Hair Care News

Selling Private Label Hair Products vs. “Name Brands”

Posted on October 8, 2009 with No Comments

I try to spend at least 8 hours per week looking through some of the hair forums and blogs to see what customers and salon owners are thinking.  It’s a great way to get new ideas and to get a feel for what customers really think - generally, the ability to post anonymous comments brings out what folks really feel.

Earlier in the week I ran across a forum where salon owners were griping (in a good way) about the expense, carrying cost, and pure hassle of dealing with some of the well known brands and the distributors they buy from.  While many folks are genuinely satisfied with many of the there suppliers, many are not.  And many have considered selling shampoos and conditioners under private label brands.

Why?  Well the list is pretty long and it will probably take a few posts to dig into depth.  But, here are a couple of things I hear.

1. Getting “jacked around” - Sorry, it’s the only way to say it, and that’s what many folks feel.  Here are some examples. 
2. Discontinued products (with no warning) - I have a long list of products customers LOVE, but have been discontinued.  We are not at the corporate level of many of these companies so you don’t know what the justification is, but I promise many products are discontinued as a mistake.
3. Price changes - Not much to say about this one - often necessary, but I don’t believe some of the changes are warranted not justified - just more attempts at increased profit.
4. Delivery - Some manufacturers are pretty good…many are not.
5. Snooty-iness - Yep, again, sorry for the lack of better vocabulary, but “it is what it is”.  Increasing demands, selective exclusivity, product positioning - yepper, all of the above.
6. Product Diversion - The major manufacturers just need to get over this.  There are numerous marketing and sales channels available for personal care products.  If a few of them would go to b-school, they might figure out that ”exclusively through professional salons” isn’t such a great idea - especially if everyone is doing it.  Prohibition is over…and the majority of consumers are not married to their brands - especially at lower price points.

I didn’t spend too much time discussing why a salon owner might turn to private label, but for those of you in the business you understand and probably have a much longer list.  With that said, here a re a couple of reasons why many stylists and owners prefer their own brands:

• They know their customers - This allows them to carry just the products they need that they think will do the job.  It also allows them to design labels, names and verbiage that will sync with thei customer base better.
• You can often make more money - Name brands may go through 3-4 levels of wholesalers, distributors and manufacturers before they hit your shelves.  This makes for lower margins for you and higher costs for customers (which is not a good thing in this economy).  As a side note, many (most) upper-end brands spend a TON of $$ promoting, advertising and packaging their products.  You can be sure you as the salon owner is paying the bills.  With private label hair products the products go straight from the manufacturer to you…period.
• You can dictate the pricing and promotion as you wish - sales, specials, give-aways - you name it, you can do it.  Plus, if you salon has a website, you can sell your products online without fear of retribution or having your “name brand” pulled.

Here’s a couple of ideas to get started.  There are some draw-backs.  You need to educate your staff.  There is a an upfront cost to getting started (labels, art work, etc.).

If you are interested, there are several companies theat have private label hair products available for purchase - Alternative Beauty, Aware, and Liquid Tech are three that are good.

Selling Discount Salon Products to Increase Salon and Barber Sales

Posted on September 28, 2009 with 1 Comment

In our continuing quest to increase sales and traffic in salons and barber shops, consider selling major brand salon products at a discount - it has worked for Wal-Mart and other major retailers, it might just work for you!

Many salons and barber shops I have visited generally carry one to three major brands they keep on the shelf.  If promoted by the stylists or owner, you might get a few sales.  Unfortunately, this is often NOT the case and product sits on the shelf moving very slowly.  If this sounds like it might be the situation for you, then consider an alternative - deeply discounting well-known shampoos and conditioners to attract more customers and increase sales.

Many small and even multi-unit shops believe products should be marked-up to give them the highest margin.  For high-demand products or if your shop has high traffic, this very well may be the strategy you might follow.  However, as with many types of products, there is an “elasticity” to the price and volume associated with most products.

“Elasticity”, or more commonly referred to as “price elasticity”, refers to the sensitivity the product’s price has on its sales volume.  For the highest demand products, the price can be raised quite high before demand drops.  For most products, however, discounting the price leads to increased sales - to the point where discounting no longer shows an acceptable profit.  The trick is finding the perfect balance - and that balance varies depending on the product’s demand and exclusivity (can they find it somewhere else?)

