Retail

Retailers Reinvent Themselves

Major department stores are revamping their sales and merchandising techniques to entice value-driven customers. What does this mean for salons?

Southern California’s big department stores — like many across the country — are struggling The hard economic times and intense competition that recently triggered mergers and bankruptcy reorganizations have forced the stores to reinvent themselves — and the way they do business — for the ‘90s.

While the retailers are working to establish new identities, shoppers can expect to find at least one thing in all stores, more value-driven products. Some steps retailers have taken include the following:

  • Offering more value-driven merchandise and secondary designer lines
  • Dismantling glitzy boutiques to make way for everyday low-price items Introducing a self-help approach to merchandising by stationing their sales representatives behind the cash register
  • Following The Gap’s success by introducing more store-label brands of jeans and other sportswear
  • Merchandising in a much more accessible way — not as many locked glass cases
  • Measuring the sales clerks “friendliness quotient” by counting complimentary calls and letters from shoppers
  • Some are departmentalizing even more while others are moving whole sections — such as the men’s department — into their own separate boutique location

What does this mean to the salon industry? Some salon owners say it’s time to learn from the department stores, while others believe that many salons have already gone through a transition similar to the one that department stores are now facing.

NAILS Magazine recently interviewed some of the country’s most successful salon owners who are members of Intercoiffure America/Canada, an association for salon owners, about their views and their tactics for running a profitable business in the ‘90s. Some have launched strategies similar to the department stores’, while others are taking the exact opposite approach to distinguish their salons as superior customer service centers. Read on for their strategies.

Pam McNair, owner, Gadabout Hair, Skin, Nails and Day Spa, Tucson, Ariz.: I am really a stickler for customer service. Even though our customers are more sophisticated and understand treatments and products better than ever before, it’s important to have someone in the salon who directs them and answers questions without taking their money. We have both a desk coordinator and a salon coordinator. Our salon coordinator directs new clients through the salon, explains retail, sells products, and goes out of her way to make clients feel welcome. The salon coordinator doesn’t take any money. Because retailers are cutting back on floor personnel and keeping people behind the register, salons will be one of the only places in a few years where people will get customer service.

If our clients are going to get excited about buying and add-on sales, we need to merchandise more like department stores. A few years ago, I hired a couple who had worked as merchandisers in department stores, so we now merchandise our products like we would in a high-end boutique. But keep in mind that people don’t buy from beautiful displays (the products still need to be explained); the displays draw their attention. We’re also following many department stores’ cosmetics departments by focusing on turning down the glitz and stocking products with less elaborate packaging, more natural, earthier-looking products with more natural ingredients.

One thing that will change the way we sell our products is QVC. Because of the phenomenon of “home shopping” via television, it’s even more important to have someone available who will help a client understand a product. That’s the only advantage we have over direct sales.

Michel de la Mar, owner, Figaro’s, Denver, Colo.: Society has split into a high end and a low end — there’s no more middle. As a result, business owners have to decide who they are by defin­ing their market and addressing all marketing dollars to serving that market.

The top end is much more boutique-style and specialized. For example, the Ritz Carlton hotel is almost double the price of many of its competitors, yet they have a 70% occupancy rate — which is very high. But they have won awards for their service. The lower-end portion will grow, too. For example, K-Mart and WalMart know their market, they have stayed after it, and they are successful.

But you also have to look carefully at what drives the markets. What works on one street corner won’t work 10 blocks down because there is a different labour pool and different clients at that location.

With the divided market, the opportunity for the salon industry today is fantastic. We have a captive audience — we spend one to four hours with one client. No other business gets that opportunity. So whatever consumers don’t find in department stores, we can deliver. That’s our great opportunity for the next 10 years!

Adam Broderick, owner, Adam Broderick Image Group, Ridgefield, Conn.: Value is the buzzword of the ‘90s. You can’t be all things to all people, but you need to be receptive to a changing economy. We let our clients know that we may be good, but that we want our price structure to be competitive. That’s why we developed a sophisticated multi-pricing structure.

In the salon business where what you are selling is your personnel, pricing is based on supply and demand — that means the more talented, gifted stylists will always be able to charge a premi­um in any economy. That’s why our stylists are priced according to the demand for their services. We offer very high-end, exclusive cuts for $60, but we also have cuts for as low as $15 with our trainees. It lets clients shop around without leaving our salon.

We discuss with our clients their budget during the initial consultation so we can make recommendations that are realistic for them. We want our clients to be comfortable with moving down if they’d like to, and we make sure they are all exposed to the less-expensive stylists. The same approach can work with nail services.

While you can’t be all things to all people, I believe there have to be different levels when you are servicing a high-end market. We don’t want to bring in clients who think $15 is a top of the line cut, but people’s circumstances change. If they lose their job, we don’t want to lose them as a client, so there are pricing options available.

In retailing, we follow the same concept. We carry an upscale line, as well as our own private label products, which are 35% less expensive. My staff makes the same commission on each so they are motivated to sell either based on the client’s needs and budget.

Jerry Gordon, owner, J. Gordon Designs Ltd., Chicago, Ill.: We’re seeing a shift in buying habits. With less disposable income available to them, clients are looking for cheaper and easier ways to get what they want. Today, everyone on every level is price-conscious.

I’ve never been a big fan of discounting. Our solution is to offer multiple pricing levels within the salon according to different consumer groups. For example, we used to have two prices for a haircut — one for clients under 12 and the other for 12 and over. Now, we’ve added a teenage price. Even the most affluent families have become very price-conscious. One reason is that many of them have been hit the hardest by the economy.

