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15 Oct 2016

Why do some beauty salons seem recession-proof despite economic downturns?

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October 15, 2016 Category: Beauty Posted by:

By Leah Fletcher

When the bottom fell out of the economy a few years ago, woman like Etta Jones tightened their fiscal belts and reviewed their budgets line item by line item. However, there was one item on Jones’ list that was untouchable—the trip to her hair salon.

James Yancey Hunter III, the principal of Go-SmallBiz, a Philadelphia-based consulting firm, reported that the hair care industry is one of the small business sectors that has experienced continued growth in the past few years.

“Demand for services is driven by demographics and population growth,” opined Hunter, who has an impressive list of salon owners, who seek his expert advice. “In order to remain a growing and expanding entity, the profitability of individual companies depends on technical expertise and marketing skills,” added Hunter, a 35-year-veteran of the beauty industry, who has worked for such companies as Revlon and Dudley Products, Inc. 

Hunter’s  industry assessment is confirmed by the Beauty Salon market research report from IBISWorld, a research organization specializing in the long-range forecasting of industries and the business environment at large. IBISWorld expects that revenue growth for beauty salons will continue to improve over the next three years, rising at an average annual rate of 3.2 percent to $58.7 billion by 2019.

Why have hair salons survived — and even thrived — in the tough economy?  Hunter believes the trend is driven by increases in per capita disposable income and declining unemployment over the previous three-year period. “Higher disposable income leads hair salon customers to spend more on higher-value services such as manicures, pedicures, facials, waxing and massages,” explained Hunter.

Hunters points out several factors that he believes give the beauty salon industry recession-proof status. 

The employment prognosis for hairstylists is good. As a personal services industry personnel, hairstylists work directly with their clientele. “Those who want their hair cut or styled must pay whatever the market in their locale demands,” according to stylist Jill Martin, who offers special incentives and discounted rates to her customers. The Camden, New Jersey stylist noted that there is a degree of security in beauty industry jobs. “While there are many who are losing their jobs to automated technology, I don’t foresee being replaced by hair-styling robots, at least in the near future.”

style_10-16-16asm01Those seeking employment often benefit the industry. Jobseekers, who are interviewing for jobs will often splurge — although their funds are limited — on beauty products and services, in order to look good and make a good first impression. Mobile salon entrepreneur Elaine Thompson said she experienced a surge in demand for makeovers among out-of-work baby boomers a few years ago. The Mt. Airy business owner noted, “They all wanted a younger look while applying for jobs,” she said. “I updated their looks and provided tips that would help them make a good impression at their interviews.”

Some customers curtail salon services, but most rarely discontinue visits. Salon services are a small luxury for most, however, budgetary consideration prompt some to use fewer services, according to Leah Davis, owner of Leah’s Beauty Salon.  Davis, who plies her services in Philadelphia’s Oak Lane Section, found that some of her customers cut back on professional services. “Others who had previously colored their own hair, seek the service because they are working more and have less time or energy to do it themselves,” she said.

Salons can vary services and pricing levels based on customers’ needs. Salons generally offer services that range from basic to high-end. So customers have some control over how much they spend. Salon owners also have the flexibility to provide special promotions, discounts and other incentives to increase sales. For example, salon owner Mardea Reed-Chandler, owner of the 46th Street Hair Salon, markets her establishment as a full-service salon, however, she also bills it as the home of “The $20 Press and Curl”. The promotion supports her high-end services and provides more cost-effective offerings to older clients, who visit every two weeks for services.

According to Hunter, salon owners like Reed-Chandler, who operates in Philadelphia’s University City neighborhood, will succeed and continue to grow if they continue to develop quality services and strong marketing programs. An array of promotions may include anything from 20 percent discounts for same-day appointments or a monthly subscription rate for unlimited hair services.

Hunter also pointed out that expanded revenue may be generated by beauty salons and barbershops that opt to sell shampoo, cosmetics, or other products for home use, which have high profit margins. 

“The bottom line is that there is enough elasticity in the industry to weather rough economic times,” said Hunter. “It’s not only a matter of watching trends, but, identifying what customers are seeking, and positioning resources and creativity accordingly.”

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