Why There Are Too Many Salons. And What It Means for Yours

Your prices aren't being held down by your clients. Your profits are being hammered by the three salons on the same street, the two people renting chairs five doors away, and the one person at the end of your road working from their shed. Hello, hello, hello my salon friends, Phil Jackson here, your queen of salons, coming all over the internet again with another dose of my Wise Owl wisdom. And I'm going to be really honest with you, this episode has the opportunity of being gloomy as hell. And I'm going to try my very, very best to make sure that it doesn't turn out that way. Because there are more places to get your hair, your nails, your brows, your skin, your injectables done than at any point I can remember in my career. We're not just talking about salons with premises in that probably what feels quite old fashioned way with the salon industry that I grew up in, but also we've got room renters, chair renters, home based businesses, mobile. We've got rooms above shops, clinics in the backs of gyms, people working out of sheds and garages. The barrier to entry in our industry has collapsed. And you can be trading in a couple of weeks with a qualification, a bed or a chair and a basin and an Instagram account and then you're in. And that's what's happening more and more and more. Now, that in itself, I don't have a problem with. I don't think that this drive towards regulation and increasing the amount of hoops that we have to jump through to open a business is the answer to this at all. And in some ways, it's kind of exciting because what we end up with is these kind of scrappy little businesses. And that's very vibrant. It's interesting. It spices things up and that kind of bootstrapping a business and throwing stuff together. I find kind of interesting. And also as a salon business coach, of course, I want to see more and more businesses in our industry. But think it through. The problem is we have a very old fashioned economics game at play here, which is supply and demand. So the supply side has grown fast. And I want to go back to the time when I opened my first salon in Newbury in Berkshire in 1983 or whatever it was. And I'd come from an employed salon. I was opening an employed salon and I basically went through the yellow pages. Yes, that's how long ago it was. Went through the yellow pages and counted how many town center salons were within, let's say, a square mile. So that it's not a huge town. I wanted to see how many salons were there. And it was something like 13 salons, which felt like an enormous amount of competition at the time. Now, honestly, I reckon that number is closer to 30. There are so many salon businesses in place. And in fact, if you look at a lot of high streets, take away the charity shops, take away the barber shops. The only thing that's left is hair and beauty and maybe some estate agents. So the supply side has grown really, really fast. We've got so many people coming into the industry. The problem is the demand side, the number of customers that we have, the number of customers that are keeping our industry afloat has not grown at anything like the same rate. So there's the same number of heads, the same number of faces in your town as there were a few years ago. And in fact, in some towns, we're seeing populations decline, not increase. And yet we've got more and more people that want to work on those faces, want to work on those heads of hair. Plus household budgets are tight. So people are spending perhaps a little bit less or they're spending a little less often. Maybe doing more stuff at home is the second trend. We've got a lot more at home treatments. The technology of at home has increased tenfold. It used to be that the home colours were an absolute car crash. Not anymore. It used to be the stuff that you could buy, you know, that people are buying serums. People are doing their own micro needling. They're doing more and more stuff in the comfort of their own home. They don't need or feel the need to go to the salon. Or maybe they're just leaving it longer in between visits, which is the same as losing a portion of your clientele. So we've got people spending less, spending less often, maybe not even coming to the salon at all for a certain service. And then that on the other side of the equation, we've got more and more people offering those services. So what supply and demand says, if demand is falling and supply is increasing, prices have to come down. So what does that actually mean for your business? Well, we've got two really awkward things. We've got downward pressure on prices through increased competition. We've got downward pressure on demand, which means that prices are supposed to come down as well. So we've got two lots of downward pressure on price. But we've also got an increase on our costs. Well, where's the increase on costs coming from? Partly is things like our energy costs going up and up and up. Partly it's because the minimum wage in our industry is on upward pressure as well. Partly, though, it's because people aren't booked up as much. So if you've got a column which is, let's say, 85% utilised, all of your fixed costs, your rent, your business rates, all of those things are shared over a very busy column. If there's less people in the column, there's less clients coming in, each of those clients has to carry more of those fixed costs. So falling utilisation, falling booked up hours, if you like, is pushing costs higher. So we've got upward pressure on our costs, downward pressure on our prices. That's why things feel tighter and tighter and tighter. Prices are getting suppressed when costs are going up. It's getting tougher and tougher. So what does that mean, though, for your business? My God, I'm so sorry if this feels really gloomy. I really didn't want it to. I just want this kind of reality check on our industry because we've got this