Out Of My Mind On A Wednesday Mornin’

DeSantis or Trump in 2024?

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Cosmoprof North America show is only a couple months away and less than 50% of the booths are sold. Most of the “exclusive” areas like natural, CBD and others are empty. None of the major hair or nail companies are exhibiting. Can anyone tell me why the show is still going on and who will possibly attend? Cosmoprof is a true indicator of the professional beauty market and its demise. This show used to be held twice annually due to demand, new manufacturer’s entering the space, new distributors excited to sell to salons and overall growth of the industry.

What factors precipitated the demise of the pro beauty industry? I have been on this subject for a few years and it is so sad because this was once a vibrant and exciting industry. Why? It featured entrepreneurs eager to get their new products into the market; entrepreneurs went to beauty school to learn their craft whether it be hair, nails or spa and then went to open full-service salons; consumers eager to enjoy being pampered and spending time and money on beauty services and products.

Eager to cash in on the explosive growth was retailers. Diversion was already a big issue but never controlled as manufacturers loved the extra sales. Diversion was the first nail in the coffin. Then Sephora opened in 1998, Amazon Pro Beauty in 1999 and Ulta in 2000. This was the second nail in the coffin.

The third nail in the coffin was the manufacture rep groups, the same ones that called on distributors (and ironically still do). They saw the opportunity with the Big 3 and went after them. When this happened, diversion was no longer an issue for manufacturers, they went direct and controlled their products and prices. Who got screwed? Distributors and salons. Call it greed, call it whatever you want, bottom line, it’s business.

Fast forward to today and what is state of the pro beauty business? Most full-service salons are at 50-60% capacity due to the fact so many of their employees quit and moved to booth rental and even more recently due to the pandemic, work at home. Many salons have closed. Salons and spas are begging for nail techs and massage therapists. Spas that are open are only open for limited hours due to staffing issues. Salon retail is dead in the water. As I predicted long ago, services are what matters and demand for services, especially at the high end, are as good as ever.

Amazon shares are now on sale for less than $2500 a share and you don’t have to be a Prime member to buy them. What happened? They reported their slowest sales growth since 2001; Bezos bet a few billion on Rivian and that bet failed; supply chain and inflation issues; and overcapacity. However they are on track to crack $450 billion in sales this year and most likely $500 billion in 2023. Their cloud business is still soaring and their advertising unit is mostly all profits. If there is any company I would not bet against, it’s Amazon.

It’s time for a commercial break and here is one of our latest products that I love, love, love. ForPro Expert Reusable 100% Organic & Bamboo Cotton Pads are best in class and actually made with certified organic cotton. I did a bit of research and found that virtually all reusable cotton pads that claim to be organic are not. Same goes with cotton rounds. These are now available!

ForPro Expert Reusable 100% Organic & Bamboo Cotton Pads

I was at Kroger shopping and checking out baked Frito Lay chips and a Frito Lay stocker was in the aisle. I picked up the bag of chips for $3.99 and said to him that bag is so small, it’s like a snack bag now. He said to me, “July 1 we have another price increase coming” and he couldn’t tell me if the bag was going to get smaller. Brownberry bread is over $5.00 a loaf. Food inflation is here.

It’s no wonder large chain restaurants are doing well. In some instances, it’s cheaper to go out if you don’t order alcohol. Chains have buying power and are better at keeping employees. Alas, small restaurants and small chains are closing at a record pace and this is after they survived the pandemic.

If a Supreme Court document is leaked, is anything sacred and trustful anymore?

Trump is licking his chops after a couple nice primary wins. If you had your choice of Trump or DeSantis, who would you choose?

Have you thought about chartering a bus? Don’t! Here is another industry decimated by the pandemic. What once cost $3000/month to insure a bus is now more than $7,000/month. Diesel is more than $6/gallon but the real pain is that there are no bus drivers around. It’s not like Generation Z kids are graduating high school and bragging that they are going to be a bus driver. Average pay is $200/day regardless if the driver drives two, four or eight hours and some companies are paying $300 and over just to get drivers. But even at that, they can’t find them.

Happy Wednesday!

Amazon Enters Pro Beauty Space

Which FANG company could you not live without?

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It’s official: Today, June 24, 2019, Amazon.com entered the professional beauty space and is now selling to licensed salon professionals through their Amazon Business platform. To get pro pricing, you have to belong to Amazon Business and submit your license. No doubt they will manually verify each and every application and most likely, have already established ties to each state government cosmetology body. No one does business like Amazon.

