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Another full service independent distributor bit the dust this past weekend, another major coup for L’Oreal. C.B. Sullivan operated in more than 20 states in the Northeast and serviced thousands of salons.

With the news out, what will those salons do differently? Shrug their shoulders and take care of another client. And that my friends is what companies such as L’Oreal, Sally Beauty Holdings (SBH) and Procter & Gamble (P&G) understand best.

L’Oreal didn’t become a $26 billion company because it is based in Paris. It didn’t get to where it’s at because of superior products although they have excellent products. In part, they got to where they are because they spend 30% of revenue on advertising. Most other consumer companies spend alike.

So what does that have to do with success? Quite simple. Global companies are truly successful because they are “people” experts. They employ psychiatrists, psychologists, human relation experts and subscribe to the best research in the world to learn and continue to learn how people think. Once they learn how people think, they employ the proper advertising to convince people to buy their products.

Pantene didn’t become a $3 billion brand because its shampoo, conditioner and styling product are superior although they have excellent products. Just think, the biggest brand in the professional industry is Matrix and they do $300 million a year, just 10% of Pantene. P&G are people experts.

And here is what else they know. P&G knows that even if they sell $3 billion worth of Pantene to consumers, they can sell Wella, Sebastian, Nioxin and Clairol to the salon industry because they know and understand people.

Walmart is the first company that demonstrated this principle. Walmart came into small towns, opened a store on the outskirts and we know what happened. At first, town folks were up in arms especially the downtown merchants. Their cry to the town folks was “you are not going to shop at Walmart, are you? We are independent, go to the same church and play cards together.” At first, the town folks were hesitant. But eventually, they succumbed. Downtowns for the most part shut down and Walmart became the largest company on the planet.

We saw this happen with bookstores. Do you remember independent bookstores? They had book readings, book fairs, book signings, yada-yada-yada. Then came Barnes & Nobles and then came Amazon. When was the last book reading, book fair or book signing Amazon held? Yet, virtually all the independents are gone.

Global companies win every time. But with our industry, many thought it would be different. After all, the customer is not the public but licensed independent professionals. Sure chains such as Regis and Hair Cuttery are in the game but control a small percentage of the business. With independent hairdressers as the customer, the thought was that they would support independent distributors who were the foundation of this industry since the 1920’s.

Alas, more flawed thinking. And it’s a shame. Sure, there will always be independents around that can make it work with the crumbs the global companies don’t care about.  And if a crumb ever gets to be too big, they will gobble that up too.

L’Oreal has won the game. SBH with their BSG/Cosmoprof division will be content with second place while P&G currently sits in third place. The game will continue until L’Oreal and SBH have no more big crumbs to buy. It was never about being a “people” business; it was about knowing how people think.

C.B. Sullivan is just another footnote. There will many more to follow.

Happy Thursday!

This entry was posted on Thursday, June 3rd, 2010 at 12:50 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.