Business Management

Delivering the Goods: Distributors Speak About Their Concerns

More and more distributors are placing service above the products they sell, offering technicians business as well as technical support. What do they want in return? Loyalty, of course.

Editor's note: This is the final installment of a 3-part series on distribution. In part I, "Getting The Goods," technicians described what they're looking for in a distrib­utor. In part II, "Getting the Goods Out" (August 1995), manufacturers talked about how they choose a dis­tributor and how they think distrib­utors need to improve their busi­nesses to better serve the industry. Here, distributors themselves have their chance to respond.

 It may come as some sur­prise to nail technicians, who feel they are at the mercy of distributors when it comes to obtaining prod­uct, that they are the driving force in the evolution of product distri­bution. The swelling ranks of nail technicians alone has resulted in growing numbers of nails-only dis­tributors. Likewise, many distribu­tors who for decades thrived selling hair products are wooing nail tech­nicians with nails-only divisions. Add to that the growing number of mobile distributors, mail-order cat­alogs, telemarketers, distributor tradeshows, distributor sales reps, and OTC stores, and nail techni­cians should see that their time isn't coming — it’s here.

"There comes a time when a distributors business comes to depend on how well the distributor services the manicurist. Manicurists can put a distributor out of business simply by not shopping there. The distributor has to take care of the manicurist in whatever way is required," maintains David Kellenberger, buyer and general manager of Nail Emporium in Anaheim, Calif.

While products are what draw technicians to a distributor in the first place, it's service that keeps them there. Top distributors un­derstand that many technicians view their distributor as a business partner; as such, more and more distributors are focusing on quality service, incentive programs, edu­cation, and merchandising support.

Good Selection: Quantity, Quality, or Both?

Far and away the number one reason technicians choose a distrib­utor is because of its product vari­ety. But what does that mean? Nailco, a full-service distributor of nail products based in Farmington Hills, Mich., carries more than 12,000 products. The number-one complaint of Nailco's customers? "We don't have every product that they want," says Larry Gaynor, president and CEO.

Distributors are caught between a rock and a hard place: Nail tech­nicians want them to carry every professional nail product, while manufacturers want them to carry just a few lines (theirs, preferably, being one of them). When deriding how many lines to carry, a distribu­tor has to consider how much space and money to tie up in inventory, how much demand there is for the products, and how to sell the prod­ucts. For example, distributors with sales reps who visit salons often pre­fer to carry just a few lines. "By stay­ing with a few major manufacturers, sales reps become comfortable and know the product lines. They can consult rather than just take orders," says Marcia Walker, director of The Nail Source division of Davidson Companies in Laurel, Md.

Likewise, Grand Rapids, Mich.-based Maly's carries just three nail lines. "We offer the top lines and back them with education; that's what nail technicians need. Educate them correctly on one or two lines and you can fulfill all their needs," says Stacy Sloan, nail division man­ager of Maly's California stores.

Says Rick Goldberg, "head coach" of Progressive Beauty Sup­ply (Eden Prairie, Minn.) and pres­ident of the Beauty and Barber Supply Institute (an association for manufacturers and distributors), "it's a catch-22 situation. As you add more and more nail lines you can have thousands of SKUs [stock keeping units]. I have 55 files from one manufacturer, but J bet 80% of my file sales come from two of those files. How many different types of tips, nail preps, and nippers do I need to carry? I have a wall of tips. All of a sudden, inventory dol­lars are tied up in SKUs that are [purchased] 10 times a month, ver­sus others that are called 10 times a day. Where does my business's needs come in and where does sensitivity to the customers' needs come in? It's a constant battle."

Claire Haske, owner of Nail Sup­plies Unlimited, a mobile distributor based in Anaheim, Calif, has no choice but to limit the number of lines she carries because of limited space in her vans. "I have one main line for each type of product that I carry. Eighty percent of a distribu­tors money should go to her number one lines and 20% to her secondary lines so that if nail technicians want something else they can get it. But you have to spend your money on your better-selling lines," says Haske.

Yet Nail Emporium has a differ­ent philosophy. "Nail technicians want to try different things. And they have price levels they can af­ford. A nail technician can come in here and get what she wants at the price she can afford," says Kellenberger. "If I carried only a few lines, I wouldn't have nail techni­cians coming from all over. They could get that around the corner."

Gaynor agrees: "When a cus­tomer needs a product, you have to have it available." But it's not al­ways the distributor's choice as to what lines he or she carries. "Tech­nicians should be frustrated be­cause there about six companies we don't represent that technicians want us to," adds Gaynor. "The technician really doesn't have a choice where to buy products; she has to buy from a distributor who carries the product. In some cases, to get the six lines we don't have, a nail technician might have to deal with three or four or even five dis­tributors to get them all."

