Posts Tagged recession
Posted on March 30, 2010 with No Comments
Many of my friends and subscribers to this blog have told me 2009 was tough. Decreasing clientele as well as a reduction of sale of in-house products such as shampoos, conditioners and styling aids.
The goods news is that 2010 has started out stronger than expected. Typically hair products whoesalers, reps and salons expect a slowing in the winter (after New Year) and another slow period in the Fall. Reports I get back are that January and Febuary were not bad, though March has been soft.
Hopefully this is a good sign that the increase in the stock market and build-up of business in the manufacturing and technology sectors will trickle down to the folks cutting the hair. We’ll see!?
With that said, Spring is here and many folks are planning Spring Break vacations and getting ready for the summer. This a perfect time to increase promotions for new 2010 hairstyles, coloring and to promote new products that have recently been introduced at the shows.
Offering discounts for family cuts as well as clearance sales for products on the shelves can boost traffic and provide a financial boost before kids get out of school. Partnering with local schools, updating signage with fresh messages, and getting your name out there via discount coupon books is a good start.
Another option for improving salon profits is to consider private label hair products. If you think this is only for the “big boys and girls”, you might be mistaken. Many manufacturers have formulations that are develoed just waiting for your label or screen. While this may seem like a minor addition for salon management, increases in prices, limited selection from distributors, and minimum quantities can lead to unsold products on the shelves.
Private label can offer a huge improvement in per unit profitability, a wide selection and very low minimums. Its easy and less expensive than you might think. To investigate further, call our favorite hair products manufacturer at 888-909-1658.
While many folks are still feeling the pinch, let’s all look forward to better days ahead in 2010!
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.
Tags: barber shop management, discount salon products, hair salons, improving sales, increase profits, increase revenue, increase traffic, more sales, recession, salon management, salon products
Category: Community, Improving Profits, Traffic & Revenue
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.
Tags: Add new tag, hair salons, increase profits, increase revenue, increase traffic, recession, salon management, salon revenue
Category: Community, Improving Profits, Traffic & Revenue, salon management
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.
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.
Tags: conferences, education, hair salons, increase profits, increase revenue, increase traffic, profitability, recession, Symposium, workshops
Category: Community, Improving Profits, Shows & Conferences, Symposium
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.
Posted on May 3, 2009 with 17 Comments
If you’re a hair salon owner, you have probably been asking yourself “How do I increase revenue, sales or traffic?” Here are some tips, advice and ideas on how you can weather the current economic storm and increase profit.
During the current economic crisis, sales and revenues for hair salons has plummeted. Many people are choosing to prolong cuts and styling, and product purchases have dried-up for all but the largest and heavily trafficked locales. With economic conditiions are what they are, increasing traffic is the primary concern. Consider several several of these successful ideas we have seen or heard about:
- Give away business (cuts) for free - There are many people in a tough situation and could use a helping hand. While this idea seems to go against the grain and purpose, promoting free (or nearly free) haircuts can give you a lot of free press and customer goodwill. Ideas we have seen are the “First Cut a Penny”. One salon owner has jars of pennies sitting around the the store full of pennies. The hope is if customers get friendly, curteous service, they will return..plus the jars of pennies are a great novelty. You can expand this idea to children, veterans, over the age of 65, or limit the offer to slow or off days when business is weak.
- Partner - Many successful reataurants and salons partner with local elementary, middle and high schools. Contant local administration offices to see how you can participate. This make require a small investment, but schools often have programs whereby partners are allowed to participate, advertising and promote their business. Chic-fil-a is a master at this and have lead to great success for many of their stores located near schools.
- Use discount coupons - I continue to be amazed how many folks look for and use coupons. Give all customers coupons for discounts on future services. We have seen quite a bit of success when coupons also include 2 for 1 or 50% discounts for hair products. It’s a great way to move shampoos, conditioners or styling aids off the shelves that might not be selling anyway.
- E-mail campaign - Though more of a long-term consideration, ask customers for email addresses when the registered for a cut or have them register online for promotions. Periodically use this campaign to announce discounts, holiday specials or servie specials - coloring, perms, products sales, etc. Be cautious not to use emails for other purposes (or sell them), and make sure propsects “opt-in” to your program to avoid violating spam laws.
- Website optimization - Make sure you have a website that is optimized for your location. We looked at a local salon’s site recently and found their meta data had not information that described their services or location. For those of you who don’t know what meta data is, it is the information search engines use to identify and classify your site. If you service downtown Atlanta or north Jacksonville, your meta data needs to say that…or, your site will be thrown in with the rest and you’ll have little chance you will be found for local products or services.
- Participate in local chambers of commerce - personally I have found this to be a bit of a drag, but for many, getting out there, mingling and getting to know local business people can be hugely helpful - especially in the long run. Many meetings allow you to do a “3 minute pitch” on your company, and announcing some sort of promotion can get you some pretty good free press. It’s all about networking.
I’ll talk about several other ideas (including buying wholesale hair products) in a couple of weeks or when we see things that really work. If you have ideas for increasing traffic, revenue or profits, please post a comment to help everyone. We would love to hear what has worked for you and we’ll happily refer to your information. Good luck.
