Beauty Industry Research SERV 724; April 6, 2012 Rebecca Horton
Icons: Noun Project
Beauty Salons Image: kk+ via flickr
NAICS 812112
Industry Overview
$19.3 B
2010 Revenue estimate, Dun & Bradstreet
Image: EJP Photo via flickr
Top Locations
California
Texas
Florida
New York
31,745 salons
19,869 salons
16,414 salons
15,426 salons
Data: 2010 Dun and Bradstreet estimates
Major Players
Regis- $2.3B
Dessange- $69M
Ratner
Ulta- $1.2B
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)
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)
Data: High Beam Business; franchise websites; company press release, 18 Jan. 2012
Key distinction
Images: Dessange International via Merchant Circle; Fantastic Sams
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
Data: High Beam Business, Ulta website
Image: Ulta Facebook page
Common Business Models* *Business models developed using the Business Model Canvas: Business Model Generation, Osterwalder & Pigneur, 2010
Supercuts: Operations-Driven Partners
Processes
Offerings
Relationships
Customers
Neighboring retailers
Attract and maintain
Basic services
Family-focused
Get customers in and out quickly
Limited number of add-on services
Dedicated customer assistance
Train and retain stylists
Parent-company products
Resources
Male-focused options
Universities/ athletic departments Retail outlets, e.g. Walmart Up and coming music artists
Local talent pool Inter-franchise network Parent company product lines
Athletics teamsponsorship
Channels
Strip malls
Self-image Peace of mind
“No matter where you are, we’re pretty confident there’s a Supercuts nearby”
Cost structure
Revenue Streams
Retailing cost Site and materials cleaning and maintenance Product inventory Economies of scale 10% of profits typically go to parent company
Usage fee +tips Bargain pricing High volume, low margins
Data: Supercuts website
One size fits most Some focus on “greying” customers
Shopping mall outlets Benefits
Little customization
Male clientele
Dessange: Multi-epicenter driven Partners
Processes
Offerings
Relationships
Customers
Off-brand franchise owners
Attracting customers
High tech offerings
Personalized 1:1
Maintaining existing customer relationships
Bespoke solutions
“Women in every country”
Parent-brand franchise owners Celebrity advocates Fashion Industry Film festivals Tennis Opens
Extending svcs. into niche arenas Resources Customer base Corporate infrastructure for franchise opportunities
“Those who travel”
Franchise-brand products
Brand loyals
Concept of global beauty Add-on services Customer understanding Benefits Self-image Personalization Serenity
Brides Channels
Aging women
Retail outlets/ “Club” concept
Segmented offerings within each salon
Partner stores
Segmented via franchises targeted at specific user groups
Partner events Own events
Cost structure
Revenue Streams
Fixtures, furniture, equipment Maintenance and cleaning High branding and Marcom costs Specialty add-ons Product inventory
Usage fees Large contracts with major players (fashion, tennis, etc.) Consultations Weddings
Data: Dessange website
Fantastic Sams: Operations-Driven
Partners
Processes
Offerings
Relationships
Customers
Parent corporation, Dessange
Attract
Own-brand products
Intimate 1:1
Mens product line
Quick-service
Range of services
Check-out
Add-on services (e.g. reconstructive treatment)
Neighboring retailers
Regional focus-not nationwide “Haircuts for the entire family”
Resources
Channels
Own product range
Retail outlets
Infrastructure (once business is up and running)
Benefits “Looking good, feeling good” Cost-friendly
Cost structure
Revenue Streams
Product inventory Low branding and Marcom costs Retailing costs Economies of scale Fixtures, furniture, equipment Cleaning and upkeep of property
“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
Processes
Offerings
Relationships
Customers
Pageants
Attract
Basic hair services
1:1
Project Runway winners
Engage
Package deals
Retouch Appeal
Styling events vs. other parentcompany salons
Entertainmentdriven (at events)
Niche-rocker hair, lots of color
Artists
Resources
Parent company products
Channels
Stylists
Close ties to other parent-company chains
Modern image
Retail outlets
Local radio stations Night clubs
Strong parent brand involvement
The “next generation”
Urban “Hair Wars” events
Benefits Cutting edge looks Youthfulness Trendsetting
Photoshoots
Cost structure
Revenue Streams
Retailing costs Relatively high marcom costs Upkeep, cleaning Fixtures, furniture, equipment Product inventory
High volume, high margins Product sales Usage fees + tips
Data: Bubbles website
Ethnic diversity
“It didn’t deal with every type of hair” – Ann of Bubbles, re: the CIBU product line
Ulta: Outside-In Partners
Processes
Offerings
Relationships
Customers
Retail product outlets
Set appointments
Own-brand products
1:1 with customers
Attract and maintain
Free samples
Mass-market, undifferentiated
Sell
Package deals
Expand
Other-brand products
Resources
Add-on treatments
Channels
Retail product outlets
Undifferentiated core service
Retail outlets
Parent brand is the outlet
Benefits
Customers (referrals) Cosmetics and hair product companies
