Service Sector Research: Beauty Salons
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Transcript of Service Sector Research: Beauty Salons
Beauty Industry Research
SERV 724; April 6, 2012 Rebecca Horton
Icons: Noun Project
Beauty Salons NAICS 812112 Image: kk+ via flickr
Industry Overview
$19.3 B Image: EJP Photo via flickr
2010 Revenue estimate, Dun & Bradstreet
California
31,745 salons
Texas
19,869 salons
Florida
16,414 salons
New York
15,426 salons
Top Locations
Data: 2010 Dun and Bradstreet estimates
Major Players
Market leaders according to 2011 report by High Beam Business; revenue data from High Beam Business (2009) and Private Equity Wire (Dessange). For Dessange, revenues were converted from euros to dollars to enable comparison. No revenue data was available for Ratner Companies, LC (privately held)
Dessange- $69M
Ulta- $1.2B Ratner
Regis- $2.3B
Regis Corporation § Market leader
§ $2.3 B in revenues (2009)
§ Manages several franchises like Supercuts, Sassoon, Hair Club for Men and Women
§ Stores typically found in shopping and strip malls
§ Ubiquitous
Image: Supercuts Coupon SupercutsCoupons.org Data: High Beam Business, franchise websites
Dessange International § Major international market
player
§ Important to US discussion because of its recent acquisition of Fantastic Sams, a value-priced chain
§ Present in over 45 countries
§ Segmented markets (high and low end consumers)
Images: Dessange International via Merchant Circle; Fantastic Sams
Data: High Beam Business; franchise websites; company press release, 18 Jan. 2012
Key distinction
Ratner Companies, LC § Virginia-based company
with over 10,000 employees
§ Owns the popular franchises Bubbles, Salon Cielo, and Hair Cuttery
§ Its salons tend to have niche foci, e.g. Bubbles caters to “cutting edge” trendsetters
§ For the purposes of this report, I researched Ratner’s Bubbles concept salon
Image: Bubbles Hair Wars, via Bubbles website Data: High Beam Business, franchise websites
Ulta Salon § Salon arm of the Ulta
brand, a company that maintains beauty and hair product outlets around the US
§ Mass-market approach
§ Uses wide array of products from a variety of suppliers to differentiate itself
§ Salons typically operate alongside the company’s retail chains
Image: Ulta Facebook page Data: High Beam Business, Ulta website
Common Business Models*
*Business models developed using the Business Model Canvas: Business Model Generation, Osterwalder & Pigneur, 2010
Supercuts: Operations-Driven Partners Neighboring retailers Universities/ athletic departments Retail outlets, e.g. Walmart Up and coming music artists
Processes Attract and maintain Get customers in and out quickly Train and retain stylists
Offerings Basic services Limited number of add-on services Parent-company products Male-focused options
Relationships Dedicated customer assistance Athletics team-sponsorship
Customers Family-focused Little customization One size fits most Some focus on “greying” customers Male clientele
Resources Local talent pool Inter-franchise network Parent company product lines
Channels Shopping mall outlets Strip malls “No matter where you are, we’re pretty confident there’s a Supercuts nearby”
Benefits Self-image Peace of mind
Cost structure Retailing cost Site and materials cleaning and maintenance Product inventory Economies of scale 10% of profits typically go to parent company
Revenue Streams Usage fee +tips Bargain pricing High volume, low margins
Data: Supercuts website
Dessange: Multi-epicenter driven Partners Off-brand franchise owners Parent-brand franchise owners Celebrity advocates Fashion Industry Film festivals Tennis Opens
Processes Attracting customers Maintaining existing customer relationships Extending svcs. into niche arenas
Offerings High tech offerings Bespoke solutions Franchise-brand products Concept of global beauty Add-on services Customer understanding
Relationships Personalized 1:1
Customers “Women in every country” “Those who travel” Brand loyals Brides Aging women Segmented offerings within each salon Segmented via franchises targeted at specific user groups
Resources Customer base Corporate infrastructure for franchise opportunities
Channels Retail outlets/ “Club” concept Partner stores Partner events Own events
Benefits Self-image Personalization Serenity
Cost structure Fixtures, furniture, equipment Maintenance and cleaning High branding and Marcom costs Specialty add-ons Product inventory
Revenue Streams Usage fees Large contracts with major players (fashion, tennis, etc.) Consultations Weddings
Data: Dessange website
Fantastic Sams: Operations-Driven Partners Parent corporation, Dessange Neighboring retailers
Processes Attract Quick-service Check-out
Offerings Own-brand products Range of services Add-on services (e.g. reconstructive treatment)
Relationships Intimate 1:1
Customers Mens product line Regional focus-not nationwide “Haircuts for the entire family”