As a student of business and finance, I feel optimistic about 1994, and I think the salon owners who know what they’re doing will get rich this year. Though the economy is still unpredictable at this moment, there is a definite upturn and feeling of optimism among my clients. What may loom ahead in terms of national health insurance and taxes may set off a complete shift in buying habits, so now’s the time to get ahead through smart business programs.

Joseph Gino Ruotolo, owner, Gino Parruchiere, Inc., Cambridge, Mass.: While consumers are very price-conscious, they also understand quality. As a result, today they want the highest quality service or product for the lowest possible price Gimmicks don’t work anymore. Clients shop much more intelligently than they did a few years ago, and they want to be serviced more intelligently by someone who is informed about the products and services they are considering purchasing. Clients also want to be serviced by someone who understands their needs. That means salon owners have to do more homework to better understand who their clients are and what they need. For example, if 50% of your salons income comes from hair colour, that tells you that your clients need products to maintain their colour. It also tells you that you can tap into the needs that make them purchase hair colour to suggest additional services and products.

The quality salons differ totally m retail from budget salons, too. In a quality salon, you need to educate clients specifically about what type of product they need. In my salon, I carry three retail lines — a higher-priced designer line with national support, a second mid-range line, and our private label Gino line. We educate every client about long-term hair care so that when they leave they know we haven’t promised a quick fix. Rather, we’ve created a long-term program to rehabilitate their hair.

I believe it’s important for salons to be departmentalized—just like department stores. When a consumer enters a department store, she knows where a given department is and what’s available. It’s the same in a salon. When a client walks in during her lunch hour, she needs to know exactly where to go for what she needs. People have so much confusion in their lives today that they don’t need to face more confusion at their salon.

Clients today are much more knowledgeable about beauty services and products because so much information is available to them through magazines and other media. As a result, they can really distinguish between a hairdresser or nail technician who knows what she’s talking about and one who doesn’t. The message here? To effectively service a client today, you have to know more about your services and products than she does.

Just like the retail stores, marketing a high-quality, full-service salon is different than marketing a mid-level or budget operation. For example, what’s the difference between a $200 cut and $60 cut? A $60 set of nails and a $30 set? The client isn’t paying for the technical service or better tools. She is paying for the individual perception of your artistry and vision.

Max Matteson, owner, Panopoulos Salons, Grand Rapids, Mich.: Right now, the market is broken into two segments. Department stores are looking for the masses, but there is still opportunity to serve a boutique audience. The same is true for salons. The first group of clients goes to a beauty salon to get a quality service with no frills, whistles, or bells. That is their affordability. They expect a great nail service at a very fair price. Since this is a large segment of the population, we have to examine how we will target these people.

The second group — comprised primarily of baby-boomers — is more upscale. As a group, they represent a significant percentage of the population and they are reaching their potential income. They understand service and have been brought up in a youth-oriented culture — they refuse to be slaves to gray hair and wrinkled skin. Their potential is large enough to drive us to a boom in upscale beauty salons, provided we are prepared to offer a more nurturing service for that type of individual. People will pay more to go to an upscale salon where they are treated as an individual and can expect customized products and services. That personalizing helps them feel more like an individual with their own identity.

If we have the work force and talent to handle this top-end group, we can operate our salons more as high-end specialty boutiques, such as Donna Karan. This type of salon will serve a smaller audience than the department- store-style salon, but from that smaller clientele can be built greater dollars and more profits.

Our concentration is focused on building loyalty with both our staff and clients. Loyalty programs are the key to retention in both cases. We make our profits on 20% of our hairdressers and 20% of our customers. By recognizing those people as your best customers, you can turn them into more dollars because they are loyal and appreciate the personal attention.

Richard Calcasola, owner, Maximus Total Beauty, Merrick, N.Y.: The department-store shift from designer labels to carrying more of their own private label lines is very interesting to me because I have seen the same thing at the salon level. First, the profit margin on private label products is much higher for my bottom line. Our clients purchase retail based on their trust in our professional recommendations, as opposed to asking for particular brand names or “designer” labels. They naturally trust that the salon is carrying a quality line.

Of course, the big picture is the shifting and adjusting of the economic climate. Department stores and other large business are making adjustments, and salon owners cannot overlook it either. It’s more important today than ever for salons to have a business plan. For so many years, successful salons have been able to operate on instinct and go with the flow. That’s no longer possible. We really put a lot of time into developing our business plan this year. We just celebrated our 24th anniversary, but we’ve only had a business plan for the past two years. As a result, today we are trying to make things happen rather than following or reacting to what has already happened. In addition, with a business plan, less falls through the cracks and ensures a much healthier bottom line.

Richard J. Weintraub, owner, Fashion Focus Hair Design, Sarasota, Fla. The client of the ‘90s is much more educated. Because of that, it’s important for us as professionals to educate clients as opposed to selling them on everything from products to services. We own beauty schools and teach students how to educate their clients. The word “sales” doesn’t exist for us. The times of learning how to close a sale are over. When the client makes the decision to buy based on information you have given her, you’ve taken another step toward building trust and retaining that client. That holds true whether the customer is buying a car or beauty products.

This philosophy of educating needs to start with the manufacturers and how they sell to us. They will be most successful if they educate us, then let us make our own decision based on the information they have shared with us. When that happens, we are much more successful at passing the information on to our clients, which makes all of us much more successful.


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