In the early days of the industry, it was easy to choose what lines to carry, says Sandy Korr, owner of Nails Etc. in Wilmington, Del. "Manufacturers had unique items and it was easy to choose. Now each manufacturer has a range of products from A-Z and many of the things, like nail tips and files, are similar or the same," she says. Korr, like many others, tries to balance the needs of her two customer bases — the manufacturers and (he technicians — by carrying as many of each manufacturer's prod­ucts as possible without too much duplication. "If a customer wants something we don't normally stock, we'll custom-order it," says Korr.

What Distributors Want From Manufacturers

When choosing lines, distribu­tors do more than evaluate the products. They also evaluate the educational, advertising, and mar­keting support the manufacturer offers. "We've chosen to stay with the lines that provide education; that do national advertising in the trade and consumer magazines; and that are committed to the pro­fessional nail technician," says DiDi Hornig, manager of The Nail Authority division of Peel's Salon Services based in Omaha, Neb. For example, Hornig cites one manufacturer who provides salons with posters and camera-ready artwork for advertising.

Manufacturer-sponsored edu­cation is crucial to distributors who depend on manufacturer's educators to teach technical class­es at their stores. These educators have the product knowledge as well as the hands-on experience to leach technicians the ins and outs of a product.

Distributors also look for man­ufacturers to back their products 100%. Says Marci Sharkas, owner of Nail Tech Supply Source in Oak Park, Mich. "The other day a cus­tomer had a problem with a prod­uct. The company had their chemist call and talk to us. A lot of companies don't provide that type of support," says Sharkas.

Finally, manufacturer discounts in the form of bimonthly "deal sheets" are appreciated by both the distributors and the technicians. Bimonthly deals allow technicians to stock up on products and save a significant amount of money.

Distributors Are Redefining Customer Service

While they will support from manufacturers, distributors have fashioned their own business-building programs for salons. Many distributors are taking a hands-on approach to helping their customers become better businesspeople and refine their technical skills. They've also fash­ioned incentives to garner techni­cians' loyalty.

Nailco, for example, has its Nailco Miles frequent-buyer pro­gram. Technicians earn one point for each dollar they spend; these points can be redeemed for prizes that range from a UV light kit to a vacation. Members of the fre­quent-buyer program can also choose from the approximately 100 free product samples. And they can use Nailco's Beauty on Demand fax database for instant access to educational articles and MSDS. Nailco also has a travel program and offers malpractice, liability; and theft insurance.

In addition to its regular tradeshow, last year Nailco pre­miered its Virtual Reality tradeshow on video. "It’s an opportunity for people who can't get to a tradeshow to view new products and demons­trations," says Gaynor. In addition, technicians can call in on a specified day for product discounts.

Maly's just started Nail Night, where technicians are invited to a Southern California store for prod­uct discounts, education, samples, and the chance to win free prod­ucts, including a basket filled with $300 worth of retail products.

The Nail Source has a similar program, says Walker. "We have caravan days where anywhere from two to five manufacturers are demonstrating products in our stores. It's a 'try before you buy' program. It’s all free and customers can spend as much time as they like with the manufacturers' represen­tatives. We also offer special dis­counts on those days," she says.

Retailing: Everyone's Chance to Grow

Product retailing is the area most ripe for growth in salons, says Sloan. But getting salons to take advantage of retail opportunities is difficult. "The challenge for distrib­utors is getting nail technicians to retail despite the fact that their clients are paying more at Thrifty Drugs for products that aren't as good as what the technicians use in the salon," Sloan says. "Nail tech­nicians try so hard not to sell — they'll give a product away before they'll sell it. But look at what they are to their clients; it's just a matter of advising and recommending."

How important is salon retailing to a salon's survival? "If 20%-25% of a salon's income doesn't come from retailing, that salon is missing the boat," says Gaynor. "For years nail technicians have owned a cap­tive market — it was theirs to grab onto and cultivate with retail prod­ucts. But they ignored that part and concentrated on the service end.

"Since the customers haven't developed a loyalty to a salons product offerings, salons are find­ing clients don't have a loyalty to its services, either, if they can get I them cheaper somewhere else. "There's no question that retail­ers and companies like mine have customers' loyalty because of the products as well as the services we offer. The same could be true of sa­lons' customers," says Gaynor.

Many distributors are starting to counsel salons on retailing and are helping them with the basics of de­veloping a retail department. For example, says Hornig, "We help sa­lons build sales strategies and teach them how to sell products to the client. When we get our bimonth­ly deal sheets from the manufac­turers, instead of just giving them to the technician, we help them think of ways to promote them to die clients.

"For example, [a couple of man­ufacturers] have a lot of promo­tions with bags. We encourage our technicians to make some signage and have some fun with the pro­motions. Tell clients, 'For every bottle of polish you buy, you get a chance to win this bag.' It gets cus­tomers excited about the product. We also offer retailing classes," Hornig adds.