Resources Own product range Infrastructure (once business is up and running)
Channels Retail outlets
Benefits “Looking good, feeling good” Cost-friendly
Cost structure Product inventory Low branding and Marcom costs Retailing costs Economies of scale Fixtures, furniture, equipment Cleaning and upkeep of property
Revenue Streams “products at a fraction of” what they cost elsewhere “9.99 special” returns during low volume times High volume, low margins
Data: Fantastic Sams website
Bubbles: Resource/Partner Driven Partners Pageants Project Runway winners Local radio stations Night clubs Artists Stylists
Processes Attract Engage Retouch Appeal
Offerings Basic hair services Package deals Styling events vs. other parent-company salons Parent company products Modern image
Relationships 1:1 Entertainment-driven (at events)
Customers Niche-rocker hair, lots of color Ethnic diversity The “next generation” “It didn’t deal with every type of hair” –Ann of Bubbles, re: the CIBU product line
Resources Close ties to other parent-company chains Strong parent brand involvement
Channels Retail outlets Urban “Hair Wars” events Photoshoots
Benefits Cutting edge looks Youthfulness Trendsetting
Cost structure Retailing costs Relatively high marcom costs Upkeep, cleaning Fixtures, furniture, equipment Product inventory
Revenue Streams High volume, high margins Product sales Usage fees + tips
Data: Bubbles website
Ulta: Outside-In Partners Retail product outlets Customers (referrals) Cosmetics and hair product companies
Processes Set appointments Attract and maintain Sell Expand
Offerings Own-brand products Free samples Package deals Other-brand products Add-on treatments Undifferentiated core service
Relationships 1:1 with customers
Customers Mass-market, undifferentiated Rewards members Female-focused Ulta store shoppers
Resources Retail product outlets Parent brand is the outlet
Channels Retail outlets Retail salons Website
Benefits Convenience Repeatable styles Accessible products
Cost structure Money spent on free consultations (staffing) Low Marcom Costs Upkeep, cleaning Leasing costs Fixtures, furniture and equipment
Revenue Streams Set-price services Product sales
Data: Ulta website
Key Innovations
Strategic Platform
Service Concept
Service Delivery System
Service Branding and
Marketing
Radical
Incremental
Bubbles “Hair Wars” concept
“Quality, service, hygiene, understanding” -Dessange
Bubbles’ Next-Gen focus
Dessange at US Open
Images: Hair Wars via LA Times, US Open via Tennis Forum
Localized product supply, Ulta
Service Innovation Matrix
Ansoff’s Growth Matrix
New
Existing
Existing New
Bubbles “Hair Wars” concept
Mall, retail outlet focus Dessange,
US Open partnership
Ethnic diversity (Bubbles)
Supercuts’ male-specific service offerings
Images: Hair Wars via LA Times, US Open via Tennis Forum
SWOT Analysis*
*Highlighted items in the pages that follow are shared by all and represent spaces for service innovation through a new business model
Partners
Processes
Offerings
Relationships
Customers
Resources
Channels
Benefits
Cost structure
Revenue Streams
Key Trends
Market Forces
Macro- Economic
Forces
Industry Forces
Youth digital culture
Individualism
Apps and mobile culture
Not many regulations
Coworking/ work from home
Living on less
Gender divides
Old channels being replaced by technology
Decrease in production costs
Shift to mixed-use development
DIY/Maker communities
Influx of start-up culture
Instability of global markets Growth of developing
nations
China as a major global player
Lots of substitute products and services
Lots of competitors
Lots of new entrants
Strengths Cost efficient operations Competitive pricing Lower than average fixed costs Economies of scale Accessibility and ubiquity
Weaknesses Resources easily replicated No network effects of value proposition Lack of customization Low margins Place-dependency High Start-up costs Product inventory=costly High facility and maintenance costs Cost structure/infrastructure hasn’t changed much
Opportunities Personalization Baby Boomers Maker culture IT support and analytics Huge opportunity for facilitating services Opportunity to differentiate distribution channels Social media partnerships Start-up culture
reats Pricing mechanisms leave money on the table Low execution quality The death of the strip mall Weak brand Competitors threaten market share Move to personalization by other brands Revenues are transactional with few repeat purchases Resource needs somewhat unpredictable Market saturation threat Customer switching costs are low Long-term impact of recession Fragmented market Unstable capital markets
SWOT: Bargain Salons*
*For the purposes of the SWOT analysis, I grouped Supercuts and Fantastic Sams together due to similarities in their business models
