As I walk past the receptionist I head over to the coffee station where there are fresh pastries, bagels, assorted beverages, comfy chairs and current magazines. The salon is buzzing with women getting hair cuts, hair color, makeup applications and it’s like everyone knows each other.
Matt comes and gets me, wonders if I need a manicure and hands me a copy of the WSJ. After a long haircut and hot towel face treatment, I’m back to the receptionist to book my next appointment and be sold on the latest hair care items. Of course she knows I’m in the business and most likely we sold her those products but that’s her job. $60 later I head out.
The rise and fall of the independent hair salon business has been remarkably quick spanning only 30 years. Oh there are plenty of other industries that have come and gone much quicker, i.e. the video rental business (Blockbuster was an amazing story). The tanning salon business is 25 years old and struggling to stay alive. In the past five years alone, tanning salons have declined by a third to less than 13,000.
I’ve mentioned the historical part of the rise of the independent hair salon business in the past and only Paul DeJoria is left to relish those memories. Everything else has gone down the drain. There are many reasons for the decline and one only wonders what the next 10-20 years is going to bring. After all, everyone still needs to get their hair cut. From what I can see, the usual suspects are at work over the decline of the industry:
- Entrepreneurs came, sold, and were never replaced. The likes of Arnie Miller and Jheri Redding weren’t just about products, they were about inspiration for a new generation of guys who never envisioned themselves being hairdressers. Suddenly in the 80’s and 90’s it was cool to be a hairdresser. Then the entrepreneurs sold out to the likes of L’Oreal, P&G, and Henkel and that began the first transitional wave down. Guys no longer see this as a cool industry and beauty schools have been turning out 99.5% female hairdressers for the last decade.
- Competition ceased and public companies took advantage. L’Oreal not only was the first hair color company in the world, they were astute enough to buy the best companies such as Matrix, Redken, Pureology, and ARTec (OK, that one they screwed up). In the meantime they had the retail consumer to support their expansion with brands such as Maybelline, Kiehl’s and L’Oreal. P&G got into the game too late with their acquisition of Wella, Sebastian, Nioxin, Clairol and Graham Webb (oops, that was a nightmare and too bad). Now P&G is unloading all these brands (Fekkai they paid $450 million is now worth $50 million) and even L’Oreal stated they are not interested in any of them. OK Henkel will come to the rescue but too little and too late. Unilever who bought TIGI, also has no interest in a larger footprint in this industry.
- Competition among distributors went public too. Sally bought BSG and BSG bought the best of the best of the independent distributors. Today BSG operates more than 1200 stores and has nearly 1000 DSC’s. Salon Centric owned by L’Oreal bought the rest and this year will most likely buy the remaining Redken distributors. They have about half the presence of BSG. Combined however, they own the market and leaves companies such as TNG to focus on innovative products that they can’t match or get involved with.
- The death of the independent salon. My story to start this blog is true. It was all about the salon experience. Booth rental was an infant industry that took root in California and Texas and then Florida. The Midwest and East coast were anti-booth rental. But hairdressers are an interesting group. History has always dictated that the salon owner made out like bandits offering only 40% to 50% commission. The rise of male hairdressers moved the needle to 60% and even 70% commission to retain the best. And even that didn’t work. Salon walk-outs became as common as salons closed on Monday. Eventually salon owners had enough and booth rental gained traction. Chain accounts with their franchisees saw a new opportunity at the same time with the proliferation of beauty schools churning out hairdressers with no where to go. It’s no wonder that the life expectancy of a new graduate that stays in the industry is at the lowest point in history.
- Retailers such as Sephora and Ulta enter and offer a superior experience for consumers to buy hair care products. Today Ulta is marching toward 1000 locations and its salon business has never been stronger. And factor in Amazon that has virtually every hair care brand on earth priced well below retail.
While all this is going on, what are our industry leaders (such as PBA) doing about it? You guessed correctly. They still flock to the trade shows and trumpet the virtues of education while the only ones attending are rushing to the flea markets in the back of the show with their empty roller bags. They still honor someone at the City of Hope dinner at Cosmoprof just like those diners on the Titanic who were raising their champagne glasses before the tragic accident.
The true winners in all this are L’Oreal, Sally/BSG and Ulta. I always applaud winners (unless they wear maize and blue). And I see them keeping on winning with no one to stop them.
For us, life is good. When you have $50 billion in sales between the winners, it only takes a few crumbs to make me happy. Over the past few years those crumbs turned into cookies, then cakes and suddenly we have a bakery. Our assortment has never been better and our customers love us for what we do for them. But when it comes to the hair care business, we need to keep the independent salon owner alive. One hint for them: Support independent distributors and manufacturers.