The good, bad and the ugly.

But before I go there, today’s announcement is years in the making and I predicted this day nearly ten years ago. I recall vividly having my annual vendors charity weekend in 2005 telling everyone they needed to have their goods on Amazon and if not, they would sell  your competitor’s brands. Everyone shook their head like I was on crack cocaine.

Amazon started to enter the pro industry with its Luxury Beauty platform. It signed up plenty of pro beauty companies along with consumer companies. Essie and Zoya were first to sign up for nails. Eventually CND, OPI, Moroccanoil, Redken, Oribe and 100’s of others would join. Interesting enough, Harlan Kirshner was the ring leader for Amazon getting pro beauty companies to sign up or lose out. Ironically, the pro beauty industry’s biggest rep who calls on SBH (Sally Beauty Holdings), Salon Centric and Ulta and makes $$$$ in commissions, played the Amazon side and got many companies to sign up. Harlan is one reason why we don’t see rep groups anymore.

With so many companies part of Luxury Beauty, Professional Beauty was the next step in Amazon’s dominance of all beauty. Today SBH stock is down more than 15% to a new low of $12.47 as I write this. Ulta is down too but that is because Ulta stock sellers don’t understand Ulta’s business strategy. Ulta will continue to best Amazon in beauty for many reasons, none of them part of this blog. But SBH like I have mentioned several times before is vulnerable, especially Cosmoprof because Amazon is focused on their best-selling brands: Redken, Wella and OPI.

OK, here is the GOOD of today’s announcement:

It’s done and now all the players can move on. Salons and spas have been buying on Amazon for years and really the only thing affected are retail and hair color products which will now be available at wholesale costs. Next week we will see what discounts are offered. What is also good is that Amazon is an open book, you can see their strategy right in front of you and you can either ignore it or take advantage of it. One thing is for certain: SBH is the most vulnerable beauty company right now.

The BAD of today’s announcement:

Amazon took the relationships of the pro beauty industry and said good-bye to them. Amazon bet big time the industry doesn’t need sales reps, education, trade shows, stores, sampling and demos. Just think of the savings. And if licensed professionals like it this way, bad news for reps and stores.

The UGLY of today’s announcement:

If you think about it the pro beauty business is only 40 years old and how fitting for Amazon to announce in 2019, nearly 40 years to the day when Matrix and Paul Mitchell started. In retrospect, that is an awfully short time for an industry to come and go and that is ugly. Right now Paul Mitchell is not part of the Amazon story and is arguably the largest pro hair care company left (and still independent). Will it become “us vs. them” mentality? In the end, Amazon wins on convenience and next day shipping (they are testing two hour delivery in Denver and other key cities). Coty went all in and soon we will see what that decision means for the rest of the industry.

Bottom line: Business as usual. Coty and L’Oreal will ship a few more goods to Amazon’s DC’s and fewer goods to SBH’s DC. But in the end, overall usage of pro beauty products doesn’t change and since Amazon Pro Beauty is only good for licensed individuals, Ulta will continue to gain overall market share.

Happy Monday! 

Out Of My Mind On A Wednesday Mornin’

What is your favorite Thanksgiving dessert?

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Sally Beauty Holdings (SBH) reported their latest quarterly results last week. The results were dismal enough to send the stock to a 52-week low. Is SBH a victim of the pro beauty industry, Amazon, terrible business plan or a combination of all three?

I recall vividly back in 1991 CND cut us off because full-service distributors didn’t like us shipping into their territory. Same thing occurred in 1997 with OPI. Back in the day full-service distributors ruled the world with exclusive distribution agreements that made them financially secure for life. Competition was non-existent.

During this time, Sally was buying OTC beauty suppliers . Sally grew quickly through acquisitions and became the dominant beauty retailer well before Ulta opened its first store. While Sally was creating a monopoly in its niche, the then CEO decided to start a new division that would eventually dominate the pro beauty side by acquiring as many as full service distributors as possible. Hence the creation of BSG/Cosmoprof. (L’Oreal got into the game late as it didn’t want BSG to control its brands so it started Salon Centric to compete and bought as many full service distributors as possible as well).

Fast forward to today and what to do we have? While Sally has more than 3000 stores, Sally’s business is declining. BSG/Cosmoprof is flat and that is with its monopoly on key hair care brands. In what used to be equal number of stores to DSC’s, stores are now more than 2/3 of the mix. Meanwhile virtually every distributor has been bought so growth is not an option through acquisitions.