Many salons sell brand products at a 100% mark-up or a 50% gross margin.  This is typical is the similar mark-up the distributor might get from the manufacturer.  For instance, a distributor may get Kenra shampoo from the manufacturer for $4.00.  They in turn sell to the salon for $8.00.  The salon in turn sells to their customers for $16.00.  Pretty stardard fare.

But, what good does a good, high or reasonable mark-up get you if you don’t sell anything?

Therein lies the the justification for selling discount salon products.  If you discount a $16.00 shampoo 25% (selling price of $12.00), you still get a reasonable gross margin (GM), but you might triple your sales -  puttting you ahead on cash and profit.  Also, if a customer likes the product they bought AND the price is good, they will likely return for more purchases - giving you an annuity-like revenue you didn’t have before.

While this sounds good on the surface,  you must promote the products.  Signage, ads, recommendations by stylists, etc can “get the word out” improving traffic.  Next time we will talk mores specifically about how to promote your discounted products.

Add a Free Facial to Increase Salon Sales

Posted on September 21, 2009 with No Comments

A good friend of mine owns one of the largest hair salons in north Georgia.  Owned and run by he and his wife, they have experienced a measurable drop in volume and sales in the past 18 months.

Theirs is a full service salon offering color, perms, straightening, and serve both women and men.  In the past, they also offered facials along with foot care and fingernail work.  The first thing they noticed was business dropping in these ancillary services - primarily because they were not considered necessities per customer feedback.

Regardless, during “good” economic times, these services sold well and were considered by many a very relaxing way to complete a salon experience - not necessarily competing with a spa or day spa, but a nice supplement to services and a very nice add-on for additional revenue.

Something you might consider to increase salon revenue, is to offer a promotion of a free facial periodically.  While this may not be a tactic you want to offer daily, picking a day or two a month might be a big draw to bring in some very tired customers looking for a renewal.

The cost can be minimal relative to a big boost in sales.  Setting up a station toward the back of the store may be as easy as putting up a few screens and there should be plenty of massage experts who would be willing to work a dy or two a month for some additional exposure.

If you have an outdoor display, post the promotion or foot the bill for a $50-$100 banner that you can display.  For those salons who have tried this, promotions have ranged from “free” to “free with a perm or styling”.  Again this may not be an answer to an overall increase in permanent traffic, it’s a service that will probably bring in new customers and boost loyalty of your current customer base.

Should You Publish Prices to Increase Salon Revenue?

Posted on August 14, 2009 with No Comments

Publishing your prices to the world - competitors or prospective customers, alike - can be a good thing and, well, a not so good thing.

With a deepening economy and salon traffic and sales down substantially, the creativity fires are brewing - leading to many conservative as well as fringe techniques for getting more folks through the door.

Most recently I noticed one of the top boutique salons in Atlanta publishing their prices on their marque.  Normally used for prophetic sayings or introducing new products, the sign clearly laid out all the prices they were charging for certain treatments…shampoo and style; shampoo, color and style, perms, et al!

While this may not seem too unusual, for this “top tier” exclusive salon, it was unexpected for me.  Does it work?  Well, yes and no.

The first argument is that you give away your pricing to your competition and you lose exclusivity.  The first issue is competitors can get your prices easy enough with a quick call or having a “shopper” stop by the salon or in fact have their hair done.

Yet pricing exclusivity issue is another challenge.  Exclusivity draws customers, and in some cases, repels them. The trick is to find the balance - which I believe is understanding what are the most common treatments in your area, finding a price point that will draw folks into the store, then keeping them (with service and a great hairstyle) for increased salon revenue?

So, how do you price the services??  I recommend running seasonal or situational sales - back-to-school, Thanksgiving, Halloween, wedding parties, etc.  Whatever the occassion, make sure it is well publisized - on your website, in the papers, on your sign, or have a small sign made-up to stick in your lawn, outside the store or in your window.

Remember, as you consider pricing and competition, that the majority of customers will stay with and be loyal to their stylist once they find someone who works well with them and does a great job on their hair.  Pulling someone away from that loyalty is tough, so make it easy with the right pricing and occasion. 

