Surviving and Thriving as a Spa and Salon in a Challenging Environment
It has now been a full year three years since COVID-19 bit us all and it’s has been a full year since pandemic restrictions have been lifted, country-wide.
In mid-February 2022, provinces and territories started initiating multistage reopening plans following the peak of the Omicron wave. BC was not much affected beyond spring 2020. Saskatchewan and Alberta took an accelerated approach and started from a more open position, because their restrictions were less stringent throughout the pandemic. Other provinces, such as Manitoba and Quebec, began removing restrictions following protests across the country. Ontario was amongst the group who removed restrictions last.
The chart below, published by Statistics Canada, refers to restrictions placed on the salon and spa industry. This chart demonstrates how severely the hair and aesthetics sector was impacted across the country but especially in central Canada.
So where do we stand one year later?
The landscape for salons and spas has changed measurably, both relative to the pre-pandemic period as well as since the end of restrictions, i.e., over the past 12 months.
During the pandemic and immediately after re-openings occured, the following issues significantly impacted the financial performance and viability of salons and spas regardless of segment:
- challenges as a result of practitioners departing the industry or moving “underground”
- inflated wage demands
- traffic dropped especially relative to city-centre businesses
- on-line shopping affected in-salon retailing
- do-it-yourself (“DIY”) services took off
- cost increases (rent; taxes; maintenance; utilities) are hurting profitability
- costly renovations to layout to facilitate client safety
- cost increases across most branded and generic products hurt margins on services
- additional requirements (i.e., PPE) forced service price increases which hurt demand
- supply chain disruptions affected the provision of some services and costs
- increased freight costs have affected landed price of all products and supplies
Over the past 12 months a new rash of issues have cropped up to make life challenging for our industry:
- many salons continue to complain about the inability to recruit talent
- the cash economy is causing many practitioners to operate as independents
- general inflation is driving wage demands even higher
- consumer spending habits have changed and are dynamic
- the do-it-yourself phenomenon is biting into the demand for services
- household inflation is causing consumers to cut back on personal services
- online buying and the ability to price check online is hurting conventional retail
- consumers have refocused their lifestyles (less is more)
- city-centre traffic remains below pre-pandemic levels and will continue to be less
- cost of capital
- some salons are struggling to repay government-backed loans
- interest cost on lines of credit or other forms of credit have increased dramatically
"In the Middle of Difficulty Lies Opportunity."
- Albert Einstein
We have seen a number of new salon and spa openings over the past 12-18 months which is exciting. Interestingly, some of these new launches are a result of professionals being able to take over existing salon-specific space at a fraction of the cost of a greenfield ( a new build from the ground up). This has been a particularly beneficial to young budding entrepreneurs who otherwise could not afford a start-up business. We have also seen a number of chains take advantage of purpose build facilities in prime locations at a fraction of the cost of building anew and being operational within a fraction of the time it takes to build out a salon.
We are also seeing new concepts come into the industry. In an effort to save on facility costs we are seeing salons open up in industrial locations. We are also seeing the advent of a “suites” concept, wherein mutli-purposed space is shared or rented on an as-needed basis.
Tips from what others are doing to survive and thrive in the new world
The environment today for salons and spas is indeed challenging, whether it be the changing winds of customer demand and behaviours, or the reality of economic headwinds. There are however, initiatives that owners and managers can undertake to minimize the volatility and optimize operations.
Staffing challenges – recruiting and retention
- give college grads a chance
- The talent that is graduating annually from beauty colleges (private or public) and adult education schools is eager and outstanding. These students are well prepared, i.e., up-to-date relative to the latest protocols, media savvy, hygiene educated, primed to learn and bereft of unwanted habits.
- Leverage education professionals for top candidate recruitment
- Partnering with colleges and instructors is a great way to gain access to top candidates. Get involved in college PACs or perform as a guest educator to build familiarity and notoriety for your brand with the population of grads-to-be.
- Not all your staff have to be aestheticians, technicians or stylists
- In fact, having strong administrators on your team will allow your front-line practitioners to focus on revenue generation while ensuring your marketing, clerical and back-office functions are optimized. Some of the top retailing businesses utilize sales professionals to drive retail sales because beauty pros are not always as comfortable, or effective at, pitching.
- Invoking the expertise of your supply base is a means of keeping your team current with new products, trends and protocols. It also allows you the opportunity to be one-on-one with your critical supply partners in order to gather market intelligence and also be heard relative to your unique needs. Ongoing staff training is also a proven means of retaining talent.
- Staff discounts with distributors
- Some brand and distribution partners will enable your staff to buy at wholesale pricing, regardless of the products on offer. This becomes a prerequisite that you can offer your staff and it costs you nothing, but goes a long way in terms of promoting employee satisfaction.
- promoting employee satisfaction.
- Focus on services that provide best ROI
- Understand your supplier’s efficiencies and pricing sweet spots, i.e., case lots and volume discounts
- Freight optimization
- Unidose packaging
- Embrace collaborative retailing
- Think consignment