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It's Time for a New Salon Business Model

Leon Alexander | February 9, 2017 | 6:48 AM

Last year, the beauty industry lost more 21,000 salons, almost 9% of the previous years’ total. There are various reasons for this reduction, including salon walkouts, salon suite/loft growth, escalating overheads, standard of work and bored consumers. In other words, the salon didn't excite the consumer with anything new. Additionally, many salons are operating at a loss or have reduced profits. I often hear salon owners talk about their annual sales and what percent they have increased over last year. In England, they have a saying, “Turnover (sales) is flattery, profit is sanity.”

How can the current business model flourish with increasing costs of workers compensation, corporate tax, insurance, rent, social security and bank fees?

One of the primary objectives for salon owners is to increase the average visit consumer’s make to the salon. Typically, a consumer visits every 4-6 weeks. Imagine what it would do to the profit of a salon if a good portion of customers visited twice a week! In a previous article, I wrote about the opportunity of high street salons offering a high-end wine bar in the evening that converts to a high-end coffee bar in the morning, or an organic juice bar. This will not only increase visits for existing consumers; it will also entice new customers, resulting in a higher average ticket and the opportunity of additional retail sales.

An Evolving Consumer
Changing shopping tastes and expectations are quietly transforming the consumer and how they buy and expect service. Great changes outside the beauty industry indicate it’s time to create a new business model within our industry. Brick and mortar businesses have been seriously affected by online shopping and it is having major effects on retailers with 68 Macys closing, all Limited stores and 42 Sears locations. We are fast becoming an E-Commerce society.

Shoppers increasingly crave instant gratification, one-of-a-kind merchandise and are cozying up to the idea of borrowing goods versus buying them. As a result, the shopping model of the near future is poised to look radically different from just a decade ago. Salons that don’t keep pace are setting themselves up for a rude awakening at best, or even extinction.

In five years, consumer electronics stores as we know them today won’t exist and the same rings true for our favorite apparel brands. Technological innovations and a hyper-connected world have significantly influenced consumer behaviors and expectations. Some businesses are faced with a scary reality: change or become obsolete. There are three seminal consumer expectations fueling this shift in the service and retail landscape: instant gratification, borrowing and customization.

Instant Gratification
Companies like Uber, Grub Hub and Amazon have forever changed the way consumers think about service and how they go about their daily lives. People are no longer willing to wait for a taxi on the corner without knowing when it will arrive or trust the restaurant’s promise of delivery within 45 minutes. Instead, consumers want as much information at their fingertips and as soon as possible.

Borrowing
What happened to the boomers American dream of owning their first car or home? Today, we Rent the Runway, Zipcar ourselves to and from the grocery store and Netflix our shows. We want to own very little in order to consume more. Take the car for example: according to the AAA Foundation for traffic safety, cars purchased by 18 to 34 year olds fell almost 30% between 2007 and 2011. In the electronics space, we are seeing mobile device rental programs skyrocketing. Consumers are asking themselves why they should pay $700 for the latest device, when it’s going to become outdated within 12 to 18 months. Instead, they are opting to lease it for a minimal cost in order to get the next hottest gadget faster.

Customization
In addition to wanting to know as much about products and services as possible and having the ability to quickly exchange an older model, consumers also want to ensure products are tailored to their individual lifestyles and preferences. For example, Adidas allows consumers the ability to create their own shoes online with personal designs, pictures or logos. (See how salons are customizing clients' music choices.)

What Will the “New Salon Model” Look Like?
Some retailers are light years ahead of the curve when it comes to who is more successfully building a new retail model that addresses new consumer demands. Imagine walking into your local Best Buy and seeing winter jackets on the show floor. In today’s retail climate this might look out of place, but the electronics retail store of the future will also sell smart apparel — picture a winter coat with a built-in smart watch.
Additionally, stores of the future will emphasize selling experiences and lifestyles over products. Think about how revolutionary it was when Fleet Feet Sports allowed consumers to run down the street in a pair of shoes to experience the fit and feel. Now apply that idea and kick it up a notch: picture visiting a consumer electronics store to solve your health and fitness needs. Sales representatives can outfit you with a fitness tracker that reads your oxygen levels and heart rate to test your performance and wellness on an in-store obstacle course.

Personal Shoppers for All
The ‘New Model Salon’ will focus on transforming mobile apps into a personal concierge of sorts. When consumers enter a salon, in-store beacons will automatically wake up consumers’ apps to deliver highly relevant and personal content. Customers will be welcomed upon entering the salon. The “personal shopper” app features will point out where they can find favorite products, alert them of items they might like and tell them about new salon services and offers.

Self-Checkout 2.0.
One of the most frustrating parts of in-store shopping is waiting in a line to check out. More retailers will follow pioneer Apple’s lead with its Easy Pay self-mobile checkout. The customer will find what he or she needs, scan it, select a payment method and finalize the transaction, without waiting in a line or talking to an associate. As consumers become increasingly comfortable with contactless payments, the ability to control when and where the checkout happens will become more prevalent. As they exit the salon, services and purchases get charged to the customers account via their mobile device.

