Page 1

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!

Service Sector Research: Beauty Salons  

A presentation developed for a SCAD course in brand-driven innovation. For this presentation, I researched the leaders in the beauty salon s...

Read more
Read more
Similar to
Popular now
Just for you