Salon Retail Disruption-How are You Going to Compete with Amazon?
Salon retail is one of the most talked about disruptions in the industry. If you have been following my “Evolution of the Beauty Industry”, or if you have been in the beauty industry for awhile, this probably isn’t news to you, but there’s been a major shift happening for years with diversion and retailers like Amazon.
We have been in the midst of a huge shift in beauty consumer shopping habits. So many salons and stylists are seeing many of their clients choosing to purchase their products on line instead of their salons. It’s a trend that’s not going anywhere, in fact it’s growing at an alarming rate.
So many pros I talk to aren’t really sure what to do in terms of retail. Some think that if you educate your clients on diversion, they will continue to buy from you. And yes, in some cases, I think they will, but you will end up losing the sale if you use retail that can be found on Amazon. The consumer wants convenience, and they’re already shopping online.
“Anyone who doesn’t take Amazon seriously as a competitor is not paying attention,” said Ian Baer, the chief strategy officer of the marketing agency Rauxa.
Beauty and personal care facts and figures
I want to point out some pretty eye opening statistics.
- When we look at the growth of beauty e-commerce vs. brick and mortar sales, online sales are up up $1.6 billion, while brick and mortar sales are DOWN -$168 million.
- In 2015 online haircare sales were only 2 % of the total beauty and personal care sold online. In the past 3 years online sales have skyrocketed to over 9%. (Source: The Fung Group)
- Shoppers aren’t as loyal, 67% of online shoppers use four or more websites to fulfill their beauty and personal care shopping needs. (Source: A.T. Kearney Study 2016)
- 45% of U.S. Consumers buy skincare and cosmetics online. The percentage for 18-34 year olds. is 60% (Source: Prosper)
- The most popular websites for searching for and buying beauty products online: Amazon 69%, Sephora 40%, Ulta 37% & Walmart 36%. (Source A.T. Kearny Study 2016)
For the last year, the professional salon and spa product sector has been the fastest growing beauty category for Amazon, nearly doubling and driving so much traffic that Amazon introduced a unique badge for items classified as Professional Beauty. (Source: One Click Retail)
- In fact One in every five beauty purchases online was made through the Amazon Marketplace.
- Amazon is now the #1 online retailer of beauty products, with 35.5% of market share. (Source: 1010data.com)
The numbers are obvious, and online growth is expected to increase.
Here are some important questions that are important to address so that you can come up with a strategy to stay ahead:
Will online’s convenient delivery, wider product selection, competitive pricing, and access to information complement the in-store experience or cripple traditional retailers’ sales and margins? Can online retailers build loyalty? And what should salons do today and tomorrow to protect their market share?
What Do Consumers Really Want?
We know that skin-care products and color cosmetics are the most frequently purchased online beauty categories. 38% of respondents surveyed indicate they frequently purchase skin-care items online, and 34 % indicate the same for color cosmetics. (Source A.T. Kearny Study 2016)
Online shoppers want good prices, free shipping, and secure sites
Finding the best prices, free shipping, and site security top consumers’ list of what they look for when shopping for beauty and personal care products online. That has changed since 2014, as finding the best prices has overtaken site security and free shipping to become the most important feature.
The Rise of Social Media Influencers
I think we can all agree that celebrity influence has fallen to the wayside with the rise of beauty influencers, lifestyle bloggers, YouTube vloggers, and Instagram stars. Consumers view them as being independent, authentic, and trusted, therefore they are holding more power over consumer decisions and brands. And more and more brands are using allocating their advertising dollars to just that.
Good news for salons
In any retail channel, success is defined by the ability to build sustainable relationships with consumers and increase the value of those relationships over time. A recent study found e-tailers are doing a better job of increasing transactions than building relationships. 67% of the survey respondents use four or more sites to fulfill their browsing and shopping needs online. Some use as many as 20 sites, which means loyalty isn’t there. Online retailers will need to rethink their strategies and figure out how to build a relationship online with the empowered consumer, which can be difficult. (Source A.T. Kearny Study 2016)
What can you do?
Enhance omnichannel capabilities.
One of the things that I have found successful is offering a way for the client to start online and end with in-salon pickup or start in a salon and end online. Salons can be delivery points or experience centers-think of in-store pick up.
Salons can educate clients and show them how to use the products and experience the brand with all their senses-which is difficult to do online. Using a salon as an experience hub requires having highly trained salon staff who add value to a highly educated consumer as well as having “experience elements” such as events and tools that support the sales process and brand interaction. Think of a seamless process, as we know that consumers love technology and love to buy, but hate to be sold.
Salons can also be used for fulfillment. By carrying a small amount of inventory to meet client demand, salons can support click-and-collect, providing customers with convenience while also generating more foot traffic. This would require an integrated system, and unfortunately most companies aren’t offering one.
Some salon distributors are launching apps that salons can promote that will give the ability to retail products through this app and earn a small retail profit. The problem with this concept, is a big one in my eyes. All of the products available on these apps are also sold on Amazon, and there has to be a very good reason for clients to use it. And while some clients will use it out of loyalty, most likely won’t due to convenience.
Salons and spas should align themselves with products that are truly exclusive and can’t be found on Amazon and Walmart. This has become a difficult task, but is definitely something that I can help with.
Over the past 20 years, personalization at scale has been the holy grail of marketing. The more that you can customize, not only the experience, but also the product, the more you become indispensable to the client. The ability to offer the right product as a solution definitely improves consumer relationships, and will keep them coming back.
Communicate with authenticity.
Clients are craving “authentic communication,” the kind delivered by peer reviews and recommendations from Influencers— in other words by “real people” or “people like us” instead of idealized models. As mentioned above-the rise of influencers has changed what people want. Brands and retailers will need to reconsider their communication strategies, establish new ways of engaging consumers and making them part of the brand, and leverage the power of Influencers to increase reach. I would even suggest thinking outside the box, and identifying clients that would share their experiences through reviews and leverage social media.
The evolution of the beauty industry
So there you have it. We are have the growing challenge of loyalty, the daily demand on retailers and brands to deliver a seamless experience between online and offline, and the need to “give up some power” to new sources of influence are indicators of the current state of the beauty industry. But the good news is, you can succeed IF you start to adapt and evolve with the changes.
I have a strong passion for helping other beauty professionals become successful beauty entrepreneurs. Helping them gain modern cutting edge exclusiveness, financial security and setting the next trends for our ever-changing industry. I’ve been there, I know what it’s like, and I have the knowledge, tools and resources to really make a difference.
If you want to find out more about what I can do to help you as a professional, please reach out. The time is now…email me at Leigh@leighraeder.com or fill out this form, and I will contact you!