Rewards members Female-focused Ulta store shoppers
Retail salons Website
Convenience Repeatable styles Accessible products Cost structure
Revenue Streams
Money spent on free consultations (staffing) Low Marcom Costs Upkeep, cleaning Leasing costs Fixtures, furniture and equipment
Set-price services Product sales
Data: Ulta website
Key Innovations
Service Innovation Matrix Strategic Platform
Service Concept
Service Delivery System
Service Branding and Marketing
Radical Bubbles “Hair Wars” concept “Quality, service, hygiene, understanding” -Dessange
Incremental
Dessange at US Open Localized product supply, Ulta
Images: Hair Wars via LA Times, US Open via Tennis Forum
Bubbles’ Next-Gen focus
Ansoff’s Growth Matrix New
Bubbles “Hair Wars” concept
Ethnic diversity (Bubbles)
Existing
Mall, retail outlet focus
Dessange, US Open partnership
Supercuts’ male-specific service offerings
Existing Images: Hair Wars via LA Times, US Open via Tennis Forum
New
SWOT Analysis* *Highlighted items in the pages that follow are shared by all and represent spaces for service innovation through a new business model
Youth digital culture Individualism
Not many regulations
Apps and mobile culture
Key Trends
Coworking/ work from home Living on less
Partners
Processes
Offerings
Relationships
Customers
Lots of competitors
Gender divides Resources
Lots of new entrants
Industry Forces
Channels
Market Forces
Benefits
Cost structure
Old channels being replaced by technology
Revenue Streams
DIY/Maker communities
Lots of substitute products and services China as a major global player
Growth of developing nations
MacroEconomic Forces
Influx of start-up culture
Instability of global markets
Decrease in production costs
Shift to mixed-use development
SWOT: Bargain Salons* Strengths
Weaknesses
Cost efficient operations Competitive pricing Lower than average fixed costs Economies of scale Accessibility and ubiquity
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
reats
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
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
*For the purposes of the SWOT analysis, I grouped Supercuts and Fantastic Sams together due to similarities in their business models
SWOT: Dessange (premier salons) Strengths
Weaknesses
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
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
reats
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
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: Bubbles Strengths
Weaknesses
Synergies between products and services High margins Resource needs = predictable Channels provide economies of scope Ethnic diversity Strong relationships with brand franchises
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
reats
Blogger culture Maker culture IT support and analytics Huge opportunity for facilitating services Opportunity to differentiate distribution channels Social media partnerships Start-up culture
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: Ulta Strengths
Weaknesses
Partnerships with other brands Outsourced product allows for focus on service Cost-efficient operations Diversified revenue streams Retail product outlets offer alternate revenue stream
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
reats
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
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
*For the purposes of the SWOT analysis, I grouped Supercuts and Fantastic Sams together due to similarities in their business models
Innovation Opportunities
Re- Work
Four Action Framework Place dependency Product inventory Waste
High retailing costs Cleaning and maintenance costs Mass-market feel Lack of customization High start-up costs
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 Charge for enhancing services (snacks, drinks, clothing press, etc.) Oer 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
What-Ifs
Insights + Strategic opptys. platform
Service concept
Service delivery system
What if we partnered with outside events to promote and sell our services?
Service branding & mktg.
What-Ifs What if we made our customers’ lives easier by helping them do other things (dry cleaning, Enhancing personal shopping)? services
Insights + Strategic opptys. platform What if our customers were coproducers?
Core service
What if we focused on beautifying other aspects of life, like party decor and fashion?
Service delivery system
Service branding & mktg.
Facilitating Services What if we offered a full service coffee bar akin to Illy (French coffee brand) in our salon?
What-Ifs What if the salon were placeless (i.e. we offered a mobile salon)?
Insights + Strategic opptys. platform
Service concept
Service delivery system
Service branding & mktg.
What if we did in-office consults for large businesses? What if we served the same customers more frequently?
What-Ifs What if we put our stylists in retail stores like Gap or H&M?
Insights + Strategic opptys. platform
Service concept
What if we viewed our employees as brand ambassadors and sent them out to other avenues?
Service delivery system
Service branding & mktg.
ank-You!