Pointing the Finger

We do not tolerate diversion of our Profound Beauty products whatsoever — even those sold on eBay. I personally track them down and have them removed. (Stefany Reed, senior vice president of marketing and salon development for Profound Beauty)

Aquage is the poster-child for anti-diversion. We don’t sell to diverters, and any company wishing to carry our products must produce at least 50% of its business dollars in salon services. (Luis Alvarez, vice president of creative and education of Aquage)

Pointing the Finger

So, who’s to blame for this salon business disaster? Everyone in the beauty biz, that’s who! Some salon owners are reaping the benefits of peddling their wares on eBay or stocking smaller beauty stores with coveted professional brands. And some product companies have grown their bottom lines by millions of dollars by diverting their goods to the mass-market sector where the high cost of education and maintaining a salon sales force doesn’t exist. Looking at the situation strictly from a dollars-and-cents point of view, who could blame them for seeking alternative channels? When the almighty dollar comes calling, these companies have to weigh their options: Should they stick with the salon business that produces modest product sales, or use the goodwill and solid retail base that has been built by their salon customers to stuff their coffers with a steady flow of staggering sums of money?

“My answer to your question: Product companies need to target their customers and stick with them,” says Guita Dovas, founder of Oloff Beauty, which produces the non-diverted Barex Italiana, JOC Color and Aéto Botanica Hair brands. “We’ve developed such highly researched products that we want them to be sold strictly in salons because only salon professionals know the difference between X, Y and Z brands. We’ve always wanted the ultimate recipient—professional beauty experts—to rate our products and to give them brands that they could call their own. Because of this, we’re fierce antidiversionists. When a distributor has even a small spike in product sales, we want to know why.”

“We, too, monitor our distributors very carefully,” says Wayne Grund, founder and president of Surface hair products. “But salon owners should also track where their brands are being sold. Besides all the lost revenues that happen any time products wind up in a Costco or Walgreens, their presence in these mass-merchandise stores degrades the total image of their salons. Think about it: You could be displaying the same products on the shelves of your $500,000 salon that a discount store is proudly displaying—often on huge palettes so they can’t be missed by the same shoppers that frequent your salon.”

Alterna closely monitors purchases from our distributors and has a cross-reference invoice-to-product coding procedure to prevent diversion. Additionally, we don’t pressure our accounts with unrealistic purchase expectations, which is a primary cause of diversion. (Jay Morris, Alterna executive VP of global sales)

Our greatest means of defense against diversion is our limited distribution network. We service all of our salons in the U.S. market with just four distributors. (Steven Goddard, CEO of Pravana Naturceuticals)

Other prolific salon retailers are turning to private-label and custom manufacturing to preserve their bottom lines. “Some time ago, we signed a contract with an upscale pro beauty company, in part agreeing that we would purchase a large amount of the company’s goods each month,” says Allen Edwards, owner of the SoCal-based Allen Edwards salon + spa. “In return, we were told, ‘We will only allow a few select locations in your area to carry our line.’ In truth, one of these select locations ended up being a lowbrow beauty store down the street—just to name one diverted location. Because this scenario has happened over and over again, we took ourselves out of the line of fire by introducing our own haircare line—Shear Force.” Beth Minardi, owner of the Minardi Salon in Manhattan, had a similar experience with the same company. “It’s a joke, really,” she relates. “Diversion is everywhere, and it’s not going away.” Perhaps, though, the last laugh is on the offending product maker: Minardi is adding her name to the growing list of product companies that refuse to divert their goods by launching her own color-safe brand, Minardi uxury Color Care Line, which will soon be distributed nationwide.