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!

Lots Of Luck With Loxabeauty.com

What are your thoughts on the economy in 2014?

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Desperate times call for desperate measures. It doesn’t take a rocket scientist to understand the professional hair product business is dead in the water. Even L’Oreal masters of the universe with their Kerastase brand among others just reported negative growth in the USA. Regis the largest operator of salons in the USA continues to report declining retail sales numbers. TIGI resorted to selling an off-label to Sally. It’s no secret either that Ulta continues to enjoy healthy growth in its business (albeit they sell a whole bunch more than hair care products). Ulta’s arch enemy, Sally Beauty Holdings (SBH), thinks it has the answer to Ulta: Loxabeauty.com.

According to SBH’s CEO Gary Winterhalter, loxabeauty will be BSG’s (they own more than 1000 Cosmoprof stores and employ nearly as many DSC’s) solution to helping salons compete against Ulta and retailers. The premise which has yet to be unveiled goes something like this: BSG gets sign-off from its major vendors to sell goods to consumers. Winterhalter already has Paul Mitchell, Kenra and a host of others lined up. The BSG DSC goes into a salon and most likely has the salon owner complete an application for the website including stylists names, name of salon and other vital facts.

The client goes into a salon, gets the service wanted and then the front desk manager gives the client a business card or such and the pitch, “We can offer you more than 3000 salon products and have them shipped directly to your front door. Just go to loxabeauty.com and enter this code on the card (the code is the salon code). All products will be shipped to you from our supplier and we endorse everything.” If the client goes home and makes a purchase, both the salon and stylist will receive commission.

For the salon owner, no more inventory to stock and a full assortment of products for their clients. Win-win, right? At least that is what Winterhalter thinks.

In the real world, Amazon has more than 10,000 salon products available at discount prices with free 2-day shipping to its Prime customers. And customers can buy any brand including brands BSG doesn’t sell such as Kerastase, Oribe, Bumble and Bumble and virtually every brand under the sun. And there are hundreds of other sites to buy beauty products. But alas, BSG is more concerned with Ulta than anyone else and Ulta cannot sell pro hair care products online (yet).

The other thing wrong here is that virtually every mass retailer has a full selection of pro beauty products. CVS, Walgreens and Rite Aid alone have more than 20,000 stores crammed with pro beauty. And they have virtually every brand BSG sells.

Bottom line is that this concept is as old as Ivory Soap. Some vendors today have their own consumer websites and give commissions back to salons. None of them work.

You at least have to give Winterhalter credit for thinking about the problem. But when it comes to hair care products for retail, it’s only a problem for BSG because that is their business. For every other business it is just one of hundreds of product categories.

I have a better idea and the timing is right. In fact, it’s perfect for the next generation of salons. I’ll talk more about it in my next blog.

In the meantime, there is one line that loxabeauty.com won’t have on its website and it’s the same brand not available at Ulta: Moroccanoil. Thank God for small miracles.

Happy President’s Day!