NEW YORK — The fickle nature of today’s shoppers can fluster a merchant.
Not so Regis Corporation.
A market leader in the hybrid salon-retail business, Regis has diversified its portfolio to get to shoppers no matter where they are. “We realized in the mid-1990s that the mall environment was getting more difficult and we saw we had to grow outside of malls,” said Paul D. Finkelstein, president of Regis Corporation, based in Minneapolis.
Regis, with annual sales exceeding $3 billion, has managed to excel in both salon and retail operations. In many cases, the company acquired its diverse businesses. Finkelstein said future growth would be driven by acquisitions, new stores and same-store sales expansion. The firm expects 3 to 4 percent ofits growth to come from buying existing businesses, 5 to 6 percent from new stores and another 3 to 4 percent from same-store growth.
With more than 9,300 salons in varying locations, Regis Corporation doesn’t flinch if shoppers stray from one channel to another. Regis has a huge reach. Mall shoppers are familiar with Regis properties such as MasterCuts and Trade Secrets. Regis, realizing the growing allure of discount stores, inked a deal with Wal-Mart and now has SmartStyle salons in more than 1,300 Wal-Mart units. Its Supercuts has a big presence in strip malls. Regis also owns Vidal Sassoon and Jean Louis David, two prominent salon names.
And now, Regis is branching into lifestyle and power shopping centers with plans to open more warehouse-size units. It already owns Beauty Warehouse, a three-store operation. It has now opened three additional units, dubbed Beauty Express, based on the concept. The stores are between 2,500 square feet and 6,000 square feet, with 11,000 stockkeeping units. In lifestyle centers, shoppers can drive right up to the door of the merchant rather than strolling long mall corridors.
The largest retail portion of the Regis portfolio is the 538-unit Trade Secrets, which produces 80 percent of its sales from retail and 20 percent from salon services. According to Norma Knudsen, chief operating officer of Trade Secrets, the format is producing comparable-store sales gains of 6 to 9 percent this year versus last.The customer is a “beauty junkie” who must have new items first, said Knudsen. She said Trade Secrets launches 25 to 30 new items per month. “Our customer has to have it first.”
Trade Secret units are about 1,100 square feet and carry about 5,000 skus. “[The warehouse stores] offer us a place to test things that we can then take to Trade Secrets,” said Knudsen.
Trade Secrets is also taking advantage of consumer demand for salon products by remodeling existing units with a fresh look. The new prototype features white wash wood and a much more open environment for retail items. “The look is more feminine and we see an immediate bump in sales when we remodel,” said Knudsen. The goal was to make the unit more “consumer friendly” instead of intimidating shoppers who might not understand the store is for all consumers, not just salon operators.
The cash wrap area has been moved from the front of the store to the back so shoppers see the wide array of professional products. The mix includes well-known salon brands such as Paul Mitchell, OPI nail care and Sebastian, as well as the firm’s private label. The average consumer buys almost three items per trip, Knudsen said.
The first-to-market strategy is one key to success that Trade Secrets has when pitted against mass merchants, including supermarkets, who have added many of the same professional salon hair care names that Trade Secrets carries. More and more women want salon hair and beauty products and if Finkelstein has his way, more will understand the importance of buying from a salon versus a mass door.
Finkelstein heads up the Beauty Industry Fund, a group with the sole purpose of cutting diversion of salon hair care products. The fund recently created a TV spot suggesting that hair care bought outside of salons could be phony. According to statistics provided by Finkelstein, retail sales of professional product in unauthorized channels increased by 45 percent during 2002 versus 2001.
As drugstores and other retailers continue to beef up professional lines to grab former department store shoppers, chances are there will be more and more competition from salon stores anxious for the same shopper.
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