Last week I talked about diversion and the history and evolution over the decades.
We are going through a huge transformation of the distribution. Between the salon, the Sephoras and Ultas, you see a lot of new retails channels are growing-salons not sure how to cope with it, and with product lines selling out to Amazon, and ecommerce on the rise, now is the time to position yourself…
Today it is hard to find large distributorships that once dominated the landscape with their sales force, educators, education, and support. They have been purchased by the giant corporations for their stores, which is part of the game plan the giant corporations continue to follow. They want stylists to come in daily if needed, to purchase what they will be using tomorrow or even this week.
While they maintain a weak sales force, the long-term plan is to get all stylists to enter their stores to purchase their beauty needs. While on the other hand you have the traditional distributor base that now works with smaller lines that many times do not have the capital to properly market and drive their business.
And customers are changing the way they shop as the channel of distribution channels are changing and a product is going directly from manufacturers to the consumer and bypass distributors and salons. Here are some statistics:
It was estimated that $17.3 billion USD of beauty sales were generated
through online stores and mail-order product sales.
Luxury haircare — which, according to NPD, grew by 7 percent to $459.6 million in the US in 2016
Colour Cosmetic sales in current value terms is $14.4 billion!
And this US market is expected to increase by a further US$18 billion by 2020, with a strong boost from the premium segment
Should the market achieve growth predictions, it will have expanded by almost 45 percent in just 10 years.
Let’s dive into AMAZON
Last week I talked about diversion and just a sliver of the product diversion problem that beauty brands in general, and salon haircare brands in particular, have long battled is on “unauthorized” websites. The scale of the issue is hard to quantify, but a 2010 lawsuit estimated that $1 billion of professional beauty products are sold through unofficial channels each year. Amazon’s marketplace is fertile ground for unauthorized vendors, who undercut suggested prices and often sell used product.
Right now the professional haircare “industry” is in the midst of a massive vicious cycle. Sales through salons have shifted to other channels (brand ecommerce sites, Amazon, Sephora, etc.), which means there isn’t enough money to justify delivering education programs and staffing the field sales teams to service the salons. As a result, both education and salespeople are getting cut, which leads to less engagement among the salons and further dropping sales.
This leads to more cuts and a scramble by the brands to open up more alternative distribution (Ulta, more online channels) to offset the lost sales through salons, which causes more sales to shift away from salons. More cuts, more new channels, lower salon sales, more cuts…… you get the picture. That’s how Bumble is ending up in Ulta and opening blow dry bars with MAC.
That’s why Davines is selling directly to Amazon. That’s why you can buy Oribe at Walgreens.com, Walmart.com, Jet.com and Costco.com all at massive discounts.
Excess Inventory is Driving Discounts of Almost 50%
One of the worst and most common symptoms of a vicious cycle in business is excess inventory. When bad decisions start leading to bad sales results, companies decide that rather than take their knocks and figure out how to change, they are going to double down and literally FORCE more sales into the system.
It starts with pushy salespeople, then moves to manic product launch cycles and eventually you see new distribution channels opening up. It’s a game of smoke and mirrors, and that’s when you start seeing signs of lots of excess inventory being offered at a significant discount, tarnishing everyone associated with the brand.
That’s where we are, folks. After several years of weak salon sales, product companies have been launching new products at an unprecedented pace, and now there is so much excess inventory it is flooding the market at massive discounts. Who are the big beneficiaries of this?
Websites like Amazon, eBay, Overstock.com, and discount retailers like Costco, Walmart, TJ Maxx. Looking at just five professional brands – Bumble, Oribe, Kerastase, Davines and Kevin Murphy – listings on eBay have jumped by 33% in just four months, and the discounts offered are incredibly steep. Kerastase and Davines are offered at the steepest discount (almost 50% off retail) while Kevin Murphy has seen the largest increase in listings (albeit starting from a much smaller base).
Interestingly, Bumble hasn’t seen too many more listings and it seems to have the lowest discounts, suggesting they have less excess inventory than others. That’s probably because they decided to bail on the salon channel at least a full year ago when they cut Bb.U and decided to focus on direct-to-consumer sales.
Some brands would rather cut out the salon and go directly to the consumer to keep more profit.
Here are just a few examples:
Embracing direct-to-consumer has helped Virtue Labs control the way it markets its products, amplified by celebrity hairstylist Adir Abergel, who joined as creative director in January. “We’ve seen it in other categories of beauty, some successful some not, but consumers need to lead the charge,” says Shaban. While she thinks the relationship between salon and customer will always be valuable, “we don’t need to have an intermediate anymore.”
Aveda and Bumble sell directly to your clients on their websites with free shipping. Bumble is also in Sephora and on their website. Aveda is next. It’s now all about the money. You are being used to promote their lines which will be sold in places other than your salon for their profit. Wake up and see what’s happening. And both are all over Amazon.
Jane Iredale Expands Into Neiman Marcus
The “skin-care makeup” brand is bringing its full collection of products to three Neiman Marcus doors and its e-commerce site.
“We are delighted to be partnering with Neiman Marcus as we continue to expand globally,” said Jane Iredale, founder and president of IMC. “The shopping experience at Neiman Marcus is grounded in providing exceptional customer service and quality products perfectly reflecting our own brand philosophy.”
Then we have Davines:
A note with respect to Amazon: “After years of fighting against Amazon, we realized we could no longer win the fight and partnering with them was the only way to prevent discounting practices and fraudulent products, and therefore the only way to protect our salons. Tomorrow, Davines will invest the profit from Amazon in providing all our loyal salons with Gift With Purchase opportunities to give consumers an incentive to purchase Davines products in salons versus anywhere else.” ~ Anthony Molet, CEO, Davines North America.
“It’s a whole other ballgame now,” says Victoria Hunter, who co-founded New York’s Whittemore House Salon with Larry Raspanti in 2009. “The only person that’s actually buying product, it’s only for convenience sake when they are in the salon, but no one is going to be making a trip to actually get product.”
So how you are you going to evolve with this major shift?
From my experience, clients want their stylist’s recommendation, trust their professional-especially now. They are tired of trial & error, and celebrity endorsements.
I know a lot of pros have decided to partner with direct sales or MLM companies. In my video, I voiced my opinion on this subject. There are so many downfalls to this decision.
*The need for exclusive products has never been more crucial. Align yourself with non-diverted product lines that aren’t found anywhere else and keep the sale.
*Beauty from the inside out-A big trend is becoming a one-stop shop. We need to be looking at the customer as a whole. Trust me, not only are they looking for this, but what’s happening on the inside will come out on the outside.
*Focus on the clients needs-Become the expert that takes pride in finding solutions to their issues. They all have them, your job is to fin out what they are.
*Solutions to support in salon services-Have retail products that support the services you are providing so they can go home with a maintenance program.
*Custom products-Offer customized products that are created just for them & you only have the formula. I teach salons how to work with professional customized cosmetics, skin care, nutraceuticals, weight loss programs, etc.
*Work with product lines that give you an ecommerce website so you can leverage the on-line sales boom. The beauty of it, is you will still keep the customer, retail profit, and it allows you to market a wide range of products without carrying a large inventory.
I am a consultant and not your typical rep. I teach and train professionals how to maximize and leverage their careers to generate more revenue without increasing their time behind the chair.
If you would like to set up a free consultation to see what I can help you with, fill out the form below and I will contact you to set a phone appointment: