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!
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.
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.
Bob Woodward has now penned his eighth presidential book, FEAR: Trump In The White House. Working for the Washington Post (now owned by Jeff Bezos)since 1971, Woodward was among the first to investigate Watergate (along with Carl Bernstein) and has written 18 books, 12 of which are best-sellers. No doubt FEAR will be among the top of the list which debuts September 11 of all days. Trump has already tweeted that most of the book is made up of lies, fabrications and other Trump phrases. Bottom line: Woodward is a true investigator reporter who is now the associate editor for the Washington Post. At the age of 75, who is kidding whom?
And speaking of Trump, will he or won’t he impose an additional $200B in tariffs on Chinese goods? Today the U.S. announced a record trade deficit with China and of course that is due to the economy on track for its longest expansion ever. Like I have said previously, tariffs will do nothing but harm virtually every company that produces a product and will cause prices to go up.
Then again we are living in the age of “no one cares a shit about anything.” Respect is out the window. Communication between people is at the lowest levels ever. Phones on desks are slated for the Smithsonian. People don’t get back to you or even respond when you ask them something. Service at restaurants and hotels is terrible and no one cares. We now trust Amazon more than we trust anyone else, hence Amazon’s trillion dollar valuation. I can see it now: New apartment and condo buildings will have Amazon access for drivers who make non-stop deliveries day and night.
Is it any wonder that suicides are at an all-time high, up 30% since 1999? Marijuana use on college campuses is at a 30 year high. Opioid addiction and deaths are at an all-time high. And should I mention alcohol sales?
OK enough of this! What is wrong with just being happy? Who cares what Trump tweets? Who cares who Nike hires? But of course there is a company that rates happiness and guess what, America is 108 out of 140 according to the Happy Planet Index. In fact, we rank pretty dismal in all categories. That is why I proclaim the new TGIF, TGFB! Thank Goodness For Beauty provokes happy thoughts. After all, we spend quite a bit of our life doing the following: Showering (wash and condition hair, wash body, shave, daydream), apply makeup, apply deodorant, brush and whiten teeth, spray fragrance, style hair, file nails, get hair cut & colored, get mani’s & pedi’s, brows, bikini wax, visit dermatologist, visit dentist, visit spa. Oh should I mention the going to bed routine? TGFB is all about being happy! Most of the time you are by yourself and can listen to music and daydream. And it’s all for looking good!
I never did blog about the Cosmoprof Vegas show that came and went last July. Perhaps because there wasn’t much to write about. Once again, they claim record booths but c’mon, what really has this show become? It is now 1/3 pro beauty (shrinking quickly), 1/3 retail and 1/3 packaging. There is not enough of anything for a serious buyer to attend, hence, attendance keeps dropping. Next year will be even more interesting as NAHA finally moves out and heads to Long Beach. Finally there will no longer be hairdressers walking the floor so the show floor will be that much less busy. Next up for us: Natural Expo in Baltimore and ISPA in Phoenix.
Most-wanted APP’s that have yet to be developed that have the greatest potential: Self-directed garbage cans that move to the curb and back to the garage; self-emptying dishwashers; self-folding laundry; and self-washing cars.
I passed level 2800 of Candy Crush and not proud of it. They say video games will be even more addictive in the next five years as consoles go away (bye-bye Gamestop) and all games are downloaded. Next fad: Live game rooms for gamers. One opened at Luxor.
I read about 10 books this summer and stayed away from the all-additive TV as much as possible. Only watched The Affair, Allison is dead but the series still has one more season to go. Also watched Sharp Objects starring Amy Adams who plays a terribly dark character. Only 8 episodes, but with so many flashbacks, each episode was slow and agonizing. Great ending and as of right now, no chance of a second season especially since Adams won’t come back.
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.
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.