Breaking into Retail

Before you start ordering products to sell in your salon, do the math. You'll need to determine how much room you can devote to a retail area, how to track inventory, and know when it's time to restock. Here are some rules of thumb to follow.

First of two parts

Everyone says that retail is the key to success, the only way to grow salon business, and is as simple as putting items on a shell. Right? Well, let's say you're will­ing at least to give it a try. Where do you begin?

"Every salon has floor and counter space that can be used for retailing," says Lau­ren Breese, who's in charge of new product development for OPI Products (N. Hollywood, Calif.). "Salons have to take advantage of that space or risk losing a great deal of income."

According to Dean Parks, owner of GC Salon (Vernon Hills, Ill.), up to 40% of a salon's income can come from retail.

"Put the spotlight on re­tailing and utilize your space properly," Parks says. "This helps cover the salon's over­head and greatly contributes to the overall profitability."

Before you order product, determine the amount of space in your salon you can devote to retailing. Consid­erations include shelf space, room for people to move around and test products, and a formal check-out area.

Lisa Goldstein of IDEA Beauty Salon and Spa Con­sulting (Newbury Park, Calif.), suggests using 25% of your salon's space for retail.

"Starting out with this amount allows you to maximize your use of retail space without in­hibiting work space," Goldstein explains. "You can expand that amount when your retail business starts to grow."

Many salons do have a dedicated area of the salon that is designed as a "retail center," but you don't have to have that to start. Your foray into retailing can start small — with a countertop or workstation display of a treatment prod­uct line, for example. Retail can be locat­ed in a single area or spread throughout the salon wherever there's room (there are clever salon owners who have sold waterless hand cleaners and nail brush­es by displaying them in the bathroom, contemporary artwork by simply hang­ing a price tag off salon decorations).

Kate Grider-Troc, president of 20/20 Foresight Training & Consulting (Chicago, III.), says devoting 20% of space to retail is standard.

"Obviously, the right way to look at a business is return per square foot. You can't base everything on it but you want to be able to have enough room to run a professional salon environment and that may mean you only have 20% you can devote to retail," she explains. "But if you have the space available to devote 30% or 40% or even half of your facili­ty to retail, you're going to have a more profitable business per square foot."

In order to determine how much square footage you can reasonably allo­cate to retail, figure out the square footage of the salon first (you do this by multiplying the length of the area by the width — a 10 foot by 10 foot area is equivalent to 100 square feet, for exam­ple) and then you take approximately 20% of that total area (to continue our example, 20% of a 100 square foot salon is 20 square feet).

If yours is a new salon, or you are em­barking on a remodel, there are still other factors to consider in determin­ing the amount of square footage you should allocate to retail space.

First, and foremost, if you are deal­ing with limited space, and you expect your primary revenue source to be ser­vice, you need to be sure that you allo­cate enough space to accommodate the number of technicians you need to achieve your service sales target.

If limited space isn't an issue, then at least 20% of your square footage can be allocated to retail.

When trying to determine your goal for sales per square foot, first decide on what increment of time (for example, monthly, quarterly, or annually) you want to use, and remain consistent. If your books and inventory system will be set up on a monthly basis, use that for the retail projections as well.

To figure out what your profit is per square foot, measure which product is taking up which amount of space. "You can do it by month or by year. What you're doing is taking sales and dividing it by square feet," explains Grider-Troc.

Divide your sales for that time period by the number of square feet it occupies. Retail sales per square foot should cer­tainly be larger than service sales simply to justify the space that's been allocated. In fact, conducting square foot analysis by department on a regular basis pro­vides you with a means of developing productivity benchmarks, and helps you identify which departments of your business generate the most sales in the least amount of space.

If you have allotted 20 square feet for retail, and sales for a one month period in that space are $500, your sales per square foot are $25 per square foot ($500 divided by 20 square feet = $25 per square foot).

Set a realistic goal, something you can stick to. It's easier to start small and grow without losing your enthusiasm for the project. It's a lot harder to rip out walls and create display units and then find out you simply can't keep it up.

Melody Lloyd, owner of Natural Nails (Greenfield, Wis.), started retail­ing with just two small shelves that held lotion. Then, she decided it was time to expand her retail but didn't want it tak­ing up too much space.

She explains, I contacted my distrib­utor and decided on a display rack that didn't take up a lot of space. It turned so that clients could stand in one place, move the products, touch them ... and then they bought!

"As my sales rep and I were putting the display together we were selling products off of it before it was even complete."

The kind of displays you choose will affect the amount and kind of space you need. For example, do you want shelves covering your walls or waiting area or do you want alcoves placed throughout the salon?

When starting out, having too much display area can overwhelm clients. Parks recommends that beginning re­tailers start with either two floor dis­plays or a few shelves around the recep­tionist area.

Goldstein suggests starting with shelves in high-traffic places like the re­ception area or creatively setting up round table displays in the middle of waiting areas.

At Bella Spazio, (Knoxville, Tenn.) 750 of the salon's 3,000 square feet are devoted to retail space. And even that amount (which is 25% of the salon), general manager Jennifer Breakey says, isn't enough.

"It's such an important aspect of our business that we should expand," she says. "Instead we're constantly moving retail around. If we put a product in one place and it doesn't sell, we'll move it around until it does."

Instead of consuming valuable space for storing back-up inventory, Lloyd chose displays that house her back-up products behind the displayed ones.

"I have a roundabout center and a five-sided shelf that has my back-up products on it," explains Lloyd.

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