Content provided by Vish
Pricing Challenges Post-Lockdown
Salons are faced with multiple layers of uncertainty as they open their doors post-lockdown. On top of handling stylist fear, home life complications, communicating and enforcing CDC rules and precautions, salon owners are also facing unprecedented financial pressures after months of no revenue. With investments in infrastructure prior to reopening along with stocking PPE and planning for reduced capacity, it’s imperative that you optimize your revenue at every turn.
When surveying a group of salon owners about the biggest concern in their salon, 66 percent said profits and low margins were their number one concern. Service profitability is largely influenced by two factors—revenue and cost. In the post-lockdown era, owners can’t afford not to tackle both fronts and stretch their profit margins. Clients coming in after months without their regular services are requiring double to triple their usual amount of color to service their regrowth, and it’s likely they will stretch the time in between services for the foreseeable future. Salons not accounting for that will see shrinking profit margins and bleak financial returns. Owners interviewed by Vish, an intelligent color scale and iPad application, have taken a few different approaches to protecting their margins.
Adding A Surplus Charge For Added Protection
One of the most common ways salon owners are increasing their revenue to compensate for the increase in costs is to add surplus cost, or a fee; adding the same amount to every service performed. The client then pays the extra couple of dollars and knows that it is covering a specific cost, like PPE, and infrastructure costs for things like plexiglass. This is a known concept across many industries and has little pushback from customers who appreciate the extra layer of care when visiting a salon.
Raising Your Prices Across the Board
Some salon owners, particularly those that have been considering a price raise prior to lockdown, have opted to simply raise their prices by 5-10 percent to compensate. These may seem similar at first glance, but while the cost to customers may be the same now, a surplus cost will be removed once restrictions are lowered and you’d be faced with a new conversation if you decided to simply raise your prices.
James Alba, co-owner of The BHive Salon in New Jersey and founder of the Salon Movement and Salon Owner Masterminds, opted to make the change for the long run, stating: “I figured this is going to be a change for quite a long time and there will be some debate for how long they’ll want to pay for PPE. When a salon is already charging for a green fee as part of a program like Green Circle Salons, clients will get fatigued with added fees.”
The conversation remains the same, but the expectation won’t be that the incremental raise will get removed later on.
Managing Product Costs
Regardless of whether you decide to raise your prices long term, or if a surplus fee makes the most sense for you, managing the other end of profitability is essential. With extended regrowth walking into the salon after clients have bunkered down for months, what was eight ounces of color becomes 16 or more. Traditionally, color services were priced with an anticipated amount of color, but in situations like we are seeing now after lockdown, you are faced with a few options to control your product costs:
- Absorb all product costs and raise prices to compensate for anticipated regrowth.
- Implement product allowances, charging when additional color and product is needed.
- Completely separate product charges from service charges.
When the same group of salon owners was asked whether they were capturing extra product charges, 34 percent said they weren’t accounting for extra product use in any way, making excessive regrowth problematic. Although a standard rate for an extra bowl seems arbitrary, it’s important to safeguard your bottom line in some way. It’s equally important to ensure that they are added to the final ticket. A study by Vish that focused on communication between the front desk and stylists found that up to 15 percent of service upgrades and additional services like toners are not added to the final ticket.
A second issue that comes up in adding product charges is communication between stylist and client. Stylists are often reluctant to charge their clients more, assuming clients will leave them or get frustrated with the upsell. In reality, most clients understand.
“Initially we thought we’d see pushback from clients, but once they understand that they are being charged only for product used on their head, and not what the average person uses, they were happy to pay the difference,” says Bruce Brothers from Goldie X Bob Hair Salon in Denver.
In fact, our industry is one of the only industries that doesn’t charge for additional product. When you go to a restaurant and order a glass of wine, you are charged more for a 9oz. glass versus a 6oz. pour. When you upgrade your latte for a caramel drizzle, you also pay more, so why do we feel bad asking clients to cover the costs of their caramel gloss at the bowl? Especially when toners and gloss treatments are the highest cost per application. Why are you losing money, when the client decides to wait longer for a retouch?
Take Control & Charge Your Worth
If you haven’t already, make sure you are considering your prices, adding a fee if you need to recoup the new costs of protective equipment or simply increasing your prices. With increased pressure due to reduced capacity, the law of supply and demand definitely increases the value of your time. An increase in prices now is a move in the right direction for most salons and won’t be something that your clients expect to be removed at a later date like a PPE fee.
Start monitoring your product costs and ensure that waste is kept to a minimum. When you are investing more in backbar inventory to cover all that regrowth, every ounce counts. Implement an extra product charge for those that require more than your standard mix and make sure that every service is charged for so you keep your profit margins healthy.
Lockdown has amplified the effects that absorbing costs can have on a salon’s profits. After the industry standard of 6-8 weeks of regrowth, a client will typically use the standard amount of product, not costing your salon any more than what was accounted for. During lockdown, clients were forced to go 12+ weeks without a touch-up, using double to triple the amount of color of a typical visit. While a large upscale salon prices their services with enough margin to absorb these costs, that’s not reality for most businesses. It is more important than ever to ensure the health of your business—charge your clients for what is used on their head and don’t absorb that cost yourself.