More than ever, salon owners have to compete with the internet for retail sales.
What makes this even worse is that sometimes your competitors are the very businesses that you’re buying your professional products from. And when this happens, it means that your clients, whom you’ve spent valuable time educating about these products, can purchase directly from your supplier. This leads to you being bypassed and can result in a substantial loss of revenue.
Your business is not a hobby.
While it’s important to enjoy what you do, it’s actually more important that you make a decent living, and this can only happen if you are making sales – service and retail.
Recently, a salon owner commented to me that she always thought of her retail sales as being the cream on her income cake. But the truth is that retail sales are not your cream on the cake, they are actually the cake itself – your revenue-fueled, deliciously profitable cake.
Income from retail sales is hugely profitable – don’t doubt it. And if you’re not clear on just how important they are to you, then you’re probably leaving a truck-load of money on the table in your business.
Given that many professional retail products now return a 50% margin (that’s 100% mark-up), and most services return nowhere near that %, you need to take retailing seriously in your salon or spa.
Here’s an example of what I’m talking about.
Let’s say you provide a 1 hr basic facial service for the price of $85 (excl. GST). Once you deduct the product cost (approx $8.50) and the wages, super and bonus expenses ($37.50), you’re left with a $39 gross profit. Sounds pretty good so far, doesn’t it?
Now, let’s look at a retail sale that takes ¼ hr. The product selling price is also $85 (exc. GST). The cost of product is $42.50 (50% margin) and labour is $7.56 (1/4 hr), and bonus commission is $8.50. This makes your gross profit $26.44 for 15 mins of time invested. Now, when you consider that $26.44 was earned in 15 mins, that makes the gross profit for 1 hour $105.76.
What do you think about those 2 figures?
Service profit of $39 per hour or retail profit of $105.76 per hour?
I think it’s fairly obvious that retail profits are easy profits with a powerful impact on your bottom line.
With the same amount of time invested that’s makes retailing nearly 3 times more profitable to your business than providing a basic facial that has minimal product cost.
So, do you still think that retailing is the cream on your business cake, or perhaps now you’re thinking it’s the other way around?
Okay. Now we’ve established how important retail sales are to your financial health, what can you do to protect them?
Do your research.
The first thing, of course, is to choose your product suppliers with great care. Become a Sherlock Holmes and do your research. Google the product range that you’re considering stocking to see where else your clients can purchase it, and for how much.
Keep in mind, even if the price works out about the same as what you sell it for, people tend to opt for the ‘easy solution’, which is a quick online purchase with the products delivered to their door. Don’t rely on client loyalty to protect your retail sales, because for 99% of clients it doesn’t exist when it comes to price or ease of purchase.
So, if your products are readily available online, and you want to protect your retail revenue, then you’ll need to look for an alternative range that caters strictly to professional salons and spas.
Let’s face it – the internet is here to stay and no amount of wishing or hoping is going to remove these product competitors from your universe, so it all comes down to the actions you take to protect your business income.
Online purchases by your clients.
Another problem that salons face is one where the client comes into your salon with a bag full of online purchases, and expect you to spend your time providing advice on how to use these products. This is happening regularly, and I’ve spoken to many frustrated salon and spa owners who’ve been put into this awkward position by un-thoughtful clients.
Here’s my solution to this problem.
Create a new service in your salon called Professional Product Consultation and charge for it – not a pittance, but as if you were supplying a service in this time-slot – because you are.
This way when a client wants you to spend your time explaining how to use products that they’ve purchased elsewhere, you can simply book them in for a paid Professional Product Consultation to provide them with the full benefit of your knowledge.
This isn’t going to prevent the client from purchasing products online again, however, you’ll at least be paid for the time invested in teaching her how to use them; and this, in turn, will help to compensate you for lost sales revenue.
Motivate your clients to purchase from you.
To encourage your clients to purchase retail from you rather than online, consider including your retail product sales into your Rewards Program.
Once your client realises that she is missing out on valuable rewards points which she could have redeemed for salon services, she may reconsider whether or not buying online is such a great idea.
But at the end of the day, the real issue lies with the fact that your clients can purchase their professional skincare products online in the first place.
To my mind, any supplier to the professional skincare industry should be bending over backward to ensure their products are not being sold by anyone other than salons or spas to ensure the end-user is using the right products on her skin.
And that’s why, as a salon or spa owner, it’s up to you to ensure you choose the right range of products to protect your salon revenue.
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