Is a Cashless Culture Killing Tips?

Around the world, the COVID-19 pandemic hit beauty and hair salons hard. An industry that relies on human-to-human interaction meant that many faced an extended period out of work when this was no longer possible. Without customers coming in through the door every day, entrepreneurs lost their base source of income. But they also lost another significant part of their wage make-up: tips.

Tipping culture has been a longstanding feature in the industry as an acknowledgment of the great work carried out by hair and beauty professionals.

The pandemic has brought a rapid transition from cash to card as the go-to payment method for customers in a bid to avoid unhygienic cash. Salons started to go digital, but solutions to tipping were limited globally, even though clients wanted this ability.

Tipping culture varies around the world – in the Nordics, tipping isn’t expected or common. Whereas in the United States and most European countries, including  France, Germany, Spain, the Czech Republic, Hungary, Ireland, Portugal, and the UK, tipping is common and a way for entrepreneurs to earn income on top of their work.

Smart Digital Payments Lower the Barrier to Tipping

With cash being the mainstay for tipping for decades, the move to digital has meant clients are less inclined to tip when using cashless payment methods. The overall feeling is that people believe cash tips will go to the right person, as opposed to digital payments, where it’s deemed more difficult to be sure the payments go to the right person.

In other news from the UK in 2020, it was estimated that hairdressers could face losses of over £81 million in missed tips without proper consideration for cashless practices. Two in three consumers would avoid tipping if they couldn’t use cash, equating to losses of £81.27M for hairdressers based on a standard 10% tip.

So, if clients are less inclined to tip if they can’t use cash, but the use of cash has dropped significantly due to the pandemic, salons need to use digital payments systems that encourage clients to pay tips – the tipping barrier needs to be lowered.  Having a system that allows clients to select tip options when paying, will serve as a reminder to clients that they can tip. Also, having the option available to tip in advance for payments made online will serve as a way to collect extra income for hard-working staff. 

Going Digital is Better for Tips in the Long-run

Firstly, and perhaps the most basic benefit, going digital means less time depositing cash at the bank every week, saving a lot of time and effort. Overall, your accounting is going to get a lot simpler. Tips go directly into the salon software and directly to your stylists’ pay from that payroll period. Reports can be autogenerated and sent to the accountant for processing. Splitting the income between salon workers can be done instantly. In addition, by utilizing digital payments and booking services, you’re able to track metrics such as new clients per month, client retention, frequency of visits, average costs, productivity, and a whole lot more with just a few clicks. 

Additionally, having instant access to weekly, monthly, or yearly performance data can help salons determine areas of their business that are outperforming or underperforming specific goals and objectives.

In Summary

The embracing of this new technology, alongside other technology, will now allow salons to cater to these changing trends and provide a better service to our customers. But in order to succeed, entrepreneurs and salons need to pay attention to two things: 1) lowering the barrier to collecting tips – make it abundantly clear that you can donate tips via digital payments and make it as easy as possible to do that, and 2) be aware that it’s not always possible to separate the processing fees for collecting the tips, but don’t penalize your hard-working staff by taking a cut from the tips to cover the fees.

About the Author: Harri Myllylä is the CEO of Book Salon. He has an extensive background in the internet, mobile, and telecommunications industry with global executive experience (15+ years) in multinational corporations, startups, and growth company environments. He is experienced and well-networked within payment services, mobile operator, application developer, phone distributor, games, and OEM communities. Harri has managed and led the deployment of operations in multiple European countries, the Middle East, Asia, and in North America. In his free time, Harri is a passionate sauna enthusiast, like a true Finn. www.booksalon.fi/en/