Tear-Free Economics

September 28, 2009

Last night I was going through a fortnightly ritual: wandering through the kitchen and bathroom to determine what we needed from the virtual grocery store. Seeing as we are still (though perhaps not for long) a car free household (which marginally balances our flight related carbon footprint) we do almost all of our grocery shopping online. Among the things that I noticed was running low was N.’s baby shampoo. He’ll be two at the end of November, and though I’ve shampooed his hair dutifully every other night since he was born, the bottle of baby shampoo I bought with my mom just before he was born still has about 10% left.

This got me to thinking: maybe baby shampoo is a natural monopoly. In other words, an industry in which its most efficient to have just one producer.   While usually applied to utilities or transport because of the large cost of infrastructure, baby shampoo might just be the same kind of industry. The average newborn has about enough hair to warrant the application of a half a pea-sized amount of shampoo, and not even every day as their little heads dry out quickly. Even a toddler has a relatively small amount of hair (though perhaps if I had a two year old daughter rather than a son I would be washing more hair than I am now).  Thus, why would you want to make a very low-cost cosmetic product that needs to be replenished only once every two years?

You wouldn’t really, unless you had cornered the market.  And given that the cost of producing baby shampoo is almost nothing, the question is how do you do that? By a clever, and timeless, marketing strategy. The “No More Tears” on every bottle of Johnson & Johnson Baby Shampoo is so familiar that I remember musing as a child about what the ” secret ingredient” was that made it tear free. The brand leader is so well established that the generic version available in the online supermarket was the same canary yellow colour.

I literally can’t name a single other children’s shampoo (though a quick search at the supermarket revealed that there are lots of fancy organic ones that I probably should be using instead of Johnson & Johnson).  This is relatively rare for a cosmetic / household product: try an experiment. Toothpaste? At least three major brands. Adult shampoo? Countless. Cleaning products? Ditto. The natural monopoly like nature of this product might just mean that one day N.’s children are using J&J Baby Shampoo as well.  Somehow that makes me feel like the world is just a little bit smaller… and less tearful.