Progressive Beauty Supply will actually design a salon's retail area and develop workstation table-talk­ers for technicians. "As the client gets her nails done, she can read about a product," explains Goldberg. "We do referral programs, menus, and bounce-back coupons. We also teach business leadership, profit and loss analysis, and give technicians in­spiration. Our job is to optimize their business; the product is incidental to that," says Goldberg. To that end, Progressive has a marketing depart­ment with copywriters, designers, and marketing program designers to help salons build their business.

Similarly, Nailco has its Salon Supplementals division, which is devoted to retailing and client re­tention. "We have displays, signage, fixtures, and our own full-color business cards, client survey cards, greeting cards, gift certificates, and postcards that can be personalized to the salon," says Gaynor.

The Big Question: Is the Price Right?

Technicians love the new levels of service they're getting from distributors, but they still want the lowest price possible. Who doesn't? But nail technicians need to evaluate what they're paying for. Just as nail technicians expect clients to understand that their prices reflect the level of service they offer, distributors ask salons to recognize the same thing.

"It comes down to what kind of service the nail technician and hairdresser want to receive. If you want to go to Sam's club and pay the lowest price, that's line. But you have to go to an enor­mous warehouse, wait in line, box your own products, and the selec­tion is limited," says Gaynor.

"Our original premise was offer­ing the lowest price. Then we said we want to offer the lowest price, but we want a color catalog, li­censed people working for us, and 800 numbers for our order and customer service lines. To offer these services, you have to make a profit. So we decided to increase our level of service. Many manu­facturers did the same thing, updating their packaging, up­dating their marketing, doing consumer advertising — everything the industry re­quired to go to the next level. Everyone was happy and doing business fast and furi­ous. Then the discounters came in and took business from the companies that made the industry what it was, he adds.

Discounters, who sell products for less than the suggested salon re­tail price, are popular with nail tech­nicians, especially since technicians have been forced to tighten their belts to stay in business.

Discounters hurt business for all distributors, including dis­counters themselves. Just as discount salons can drag clown ser­vice prices in an area, discount distributors can pull business away from wholesale distributors.

But Michelle Schinker, sales di­rector for Manufacturer Direct, a discount distributor, says her com­pany fills a need. "Technicians can't afford some of those lines, no matter how wonderful the prod­ucts are," she says. "Technicians turn to the discounters because we're all offering a decent prod­uct they can work with that's not emptying their wallet."

Steven Greenspan, president of On the Spot Nail & Beauty Supply Inc. in Davie, Fla., has refocused his business from the mobile distri­bution business that he started in 1987 to servicing drills, "Discoun­ters are willing buy a gallon of acetone for $5 and sell it for $5.50. How can they invest all this money in inventor) and sell it for a 10% profit?" he asks incredulously.

Gaynor doesn't foresee the price wars lasting for long. "We have other products that we can make up our margins with, where­as most companies competing on price don't. As the discounters' margins shrink, they'll have to re­treat or raise their prices. It's called Capitalism 101."

Schinker disagrees that compa­nies like hers will be forced out of the market. "We work on a very light profit margin. To keep our prices down, we cut back on a lot of things, but not the important ones. Our packaging is very sim­ple, our ads arc black and while, our price lists are one sheet. Thai's where we're saving money, and we're passing (hose savings on." Schinker is frustrated by what she considers to be a non-issue. "There isn't an industry around that does­n't have discounters. There's room for even-body. Not all technicians can afford the higher-priced items, and we're offering them an alternative," she argues.

When a discounter gets hold of a name-brand line, though, the man­ufacturer can suffer as well. Saws Bobbi Berman, president of Hair Care Nail Supplies in Dania, Fla., "I've had products that have sold fine for years at the suggested price. Then all of a sudden someone dropped the price, and price wars began. Unfortunately, those are the products that don't last. Dis­counting can ruin a line for a company."

Most traditionally priced distributors in­sist that nail techni­cians can decrease what they spend on products without bar­gain-shopping if they take advantage of manufacturer's bi­monthly deals and stock up. Instead of placing their regular order of liquid and powder when it's on special, for example, nail techni­cians could buy three or four times more than they normally would. And instead of ordering once a week, technicians could order once a month, cutting down on the num­ber of trips to the beauty supply or on freight costs. And no one should even pay C.O.D. charges because most distributors accept payment by credit card.

For Better or Worse, You're in It Together

In the final analysis, distribu­tors lace the same challenges nail technicians do: Offering the highest level of customer service and the best selection of prod­ucts, all at reasonable prices. Their success is dependent on each other. If nail technicians choose distributors solely on price, they will lose the business and technical support that's so vital to their own success. Dis­tributors, too, must offer techni­cians all the support they can to help them improve their business and technical skills so that they both can survive in an industry beleaguered by discounters.

 

 

Keywords:   distribution     Hair Care Nail Supplies     Nailco  

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