A Hairy Market For China

I read a very interesting story in the Wall Street Journal on Wednesday called A Head Trip: Indian Hair Finds Parts in Hollywood. The story was about the human hair market. Apparently the United States imported $47 million in human hair last year. It's big business. Here's how the value chain works. Hair wholesalers pay $45 to $75 per pound for strands of human hair. They then sell that hair to hair "manufacturers" for approximately 30 cents a strand. Hair manufacturers then process the hair and sell it to international distributors for approximately $1.50 a strand. Hairstylists then buy that hair and sell a full hair weave for between $1,500 and $3,000 (sadly, I don't have the data on how many strands of hair are used in a typical weave). And thanks to all these participants in the hair market, Lisa Marie Presley is able to instantaneously have long luxuriant hair.

But here was the really interesting part of the article to me. It talked about the temple at Tirupati in India from which one of the leading international hair wholesales buys tens of thousands of pounds of human hair each year. Millions of visitors to the temple annually have their heads shaved in thanks to Lord Vishnu for good events that have occurred in their lives. The temple then collects up that hair and sells it in the international hair market. Some of those who are shorn in honor of Lord Vishnu have no idea that their hair is being sold, but regardless no one is paid for the hair. As a result, the proceeds from the sale of hair is essentially pure profit. The hair is a costless byproduct of prayer at the temple and the temple uses it to its full advantage.

Other than it just being a fascinating read, the thing that struck me in reading the article was the incredible advantage the temple has if it ever comes to price competition. With a zero cost structure, they can never be underbid. Other suppliers of human hair are at a disadvantage because they have to pay for it. Ironically, the market leader in the human hair market is China, which is for once at a price disadvantage. We often have the conversation with presenting companies about the difficulty of competing with Chinese manufacturers because their cost structure is so incredibly low. As can be seen with numerous consumer electronic devices, networking products, etc., once the technology behind those devices becomes commoditized, Chinese manufacturers are at an incredible advantage given their extremely low cost structure. Not only has the pervasion of Chinese manufacturing lowered the cost of numerous devices and sped the process of component commoditization, it has changed the way in which startups must look at sales and marketing strategy for device enabling technologies. But, hey, at least those startups can take some solace in the fact that China is at a disadvantage when it comes to producing human hair. Who would have guessed?

Comments

[Con Tendem]

Now that you have uncovered their weakness I am sure some provincial government will implement a measure for manadatory haircuts on a rotating 10% of the population. They might be kind and restrict it only to the male half. :)

Actually, since most Armies in the world require shaved heads for non-officers would not that be a huge source of essentially free hair? Chinese still have conscription, I believe which should give them millions and millions of heads to shear. Same goes for India and Russia, but even in US there have got to be a couple of hundred thousand new recruits each year?

Semi-unrelatedly. Hair has always been big business. Let's not forget that from late 17th to 19th centuries everyone higher than a worker/peasant wore wigs. I recall even a book plot where a Dutch officer comes to Russia with a get-rich-quick scheme of buying high-quality hair and selling it to the West.

[Young]

I dont know if this is a good example for the point you are trying to make. The $45 paid for the human hair is not that much compared with the final price $1500-$3000 of the finished product. It is the labor(clean, process, weave etc) that increases value. I would think China would be an ideal place to do that.

Any place with low labor cost should be able to compete. I dont know why China is particularly good for that, maybe because of its own market?

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