The idea to keep in the back of your mind is that if you normally see 60 customers per week and each of them extend their stylings one week, you will lose about 240 stylings per year - or the equivalent of roughly one month’s worth of revenue.   (Note- this assumes your clients get their hair styled once per month)

Price your services and consider your service specials accordingly to make-up for that lost traffic.

Revenue vs. Margin - Salon Management in a Recession

Posted on June 3, 2009 with 1 Comment

This a bit rambling, but stay with me for the punch line.

My wife, kids and I have been going to the same “favorite” sushi place almost once a week for the past 9 years.  The staff knows us and we know them by name.  They know what we like to drink, eat, and where at the bar we like to sit (the kids and I love to watch the food being prepared).  We’ve seen the owners’ kids get married and have a couple of kids themselves.  Even their older boy knows us when we come in and he and my 5-year-old go to the back and play with the toys.

Given the economy and recession, its no surprise that the crowds have dwindled.  In fact, we are only going every 2-3 weeks.  But here is the kicker.  In the past several months (more like a year now), we have noticed the prices going up and up.  In fact, I would argue prices have climbed probably 30-40% based on the bill we receive at the end of the night.

The Case Against Margin

I asked the owner why the steep price increases.  She commented, rather sheepishly, that they needed to maintain their margins.  Well interestingly, part of the reason we go there less often is because its getting too expensive.  As a side note, we have several other friends who go there as well and we all agree the cost has gone through the roof.  Like everyone else, we’re watching what we’re spending having seen many of our investments drop.

The point I’m making is that though business has dropped-off because of economic woes, they have further cut-off their toes by driving away business they are getting - or could be getting.

Now there is a reasonableness to the level of margins any business can sustain and still pay the bills, but as the saying goes, “I’d rather have 25% of something, than 100% of nothing”!

In the recession in 91′-92′, my wife and I owned a firm with 5 locations and about $5 million in revenue.  We had a tough time when our customers’ purchase volume decreased by ~35%.  With about 45 employees she and I both were more in management roles (vs. sales that we had been doing since we started).  The Gulf War had started and business dropped almost overnight.

We assembled our staff and had a series of meetings to outline a game plan for surviving.  The result was a three-point approach involving putting revenue, gross margin and expenses “under the microscope” to see what we could come up with.  After several days we had put together a rather long list under each primary category.  Interestingly, the gross margin list was the smallest, and it was agreed, the most fragile to our success (and survival).  Why?

Raising Prices Can Be Bad for Profit

Fortunately, we had some very good customers - many personal friends.  I called many of them and asked if they could continue doing business with us if we raised our prices a bit.  The response was friendly, but frank.  They too were having a rough time and if we raised our prices (even a bit), their management would ask they find another vendor (see, they were looking to cut costs as well).

The verdict was in.  There were some services that were inelastic (less prone to pricing change), so we rose them a bit; but we slowly started lowering prices with new orders.  Many of our customers noticed this and we were able to avoid widespread attrition of our client base.  In fact, we ended up picking up a bit of market share as a result.

The Case for Traffic, New Customers & Sales

If you’re tired of reading, sorry.  That was the prelude.  The real story here is the other ideas that came from the meeting.  Specifically, we needed to do everything we could to increase revenue and sales.

The list was long.  Some ideas were great, some good, some goofy.  But we wrote everything down, prioritized, and went to work - but the holy grail was to get more, new customers…period!

We put additional sales incentives in place for account execs (sales folks), and my wife and I returned to a daily sales routine.  In the roughly 18 months of the recession, we increased our customer base by ~40% - but, our revenue remained flat.  The good news is, if we hadn’t increased the traffic and number of customers, I’m sure we would have seen a steep decline in sales with layoffs and closings as unavoidable results.  Another note, when the recovery began in 92″, our sales sky-rocketed.  We had ~60% more customers than 2 years prior and everyone began ordering again.

It was a tough time, but we got through it.  but the lesson learned was folks are very sensitive to price during a down economy, yet they still need services, though at a greatly reduced level.  As per-customer-volume drops, it must be made-up with increased transactions albeit at possibly a lower margin.

Consideration for Salons

I want to finish with a real-world salon story.  My wife has been going to the same stylist for 9 years.  he and his partner split-off several years ago from a previous salon.  The last time she went there, they were “slow” - as is the common phrase I hear with several of the salons we work with. 