Strengths Very high margins Synergies between products and services Resources not easily replicated Diversified revenue streams Value propositions well-aligned with customer needs Loyal customer base Recurring revenue streams Charge for what customers are really willing to pay Strong brand Own-brand products and bespoke solutions Good working relationships with key partners Fashion and beauty industry partnerships
Weaknesses White, affluent focus Revenues difficult to predict High fixed costs High start-up costs Product inventory=costly High facility and maintenance costs Cost structure/infrastructure hasn’t changed much
Opportunities Standardization The global jetsetter Coworking Opportunity to use less costly resources Global shift to cities Maker culture IT support and analytics Huge opportunity for facilitating services Opportunity to differentiate distribution channels Social media partnerships Start-up culture
reats Cost inefficient operations Threat to activities and partnerships by other luxury brands Customer switching costs are low Long-term impact of recession Fragmented market Unstable capital markets Lots of substitute products and services
SWOT: Dessange (premier salons)
Strengths Synergies between products and services High margins Resource needs = predictable Channels provide economies of scope Ethnic diversity Strong relationships with brand franchises
Weaknesses Female focus Tired, outdated feel of mall salons High Start-up costs Product inventory=costly High facility and maintenance costs Cost structure/infrastructure hasn’t changed much
Opportunities Blogger culture Maker culture IT support and analytics Huge opportunity for facilitating services Opportunity to differentiate distribution channels Social media partnerships Start-up culture
reats Channel reach among prospects is weak Rising costs for leasing in cities Fail to charge for things customers are willing to pay for Customer switching costs are low Long-term impact of recession Fragmented market Unstable capital markets Lots of substitute products and services
SWOT: Bubbles
Strengths Partnerships with other brands Outsourced product allows for focus on service Cost-efficient operations Diversified revenue streams Retail product outlets offer alternate revenue stream
Weaknesses Undifferentiated core product Revenues are transactional Too many partner relationships to maintain quality Lack of synergies between products and services High Start-up costs Product inventory=costly High facility and maintenance costs Cost structure/infrastructure hasn’t changed much
Opportunities Global shift to cities Opportunity to convert product lines into services Personalization Maker culture IT support and analytics Huge opportunity for facilitating services Opportunity to differentiate distribution channels Social media partnerships Start-up culture
reats Weak brand Constant danger of losing partners Customer switching costs are low Long-term impact of recession Fragmented market Unstable capital markets Lots of substitute products and services
SWOT: Ulta
*For the purposes of the SWOT analysis, I grouped Supercuts and Fantastic Sams together due to similarities in their business models
Re- Work Innovation Opportunities
Place dependency Product inventory Waste
Customer service Customization Brand loyalty Employee loyalty Social media presence Retail partnerships (why not put a stylist in a retail store like Gap or H&M?) Corporate partnerships
High retailing costs Cleaning and maintenance costs Mass-market feel Lack of customization High start-up costs
Charge for enhancing services (snacks, drinks, clothing press, etc.) Offer more facilitating services (e.g. home styling consultations, nutrition) New customer segments (kids, men) Build innovative Marcom concepts Blogger partnerships Customers as co-producers Technology-enhanced services
Four Action Framework
What-Ifs
Insights + opptys.
Strategic platform
Service concept
Service delivery system
Service branding & mktg.
What if we partnered with outside events to promote and sell our services?
Enhancing services
Insights + opptys.
Strategic platform
Core service
Service delivery system
Service branding & mktg.
Facilitating Services
What-Ifs
What if our customers were co-producers?
What if we focused on beautifying other aspects of life, like party decor and fashion?
What if we made our customers’ lives easier by helping them do other things (dry cleaning, personal shopping)?
What if we offered a full service coffee bar akin to Illy (French coffee brand) in our salon?
What-Ifs
Insights + opptys.
Strategic platform
Service concept
Service delivery system
Service branding & mktg.
What if we served the same customers more frequently?
What if the salon were placeless (i.e. we offered a mobile salon)?
What if we did in-office consults for large businesses?
What-Ifs
Insights + opptys.
Strategic platform
Service concept
Service delivery system
Service branding & mktg.
What if we viewed our employees as brand ambassadors and sent them out to other avenues?
What if we put our stylists in retail stores like Gap or H&M?
ank-You!