Some say Amazon will buy SBH to get a foothold into the beauty business. Then again, anything is possible as Amazon ponders getting into medical/dental distribution, auto parts, fresh food and just about any business that has margin it can eat. Perhaps a more intriguing question to ponder is the fate of SBH the fate of the pro beauty business? One clue: The demise of DSC’s.

One thing is certain, SBH is in survival mode. Look no further than their email blasts advertising new lower prices, BOGO’s, 25% off everything and a deal of the day that makes one ponder what their pricing strategy really is. And here is the thing about today’s economy: No one cares if SBH survives or not, their products will always be available somewhere else with free shipping and two day delivery, sooner or later.

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Thanksgiving is tomorrow and my favorite holiday of the year. Plenty of great food, family fun, sports on TV and the Turkey Trot. But what about Black Friday this year? Never before have so many retailers advertised weeks in advance their Black Friday deals. Add to the fact that there are no must have gifts this year, it’s going to be a shootout on the OK Corral. Who is going to win? Walmart for sure, the rest, we will see. Cyber Monday? Who else but Amazon? We are more conditioned to buy from Amazon than at any other time even with the economy firing on all cylinders. 2018 will certainly be a watershed year for many retailers. And as far as football goes, does Detroit have a chance against Minnesota?

I just got done watching Big Little Lies on HBO. The story focuses on parents in Monterey, CA that have first-graders. Who knew how much drama could come from six-year olds. No wonder stress and high blood pressure is at an all-time high.

And yes just in case you were wondering, pumpkin pie is still my favorite Thanksgiving dessert, candied sweet potatoes favorite side and a little dark and white turkey with a touch of gravy makes the perfect plate.

Enjoy!

The New Big 3: Amazon, Apple and Samsung

Do you own a tablet and smartphone?

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Growing up everyone knew the Big 3 as GM, Ford and Chrysler. Cars were the world  and the engines to economic growth. There are more than 90,000 Interstate miles in the USA alone built for cars.

Fast forward to 2012 and the Big 3 are now Amazon.com, Apple and Samsung. Instead of 4000 pound hunks of materials with engines and thousands of parts provided by hundreds of suppliers, the new economy is focused in the cloud. There is no longer any need for the 90,000 Interstate miles. Heck, there is no need for cars if you are talking about the economy. And if you really think about, there is no need for stores, malls, parking lots and everything else built in the 20th century.

It’s kind of scary.

Best Buy and Target both recently announced they are matching online prices. Walmart recently announced same day delivery. And whom do they all compete with? Amazon.com.

Barron’s magazine recently featured the death of the PC on the cover and even featured a gravestone. Who needs PC’s anymore? Remember the Big 3 during the 1980’s to 2000? It was the Wintel: Microsoft, Intel and Dell. When was the last Dell computer you bought? Now everyone uses their smartphones or tablets to go online, text, access Facebook, make reservations, play games and so forth. And whom does those companies compete with? Apple and Samsung.

It’s more than scary.

ABC Warehouse, a Michigan based retailer of electronics and appliances recently started selling mattresses. Really? What do mattresses have to do with TV’s? Oh, you watch TV in bed so why not offer mattresses! Fact is, they have these huge stores and need something to put in them that Amazon.com can’t ship so easily. Mattresses appear to be the cure. But for how long?

All Apple devices connect to the iCloud. Amazon makes more money in the cloud business than selling goods out of its distribution centers. Samsung uses Google’s Android technology for FREE to power up its phones and also utilizes the cloud for storage. Remember thumb drives? Remember discs? Remember battery back-ups? Yikes, I still remember CD’s, DVD’s, cassettes and VHS’s.

It’s Halloween all the time.

What’s left that the Big 3 can’t touch? Food and services. But wait, Amazon.com is testing same day delivery of food in Seattle. But wait, SIRI is now accepting reservations and carry-out orders at your favorite restaurants. However, they can’t cook the food or provide an experience, yet. Services are also safe such as medical, health, beauty, dry cleaning, auto repair and so forth. Apparently those 20th century things have no interest to the Big 3 at this time. Eventually though, time will tell.

I’m happy to be in the beauty business.

Happy Wednesday!

P.S. MSU and the Detroit Lions. Really? At least we have the TIGERS! Go TIGERS!