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The State of Salon & Spa Retailing

July 24, 2017 | By Neil Ducoff | No Comments

the state of salon spa retailing

Professional product retailing was in its infancy in the early 1970s. The four- to six-week haircut and blow dry and the baby boomer generation were absolutely made for each other.

Redken was the first major player to take the retailing of professional products seriously. It was the first to offer basic signage and Redken branded retail displays.

It didn’t take long for competitors like Jerry Redding’s Jhirmack to jump in to stake its claim to a piece of the salon retail marketplace.

Then came Matrix, Paul Mitchell, Aveda and a seemingly endless parade of professional-only manufacturers.

Along with the success of professional product retailing came diversion. Just about every major professional product manufacturer touted their attempts to stop diversion … but diversion is as widespread today as ever.

From its very beginning, the retailing of professional products through salons and spas has been up against two major challenges:

  1. The “I’m an artist … not a salesperson” mentality: The majority of salons/spas generate plus or minus 10% of total revenue in retail. That’s pretty dismal considering service providers have the client’s undivided attention for 30 to 60+ minutes, and shelves that are conveniently stocked with product near checkout. Across the board, salon/spa retail systems and the leadership accountability to lock in those systems, have been notoriously inadequate.
  • To this day, manufacturers, distributors and owners have yet to crack the code to ensure that EVERY client receives a professional product recommendation.
  1. Diversion makes “professional” irrelevant: The promise of salon/spa product exclusivity is a mixed bag that leans heavily towards broken. Walk through most supermarket and drugstore hair care aisles and you’ll see a fine selection of many professional brands. FACT: If an exclusive professional-only product line is readily available to consumers anywhere other than at or through a salon/spa, its professional-only credibility and mystique is shot to hell. Professional becomes irrelevant.
  • Manufacturers have sued retail outlets, used special product coding, terminated distributors for diverting, and even refused to do business with salons found funneling products to diverters. Yet diversion continues as if unchallenged.
  • Over my 45 years in this industry, diversion continues to thrive almost as if it’s a normal and accepted component of professional product distribution. I’m certainly not saying manufacturers have a hand in diverting their products. What I am saying is that diversion is so widespread that it could certainly be perceived that way.
  • For that small and elite group of professional-only manufacturers that have managed to prevent the diversion of its products … and keep its exclusive professional-only promise … congratulations. You are proof that diversion can be controlled.

The reality of manufacturer acquisitions by global brands, intense competition, pressure to achieve growth/revenue targets, and the proliferation of booth rental and suites:

  • Global consumer brands that entered the professional product arena through acquisition are, most respectfully, sales machines. Their professional product lines must perform and hit their revenue numbers. It’s not all warm and fuzzy in those corporate offices.
  • The battle for a salon’s color, back bar and retail business is beyond intense. In so many ways, it’s a buyer’s market for salons and spas looking to change product lines.
  • Now, think about the manufacturer’s sophistication and ability to move product into salons and spas, then factor in the fact that the majority of salons/spas struggle to get service providers to “recommend/sell/embrace” retail. Manufacturers are acutely aware of the “I’m an artist not a salesperson” dilemma. The only way to move product and hit their numbers is to find more viable retail outlets.
  • Expansion of booth rental and suites means fewer employee-based salons/spas. Renters and suites operators are far from effective retailers – if they embrace retail at all. So, as the number of viable employee-based salons and spas shrink, professional product brands are forced to get more creative to get their products into the hands of consumers.

And the “Age of online sales” has officially arrived for professional-only products:

Retail - How Amazon Sales Stack Up

  • Aveda was the first professional manufacture to creatively offer consumers an online portal for its products. Called “Pure Privilege,” the program respectfully offers Aveda salons a commission … as long as clients identify their Aveda salon of choice. Aveda ships to the client. Aveda also acquires the client’s email and contact information.
  • And now there is the emergence of Amazon as a professional retail competitor. Go to Amazon and search your favorite salon-exclusive professional products and damn near all are available. Salon owners are complaining that when their staff recommends their products, clients pull out their smartphones and order on Amazon.
  • More and more professional product manufacturers will make the jump to some form of online direct-to-consumer sales. This train has already left the station.

Here’s my challenge to you: You cannot bury your head in the sand and ignore the dynamic changes taking place in the retailing of professional salon/spa products.

  1. If you are one of the many owners that says, “My salon/spa doesn’t make any money on service sales, only retail sales” … then something is terribly flawed in your operational and financial structure. Retail should create additional profit, not be your only source of profit.
  2. Today, creating a successful salon/spa business means creating a UNIQUE BRAND. That being said, I believe the attraction and/or advantage of having a product-branded salon/spa may slowly be starting to wane. Your BRAND needs to be 100% your BRAND. That means EVERYTHING you use and sell has your BRAND identity on it – not some other company’s brand. Your service and technical client experience must be 100% owned and controlled by your salon/spa. NOTE: If being aligned with a brand is working for you … and there is a true partner relationship … stay with it. Just remember, it is your salon/spa brand that creates value to your company. Your brand will always be your best return on investment.
  3. The days of the BIG retail area are over. The days of looking like a “retail store” up front are over. Retail space can easily be replaced by service stations that are capable of generating more revenue. You can still sell a ton of specialty professional only products through recommendations without the massive retail space. (If you seriously do the math on a retail sale that goes beyond product cost to include G&A and space costs, net profit on retail is not at all impressive. No, you don’t make 50% on a retail sale. That’s gross profit. Subtract ALL the other REAL expenses and you’ll see what I mean.)

It’s time rethink the salon/spa business model with a focus on creating a unique BRAND that you own … not borrow from a major manufacturer that is desperately seeking ways to sell their products without you.

BUILD YOUR OWN UNIQUE BRAND … not someone else’s.

Categories: Monday Morning Wake-Up

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