring innovative ingredients or clinical results messaging will capture greater market share during the forecast period.

This is one of the strategies explained in our beauty supply store business plan.

What inventory turnover ratio should you target?

Beauty supply stores should target an inventory turnover ratio between 4 and 8 times annually to maintain optimal cash flow.

What are your carrying costs per unit?

Carrying costs for beauty supply stores typically range from 20%-30% of each product's unit value per year due to short shelf life and expiration risk.

These costs include three main components: storage expenses (warehouse rent, utilities, climate control), insurance premiums (product liability and property coverage), and depreciation (value loss from product aging or obsolescence). Each element should be tracked separately per unit to inform accurate budget planning.

For example, if a skincare product costs $10 wholesale, annual carrying costs would be $2-$3 per unit. This breaks down to approximately $0.80-$1.20 for storage, $0.40-$0.80 for insurance, and $0.80-$1.00 for depreciation or obsolescence risk.

Storage costs vary based on product requirements—makeup and hair care need climate-controlled environments at 60-75°F, while specialty skincare may require refrigeration. Insurance costs increase for high-value items or products with higher liability risk, such as chemical treatments or products making medical claims.

Depreciation accelerates for beauty products as they approach expiration dates, with most items losing 50%-80% of their value in the final 6 months before expiry. This makes accurate inventory rotation and sell-through velocity critical for minimizing carrying costs.

How should you allocate your replenishment budget by category?

Your replenishment budget for a beauty supply store should allocate 60%-70% to makeup and hair care categories based on their higher sales volume and turnover rates.

Makeup products should receive 35%-40% of the total replenishment budget because they generate the highest sales velocity and customer demand. Within this allocation, prioritize lip products and blush items, which show the strongest performance in 2025 market data.

Hair care products should receive 25%-30% of the replenishment budget due to steady demand and consistent monthly sales. Focus spending on styling products and treatments that show reliable year-round performance with seasonal upticks during late summer months.

Skincare products should receive 20%-25% of the budget, with emphasis on functional products featuring science-backed claims. Although this category generates lower volume than makeup and hair care, maintaining adequate stock of trending formulations captures growth opportunities.

The remaining 10%-15% should cover accessories, tools, and emerging categories that support core product sales. This allocation allows flexibility to test new product lines while maintaining sufficient inventory of proven sellers.

We cover this exact topic in the beauty supply store business plan.

What are the reorder points and safety stock for best sellers?

Reorder points and safety stock for beauty supply store best sellers are calculated using average daily sales, supplier lead time in days, and a safety margin for demand fluctuations.

How much budget goes to new launches versus replenishment?

Successful beauty supply stores allocate 10%-20% of their inventory budget to new product launches and 80%-90% to replenishing proven best-sellers.

The larger portion dedicated to replenishment ensures consistent availability of core products that generate reliable revenue and maintain customer satisfaction. This allocation protects cash flow by investing primarily in items with established demand patterns and predictable sales velocity.

New product launches receive a smaller budget share because they carry higher risk due to uncertain demand and potential for slow sell-through. However, this 10%-20% allocation is essential for staying competitive, capturing emerging trends, and attracting customers seeking innovation.

During peak launch periods (typically pre-holiday and spring seasons), you may temporarily shift allocation to 20%-25% for new products while reducing slower-moving replenishment items. This strategic adjustment captures market momentum when customer interest in new products peaks.

For a beauty supply store with a $50,000 monthly inventory budget, this means $40,000-$45,000 goes to restocking proven sellers like popular makeup and hair care lines, while $5,000-$10,000 tests new formulations, trending brands, or seasonal collections.

What supplier lead times should you expect?

Beauty supply stores should expect average supplier lead times of 4-8 weeks from order placement to product delivery.

Domestic suppliers typically deliver within 4-6 weeks, while international suppliers require 6-8 weeks due to customs clearance and longer shipping distances. Premium or luxury beauty brands may extend lead times to 8-10 weeks during peak ordering seasons when demand overwhelms production capacity.

These lead times directly impact your cash flow planning because you must pay suppliers well before products arrive and generate sales revenue. For example, if you place a $20,000 order with a 6-week lead time, that capital remains tied up for over a month before you can start selling and recovering your investment.

Longer lead times also increase your safety stock requirements to prevent stockouts during the waiting period. If a best-selling lipstick sells 20 units daily and has a 6-week (42-day) lead time, you need at least 840 units on hand when reordering, plus additional safety stock for demand variability.

