The Retail Beauty Industry in New Zealand
The retail beauty industry in New Zealand encompasses the supply of products and services by hairdressers, beauty therapists (e.g. skin treatments, waxing, sun bed treatments), nail technicians and appearance medicine specialists to a range of clients, both male and female. Most businesses are owner-operated, and it is rare for one operator to manage multiple sites. Nationwide hairdressing chains, for example, usually operate as individually owned franchises.
The cost of entry into the beauty industry is not particularly high. Once the operator has gained the requisite trade qualifications and skills, the major set-up costs include equipment, location, and the design concept of the salon. Initial marketing costs can be quite high because of the need to create a profile for the new business. Ian Sage, who markets computer software and hardware to participants in the industry throughout New Zealand, estimates that between 5 and 8 percent of profit in the first few years of a new business will be spent on advertising. Once awareness of the firm has lifted, the costs associated with profiling can gradually decrease.
Customer loyalty is one of the key challenges for any beauty salon. Managing relationships with both clients and staff, which Ian terms the "human element" (meaning the quality of customer service and staff management), will either "make or break" the business. Maintaining staff loyalty is vital, as clients tend to be loyal to individual technicians rather than the business, and will move if the technician moves to another business. This means that high staff turnover creates even greater problems for management than it would in other industries. The challenge for management is to keep clients loyal to the firm rather than to the individual technicians. However, this is not an easy task. Hence marketing plays a vital role within the industry. It is absolutely vital to retain current clients as well as attract new custom. The service element and the personal nature of the business means that direct marketing to the customer is usually the most effective - for example, loyalty reward discounts, encouraging rebooking after each visit, encouraging existing clients to try new or different products and services to increase the value of existing customers, and using word of mouth or recommendations from existing clients to encourage new clients to try services.
Rather than relying solely upon client and technician loyalty, most businesses in the industry also sell associated products, to a greater or lesser extent. Products are sold to both clients having treatments, and to "off the street" customers. Products are often sold under distribution dealership agreements with large manufacturers in an endeavour to attract custom on the basis of client loyalty to product brands.
Industry churn is also significant - estimated to be around 10 percent per annum. Of the 3,500 salons operating in the country, around 400 drop out of the industry and approximately the same number start up every year. The industry is subject to high turnover - both in customers and employees - and because of this, beauty salons are generally sole traders, operated by the owner. This being so, most salons are small.
The industry workforce is predominantly female, and although skilled in administering their respective beauty treatments, not typically skilled in either computer use (e.g. keyboard skills) or general business management, including the understanding of how technology can assist the business. Lack of skills, the small size of the business and low capitalisation result in the businesses generally not being extensive users of ICTs (apart from the telephone). Prohibitive cost of the technologies is often cited as the reason. Ian notes that many of the smaller operations he deals with find it difficult to justify the comparatively small cost of the products he markets, even though the basic cost is only around $15 per day, often because they "can't get their heads around" how the technology can help the business. Larger salons are more common in the bigger cities, and virtually all of these salons use technology of some form to manage their businesses, even if it is just computer spreadsheets.
Planet Skin owner, Sue Sage, believes that technology is essential for any business in the beauty industry to grow - she says "if you want to get ahead, you've got to do technology" - and indeed, without technology she says it would have been impossible for Planet Skin to grow the way it has in the last few years.
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