Power to the Consumer
In the palm of their hands, consumers are carrying around their own big data tools. They can scan bar codes and compare prices, check reviews or snap a picture and ask their friends for advice. Consumers have more power than ever before. As a result, salons will provide rich information and social capabilities optimized for every screen while integrating scanning and other tools to unlock content in their apps. Consumers will shop around and more salons will take broader steps toward transparency.

Virtual Fitting Rooms and Aisles
The rich virtual world will continue to supplement the physical world via consumers' phones and connected wearable devices. Consumers will access information and special offers through augmented reality, while moving through the retail area or seeing how they would look wearing something without trying it on.

Everything Starts with an Idea!
In our daily lives, we often describe those rarefied, super-energized states we cannot see as “spiritual,” and the slowed-down, more substantial states we can see as “physical.” Science has now told us this is an arbitrary distinction, just a convenience of language and perception. Take ice! The truth is water is water; it came from the idea of “quantum potential” of water through the states of vapor, steam, liquid, and ice. It’s all water. But it starts with an idea.

Everything in the physical world is made out of atoms. Atoms are made out of energy and energy is made out of consciousness. In other words, everything in nature, every phenomenon in the universe, starts as an idea.

What does this have to do with your dream business? Everything. Because everything you manifest in your life follows the precise same pathway, from idea to physical form. We create from the non-physical level, turning that which we can’t see into that which we can. Every thought you form broadcasts a distinct and particular frequency, and that frequency elicits a response from the quantum universe as surely as a swinging hammer has an impact on the surface it strikes. Things don't arbitrarily happen to you.

Events in your business are the reflection of your thoughts, the echo of your own actions and the thinking behind them.

In the East this truth is reflected in the idea of karma, in the West in the Golden Rule. The core of the principle is this: you are the cause of your life and in your business.

The History of the Beauty Salon Business Model
The beauty industry hasn’t had a major transformation since Vidal Sassoon created geometric cutting and revolutionized women hair in the 1960’s. We moved towards the model of full service provider in the 1990’s with a growing influence in retailing. Unfortunately, the evolution represented merely a tentative step rather than a giant leap for our industry. In business, today’s initiatives become tomorrow’s minimum standards with increasing rapidity. If we really want to maximize our business opportunities, a major paradigm shift in our thinking is required. Decision-makers must cease to view their businesses as salons and begin to think of them as ‘Consumer Locations.’

New Business Model
We need to emulate the best practices of service companies, retail providers and marketers outside our industry, because the same consumer that visits Starbucks, Apple and Burberry, come into our salons and we think of them as guests or clients. If we think of them as consumers, we adopt a consumer strategy and maximize the potential of our business and fulfill their expectations. We need to go beyond service and experience and create entertainment.

Currently consumers visit a beauty salon for services. The new business model will create multiple reasons why the consumer will visit a salon, including services. Reviewing ‘Salon Today’ top 200, the average of retail sales to overall sales in 2016 was 14%. 86% of salons revenue comes from service. The new model will have 40-50% of sales other than service. This is the formula for new projects!
Formula and Foundations

  • 5,000 square feet, high street, strip mall or mall location, not destination.
  • 1,000 square feet dedicated to retail.
  • Juice bars, coffee bars and where states permit, wine bars.
  • Additional retail items other than wet products.
  • Digital content will entertain and educate the consumer.
  • Beacons to notify customer’s mobile devices with salon data.
  • Self-Checkout. The ability to control when and where check out happens.

Salon Design

Currently the design of high-end retail areas in salons follows the pattern of illuminated wall units, launch promotion and seating in the center. This is a major leap from 15 years ago. This design has worked for a number of years and relies on the consumer going over to the products and hopefully purchasing.
The new design will have interactive touch screen sections of haircare, skincare and make up. Each boutique zone will have hands on activity combined with digital experience including scanning the consumer’s avatar. This design presents a collection of areas that will entertain, educate and will lead the consumer to facilitate the purchase.

Entertainment will not be limited to only the retail area. The color department, styling and shampoo areas will each have an environment appropriate to activity including digital content. Salons that move beyond focusing on the customer’s experience as purely transactional, are adding more dimension and fun to the salon visit simultaneously. The reality is, if salons entertain us with an ‘Omni Channel’ presence, our propensity to spend increases significantly. For consumers, this means they can expect more than just a service. They expect a full sensory experience.

It’s an alluring cocktail of touch and digital content. When we design a model that includes other retail items, along with juice bars, coffee bars and wine bars, the effect creates multiple reasons for the consumer to visit and have service, play, shop, stay longer and get entertained. The salon and stylists will benefit from new customers that can be converted from the other offerings of the location.

We think of Starbucks as a coffee shop. By offering free Internet, wine, beer and food items, 48% of Starbucks revenue is from sales other than coffee. Another example is ‘Gas Stations.’ Retail revenue is a major part of their overall sales strategy.

In the near future retail, wall units will have built-in-devices for educating and entertaining the consumer about the features and benefits of the products via Bluetooth. As the consumer picks up the product, a video will open showing tutorials and benefits.

Conclusion
The industry has evolved from service to experience. We need to take one giant leap to entertainment and implement a new business model designed around the emotional needs of the new and savvy consumer.

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