Well if you have folks on staff or if you are a partner or owner-operator, the time you spend at the shop is a “sunk cost”.  Meaning that money and cost is incurred whether 1 customer or 30 come in that day - similar to rent or utilities.  With that said, if your cost structure is somewhat fixed, then driving traffic is the difference between making money or not.

Let me give an example.  Let’s assume you have three salaried staff plus yourself and two partners.  Again, assuming you’re paying yourself a salary (plus tips and commission), you have overhead and  daily costs you must cover.  If your customer traffic has dropped-off because of the expense of coloring, consider contacting all your customers (email, phone, letter, etc.) and charging just for the cost of the materials and chemicals (and maybe a few extra bucks) - maybe once per month or something else a bit more creative.

Wow…are you kidding?  Well consider this.  If you have a staff of 6 and you’re working at 50% capacity, wouldn’t you rather have the traffic with hopes of new customers, repeat customers, sale of a few accessories or products, or some pretty healthy tips?  I would - and it works.

This is one possible example, but there are more…many more ways to drive traffic, keep everyone busy and gain market share.  When the economy returns to “normal”, your customers will love you, tell their friends, and business should be booming.  Right now the keyword is market share and volume.  Margin will take care of itself.  That’s what we found!  Good luck.

By the way, if you want to leave a comment or have a specific issue or want some advice, leave a comment, and I promise I will get back with you soon.

ISBN Annual Conference May 31, June 1 & 2

Posted on May 25, 2009 with No Comments

The ISBN (International SpaSalon Business Network) is holding it’s 2009 Annual Conference May 31st, June st and June 2nd at the Ritz Carlton on Amelia Island.

If your company owns multiple salon/spa locations, attending ISBN’s Conference gives you your best chance to stay on top of the many changes our industry is experiencing, especially important in these difficult times. Our association offers salon and spa owners an opportunity to belong to an inclusive network of companies that shares information and ideas.  ISBN

The Keynote Speaker will be John Paul DeJoria the CEO of Paul Mitchell.  The conference will highlight workshops, a “Link-Up lounge” for making and re-cementing industry contacts, and will kick-off with a golf tournament.  Registration ranges from $395 to $995.  Follow this link for more information and registration.

Considered a great online destination for the hair salon owner, ISBN does a great job focusing on business management…particularly in these difficult economic times when traffic and profits are down and costs continue to increase.

Free Haircuts Boost Salon Revenue

Posted on May 6, 2009 with 3 Comments

As a follow-up on our previous post regarding increasing salon revenue, last night (coincidentally) I saw a report on the local Atlanta news about  salon owner giving away free haircuts to those who recently lost jobs.

11 Alive News a local NBC affiliate reported how a salon owner was reaching out to those who recently becam unemployed.  I reported on this in  previous blog as a technique to not only improve traffic but to help your community.  Apparently from the report, all the stylists were excited to take part and response from customers was overwhelming - and heart-felt with gratification.

Needless to say, the two minute piece on the 7pm news has helped build traffic, loyalty and exposure - free exposure.  While every owner who chooses to offer a plan like this will get similar FREE coverage, it might be picked on the radio, local or community paper, or by word of mouth.

The key to promoting, is, well, promoting.  Let nearby unemployment agencies and churches know of your program.  Drop-off leaflets at temporary agencies.  They usually have large rolls of folks looking for work, and displaying or posting a professionally prepared flyer may often work well.  Especially if you reciprocate.  Offer to put some of their cards or a flyer in your shop.  If folks are getting their haircut and are looking for a job, considering registering with a temporary employment service may help them find a job…everyone wins!

The cond part of the report focused on free styling for moms for Mother’s Day.  An Atlanta-area salon hosted a Mom Pampering Day.  The recruited several makeup artist, nail specialists, and spa staff to give free massages, nail treatments, and makeovers - along with a wash, cut and styling.  Again, they got great, free press and exposure and judging from the video, the place was PACKED.  Most salons provide some spa services.  If you don’t, go visit a few to see if you can pull together a partnership for a day to promote everyone’s business.  If they are slow, then they might jump at the chance to perform the services + they have their own prospect for promotion.