To mitigate lead time risk, maintain relationships with multiple suppliers for key categories, negotiate expedited shipping options for emergency orders, and build lead time buffers into your reorder point calculations. Accurate lead time forecasting prevents both costly stockouts and excessive inventory carrying costs.

It's a key part of what we outline in the beauty supply store business plan.

What percentage of inventory becomes obsolete or expires?

Beauty supply stores typically experience 5%-10% annual obsolescence due to product expiration, formula updates, and changing consumer preferences.

Product expiration accounts for 3%-5% of losses, particularly in skincare and natural/organic beauty products with shorter shelf lives of 12-24 months. Makeup products generally have 18-36 month shelf lives, but items approaching expiration lose customer appeal and must be heavily discounted or removed from inventory.

Formula reformulations and discontinuations by manufacturers cause an additional 2%-3% obsolescence as brands update packaging, ingredients, or product lines. When a manufacturer discontinues a shade or SKU, remaining inventory becomes difficult to sell and often requires clearance pricing.

Trend-driven obsolescence affects another 1%-2% of inventory, especially in color cosmetics where seasonal shades or fashion-forward products lose relevance quickly. For example, a bold summer lip color may become unsellable by fall regardless of expiration date.

Your budget should include provisions for these anticipated write-offs to avoid overstating profits and maintain accurate cash flow projections. For a beauty supply store carrying $100,000 in inventory, budget $5,000-$10,000 annually for obsolescence losses through markdowns, donations, or disposal costs.

What cost-saving opportunities exist in your supply chain?

Beauty supply stores can reduce inventory costs through bulk purchasing discounts, supplier negotiations, and logistics optimization.

• Bulk purchasing agreements: Negotiate volume discounts of 10%-20% by committing to larger order quantities with manufacturers. For example, ordering 500 units instead of 200 may reduce per-unit cost from $10 to $8, saving $1,000 per order while increasing turnover velocity covers the higher upfront investment.
• Consolidated shipping: Combine orders from multiple suppliers into single shipments to reduce freight costs by 15%-25%. Working with a freight consolidator or scheduling coordinated delivery windows cuts per-unit shipping expenses significantly.
• Payment term negotiations: Request net-60 or net-90 payment terms instead of net-30 to improve cash flow without additional costs. This 30-60 day extension allows product sales to generate revenue before supplier payment is due, reducing working capital requirements.
• Minimum order quantity (MOQ) reductions: For new or slower-moving products, negotiate lower MOQs to test market demand without excessive inventory investment. Reducing MOQ from 100 to 50 units cuts initial investment by 50% while maintaining access to the product line.
• Automated inventory forecasting: Implement inventory management software that uses historical sales data and seasonal trends to optimize order timing and quantities. Automation reduces human error in reordering and prevents both stockouts and overstock situations that tie up capital.

What contingency plans should you have for budget disruptions?

Beauty supply store budget contingency plans address scenarios where sales fall short of projections or supply chain disruptions interrupt product availability.

If sales miss projections by 15%-20%, immediately pause all new product launches and redirect that 10%-20% budget allocation to proven best-sellers with guaranteed demand. This protects cash flow by eliminating speculative inventory investments until sales stabilize.

Switch to just-in-time (JIT) ordering for non-essential categories, reducing order quantities to minimum levels that maintain shelf presence without tying up excessive capital. For example, reduce hair accessory orders from 100 units to 40 units until sales recover to forecasted levels.

For supply chain disruptions like manufacturer delays or shipping bottlenecks, maintain relationships with 2-3 alternative suppliers for each major product category. This diversification allows you to source critical items from backup suppliers within 1-2 weeks rather than waiting 6-8 weeks for primary suppliers to resolve issues.

Increase safety stock on core products by 25%-50% during periods of supply uncertainty, even though this temporarily raises carrying costs. The expense of additional safety stock is significantly lower than lost sales from stockouts of essential items like popular makeup or hair care products.

Establish a cash reserve equal to 10%-15% of your annual inventory budget specifically for emergency purchases at premium prices or expedited shipping costs when disruptions threaten product availability during peak sales periods.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. GCI Magazine - The State of Beauty 2024/2025
2. Accio - Beauty Trend Forecast
3. Personal Care Magazine - US Beauty Industry Sales Report
4. Circana - US Beauty Industry Growth Report
5. Faster Capital - Inventory Optimization in the Beauty Industry
6. Shopify - Inventory Valuation
7. NetSuite - Inventory Valuation Methods
8. LookFantastic - 2025 Beauty Trends