thing at the moment here in the UK where they're trying to get the dodgy businesses off the high street. They're trying to get rid of those money laundering salons and those barbershops that don't actually seem to have any customers in. They're trying to get these dodgy businesses off the high street. But that's not the only thing that's going on. There's a lot of people thinking this is going to be amazing for our industry. It ain't going to change things because of what I'm describing today. So the net effect is that we're working harder for the same money or we're just taking less. And I've seen this in lots and lots of the businesses that I'm coaching. So we've really got to set ourselves apart. We've got to make sure that we're bucking the trend a little bit. So what can we actually do? What are the steps that we need to take? Well, the first is we need a reality check on our marketing. You can't market your business in the same way as you did a few years ago. The market is not growing in the same way as it was a few years ago. So basically all you needed to do way back when was do a reasonable job and population growth demand growth would fill those columns for you. That ain't going to happen anymore. And I want you to realize that your marketing now is directly taking money away from other salons. It's the only way you're going to get busier is taking people from somewhere else. People are not sat at home going, oh, my God, I've got such hairy legs. I wonder what I can do about my hairy legs. They're already going somewhere else for hair removal. They're already going to other salons for waxing. They're already looking at spending money somewhere else with laser hair removal. So you've got to get them through your door instead of your competitors. So your marketing needs to have teeth in a way that it never used to. The second thing we've got to get away from is this supply and demand. So what can we do if we've got increasing supply and reducing demand? And the answer, my dear, is to specialise, is to niche down, play a different game to everyone else. If you're in the hairdressing game, you're competing with all of those at home solutions, all of the mobile hairdressers, all of the places that are renting chairs and every salon on the high street. A huge amount of competition. Position yourself, however, as the person who helps people who have been through maybe radio and chemotherapy, hair in recovery. And suddenly the market is much, much tighter as far as your competitors are concerned. People will travel further. OK, the overall size of the market might be smaller, but people will travel further. You're not competing with as many people. The demand is going to be a different shape, which means that you can price as an expert. It means that we can start to get our prices up. That means that we can afford a less utilised column. The other thing we can look for is to change the way that we look at utilisation. So I've always coached people. The sweet spot for salons is 80 to 85 percent utilised. That leaves enough room for a few upsells. It allows a little bit of leeway if you start running behind. But people are ticking over. They're busy. Maybe we need to price in having less people in our columns. Perhaps we need services to take a bit longer. We want a longer, more luxurious treatment. We want something that actually takes up a chunk of time in the day. So we can do a beautiful job and offer an impeccable service, which takes a little bit of time. The other thing we've really got to do is once you get a client on your list, you've got to hold them tight. In a saturated market, keeping your clients is worth several times finding a new one. It's a lot cheaper to keep clients happy and spending with you than it is to go and find new clients to bring into your business. So you've got to know your numbers. You've got to understand your utilisation. You've got to niche down. You've got to play a different game to the rest of the markets. And we've got to look at the way that our time is spent in our columns and figure out whether that old fashioned way of looking at utilisation is perhaps, you know, it's time for retirement and it's time to think about something else. This is not going to change in a hurry. There are businesses, salon businesses going out and basically closing up for the last time every single day, but they're not retiring. Basically, those people who are running salons, employing apprentices, running teams are going out and doing their own thing. So the overall market is not shrinking. OK, the crowded marketplace is here to stay. You've got to find a way to navigate it and make it work for you. I'm sorry, I haven't got better news for you, but I hope I've given you a couple of strategies on how we can maybe think about starting to deal with some of these things. What's happening with you? I want to hear from you. Reach out and let me know. Phil at buildyoursalon.com. If you're navigating a very crowded marketplace in a successful way, if you started to pivot into something that's a bit more specialized and you're seeing sort of success, or if you've got a different way of marketing your business, which means that you stand out in a very crowded marketplace, reach out and let me know. I want to speak to you. I want to get you on the Build Your Salon podcast. My email address scrolling at the bottom of the screen. Phil at buildyoursalon.com. One thing that I always recommend for keeping people in your business, increasing loyalty to your brand and smoothing out the peaks and troughs is salon memberships. I'm not going to talk a whole load about salon memberships. Head over to queenofmemberships.com. You can see my memberships training. I've got plenty of resources on there to get you going on that as well. Just a few short days until your uncle Phil's coming all over the internet again with another dose of my Wise Owl wisdom. And until then, take care.