Adapting Salon Business for Today’s World

By Web Editor | 03/24/2009 10:51:00 AM

 


As a sluggish economy slows industry growth, Analyst Cyrus Bulsara points to the bright spots in his 2008 Professional Industry Study.

 
 Cyrus Bulsara
As president of Professional Consultants and Resources (PCR), Cyrus Bulsara has analyzed and commented on the professional salon industry for more than 20 years. He conducts and packages original research, forecasting and trend analysis for corporate clients annually. Highlights of his report have been featured regularly in the popular “State of the Industry” reports launched in SALON TODAY and seen more recently in sister publication MODERN SALON.

As he finalizes his 2008 Professional Salon Industry Study, SALON TODAY invited Bulsara to be the voice of our first CONSULTATION column. The bottom line? Macro-economic factors of a recession will undoubtedly further impact professional beauty. All segments need to rethink and retool business practices, and there are opportunities for salons and companies smart enough to adapt and act.

General Overview: Good News and Bad

Professional beauty is still growing—up 2.8 percent overall in 2008, with hair care soft goods at 2.1 percent. This rate, however,  is the lowest PCR has tracked in the history of the salon biz.

“Salon hair care service revenues grew at only 2.1 percent,” he says. “Even color services, which are the staple and axis service of the industry, are down to 3 percent growth. Shampoos and conditioners are also in a low-growth cycle due to realignments, mass-retail brands and diversion.”

Even with these challenges, many product and distribution companies posted notable growth last year, according to PCR’s analysis. “Globally, Sally Beauty and Beauty Systems Group grew 5.8 percent in 2008, and Sally stores were up 6.6 percent and BSG/Cosmoprof stores posted 3.2 percent growth,” he adds. Some small- to mid-sized product companies experienced growth, while others faltered due to distribution realignments.

Economy chains surged in growth, Bulsara reports. “Great Clips experienced a 37 percent increase in franchisees, and Sports Clips performed well,” he cites as examples.

Bulsara estimates direct hair care product sales to salons began to plateau in 2008, then declined to represent 12 percent of total product sales to the salon industry.

Appliances are Hot

Clients may be slowing or stretching service appointments, but one of the biggest shifts in consumer behavior in 2008 was they were spending more time—and money—on home styling with high-end, professional-grade or professionally retailed tools.

“The hardgoods/electrics category grew 8.5 percent,” says Bulsara. He notes that innovations in flat and curling irons, dryers and other tools drove this business, with extensions of popular lines, new brand entrants and advances in materials that deliver higher performance.
 
Hand in hand with the hot tools trend are specialty products, such as thermal protection and hair-loss prevention products, which grew at 6.7 percent, and hair styling (wet line) products at 6 percent, mainly due to home hair styling during the recession.

New Opportunities, Same Challenges

Even in a recession, whatever is “new” is going to pique client interest and generate business for salons. New product trends that took root in 2008 and continue to drive pockets of vitality for salons in 2009 include new genres of products, such as Brazilian-keratin treatments, and deep-conditioning, lightweight, smoothing oil treatments (Moroccan).

Another trend that continues to evolve and develop in select parts of the United States is booth rental, which grew to approximately 25 percent of total salons in 2008. Industry consolidation and product diversion also continue to impact salons.
 
Although these factors can’t be ignored, Bulsara says independent salons shouldn’t necessarily see them as threats. As long as salon owners crunch and study their own numbers, carefully evaluate their own service and product sales trends, look for efficiencies in operations, seek out innovation and pay attention to the fundamentals of what sets them apart, they should be in good position to sustain—and grow—their businesses.

“Leading salons built on the artistic abilities of their top stylists and colorists are still going to have the best competitive advantage,” he says. “Continue to cultivate skills and creativity in a smart way, with the right education, products and partners, and you’ll do well.”



 

 

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