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A $1 Billion Opportunity: Salons Falter on Product Sales

Professional Beauty Association's survey showed poor selling skills and industry-wide failure to recommend products inside salons.

The salon industry may be missing out on $1 billion in retail sales a year.

Poor selling skills, long-standing customer relationships and product confusion were some of the key reasons to slow sales, as revealed in a study commissioned by The Professional Beauty Association and the PBA Foundation, the industry’s largest and most comprehensive survey to date. Its results are important — now more than ever — as salons continue to struggle amid stretched visits, fewer spa services and value-seeking consumers. Last year, according to the study, U.S. sales for the $37.5 billion industry fell 2.79 percent, the first decline in recent memory due to the troubled economy.

Moreover, in recent years, at least the more high-end salons have been viewed as a new distribution opportunity in an increasingly multichannel and complex beauty world.

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Reuben Carranza, managing director at Procter & Gamble Professional Care, sees an immediate opportunity.

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“If we could just grow sales 3 percent that would be $1 billion in additional revenue of stylists selling to consumers,” he said.

Of the salon industry’s overall sales, about 7 percent is generated from retail sales, according to PBA.

“Everyone has a role in this,” Carranza continued. “It starts with the mentality of our professionals. Many of the people in this role, it is their passion, and when you look at what happens in the salon, they don’t think they have a responsibility to make sure the client has the appropriate tools to get that style at home. The report calls out some recommendations with how the salon owner holds stylists accountable for this responsibility. And then the manufacturer has a role in that. It has to become part of what we do in the industry.”

The survey, called the “Business of Beauty: Maximize Your Profitability,” was conducted over the past 13 months and aims to provide salon owners, stylists, manufacturers and distributors with data that can help them build their respective businesses.

While full results of the study won’t be released until July 19 — during several conferences at Cosmoprof North America in Las Vegas — preliminary results were shared exclusively with WWD. For starters, the industry can build in-salon sales by following a detailed, eight-step program, which includes an emphasis on education and merchandising.

The study also:

• Debunks myths about salon retail: Yes, stylists actually like to sell products, they just don’t know how.

• Discusses who is taking revenue from salon retail: Ulta, Target and Sephora, to name a few.

• Reports on some of the best practices by salon’s leading competitors.

• Reveals some insights as to how the consumer perceives salon products: One-third of respondents think they’re priced too high; only 50 percent of consumers think salon products are different from mass retail brands.

The study was conducted by McMillan Doolittle of Chicago, a firm specializing in retail research, and combines four different segments (consumer, stylist, best practice and market size/share studies) which consisted of qualitative and quantitative research and surveyed more than 450 stylists, owners and stylist-owners. Steve Sleeper, executive director of PBA, a nonprofit trade association, said interviews were conducted across the country with nearly 1,000 consumers. Data was compiled from seven interviews with multiple manufacturers and distributors about their point of view on practices in salon beauty retailing and how those practices could be improved. About 30 leading salons around the U.S. were interviewed to document their successful systems and strategies. The practices of retailers, including Sephora, Ulta, Walgreens, CVS, Target and Wal-Mart, were also evaluated to understand their approach to the beauty category.

“This is bread and butter stuff, things an association should provide an industry,” Sleeper said.

While many of the findings were worthy, PBA kept returning to one finding in particular.

“The one we keep talking about is the urban legend in this industry that stylists don’t like to make product recommendations. But, the reality is, they like to do it, but they don’t do it as often as they should because of a lack of training. We have to wipe that bad habit away,” said Samantha Alvis, director of leadership operations at PBA, which is based in Scottsdale, Ariz.

According to the study, 71 percent of consumers weren’t even given a product recommendation on a recent salon visit.

“That’s a large percentage where there’s no selling taking place. It’s a revelation, especially since 34 percent said if a recommendation had been made they likely would have purchased something,” Alvis said.

While it seems stylists are to blame, Alvis explained that “a finger can’t be pointed at any one spot. The distributors have been trying to get selling practices in-house and ingrained in the mentality of the overall salon. But what has been found is that the stylist sees himself as a service provider only,” she said.

Selling products — or not selling products — is an age-old problem in the professional beauty world where, on average, only about 10 to 12 percent of a salon’s total sales are generated by retail products. As chains such as Ulta, Pure Beauty and Beauty 360 emerge — which all offer professional hair care — sales at salons are continually pinched.

Distributors are taking a special interest in the study’s findings, too.

Edwin Neill, president of the distributor Neill Corp, said that as a distributor, it is his role to inspire staff and stylists to talk about retail products.

“It’s not even a matter of selling. We need to inform stylists of their power. They have an incredible influence and ability to make consumers make a great choice. As a distributor we need to educate more and provide salons with a system for selling,” said Neill.

But not all salons are poor at selling products. Many Aveda concept salons, such Avalon in Deer Park, Ill., make retail sales a part of their operating rhythm.

Avalon’s owner, Bonnie Conte, said, “We are immersed in it because it is our culture. Everyone here is responsible for selling. We try not to even use the word selling but rather ‘educate’ guests on our products. When we hear that a stylist doesn’t have the time to do this, that’s when we go into training mode. They are the licensed professional. They are the one who will use the product based on the needs of their guest. So why wouldn’t they be the one who sells the product for take home? The [receptionist at the] desk is great and convenient, but they are not there throughout the service. If a stylist is really busy we have a traveler who comes up to the desk with the guest and they circle the products that were used.”

Retail sales at Avalon have dropped a little with the economy, but sales of products have been as high as 24 percent of salon revenues, Conte said, and they are now at 19.4 percent. In 2007, Conte said her salon generated $3 million in business — with $500,000 of that in retail sales. She said she uses a variety of strategies to jump start her staff, such as three “daily huddles” in the salon to keep morale up, featuring a “product of the week” and always talking about a finishing product with a guest, which can be an easy sell.

“They need to talk about the product instead of what they are doing Friday night,” said Conte.