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by Douglas Preston
If you’re the operator of a day spa, salon, or esthetics clinic you’ve no doubt by now discovered one undeniable reality: that hard work and huge sales doesn’t always mean a decent income for you. You may have also realized that no matter how much your sales increase you can’t seem to find any extra money to take home. If it weren’t for those life-saving gift certificate sales staying financially afloat might not be possible for many. The usual causes for this all-too-common situation are a). cost overruns (including labor and wholesale prices relative to retail prices), and
b). inefficient use of business resources such as service timing, schedules, and professional supplies, etc. Many businesses have no operating budget to guide company expenses, similar to having a checkbook without a check register—it’s difficult to know how much money you have when you can’t track it easily. To put it in a nutshell, if you want to make money, that is, to have more than you need to cover your operating expenses, then you’ll have to find a way to keep your costs as far behind your revenue generation as possible. As they say in stock trading: buy low and sell high. You have to find opportunities in your company to bring costs under control, and the two biggest are also the most challenging for most business owners to approach: labor and products.
 My partner and I began Preston Wynne in 1981 by working as freelance makeup artists and color analysts. We sold skincare and makeup products from a large fishing tackle box at home parties and, later, from a tiny rented room above a hair salon. These were entirely private-label products (without labels!) and, much to our surprise, they sold very, very well. The reason we chose to sell private-label products over many well-established name brands was simple: not having an established salon made most name brand products unavailable to us, we were looking toward the building of a brand name that we could own, and the larger-than-average profit margins found in them. Having both had a background as line artists for major department store lines we could see that quality was not an issue for these products, and as for image, that was up to us (we didn’t have an image problem thankfully!). Remarkably, we found that our “brand” competed quite successfully against the cosmetic giants—our clients were happy to toss out many of their traditional favorites for Preston Wynne endorsed products. The formula was simple—in the customers’ view the direct advice of the professional, especially in an up-front and personal setting, could trump a multi-million dollar ad campaign because the element of relationship and authenticity is more compelling. It’s the same strategy that has made Avon and Mary Kay some of the most successful cosmetic companies in history. All philosophies and statistics aside, the “best” cosmetics for customers are the ones they choose to buy and are satisfied with. Preferences change over time but the relationship factor between product and consumer remains relatively in tact. As far as our clients were concerned they just wanted to buy whatever we, the professionals, thought was best for them. And, of course, we always knew what that was!
Since those fledgling days Preston Wynne has gone on to become the of the most widely recognized day spas in the industry. We sell roughly $1,000,000.00 in products annually—almost all of which carries the Preston Wynne brand name. Our products are not advertised nor supported by brochures, samplers, or even counter top signs. We continue to count on our tried and true selling method: the relationship between the customer and professional. The program works and we make money, enabling my partner and myself to retire from our service professions, delegate the management of the spa to others, and go on to establish a highly successful spa business consulting company.
Many articles have been written about the pros and cons of private label products but not many have been authored by those actually engaged in retailing them. To help you make an informed decision as to whether such products are right for you we offer the following insights take from our own experience with them.
How sellable are they?
For us this has never been an issue. While there are occasions where a client may ask for a specific brand other than what we carry it has never amounted to a reason to give up our high profit margins just to satisfy such requests. As I pointed out earlier the preference of customers is easily influenced by the endorsement of a credible skin care professional. In most cases where a customer will request a certain product or brand we simply show them what we like as an alternative to their original choice and that pretty much closes the sale. Product loyalty is a pretty fragile value in customers while personal loyalty is cemented with a stronger bond. In the personal services business most of our sales are driven by direct professional recommendation, and purchases are often a reward for successfully meeting the personal needs of the client. It’s very difficult for national brands to unhook this connection if we are doing our job well.
We recently conducted a consumer survey to explore the buying influences of customers who do business with spas. 400 men and women were asked to respond to 10 questions regarding how they do and would make product selections under certain circumstances. The survey revealed that 92% of all respondents would take the advice of a skin care professional over a national ad campaign when deciding which products he or she would ultimately buy for personal use. 87% reported that they would be willing to try an unknown brand over a familiar one on the advice of a skin care professional. And 89% said that they would be willing to replace a favored branded product for an unknown one on the advice of this professional! What these results reveal is the power that even small, little known companies have in the buying decisions of their customers. Does your company name mean something to your customers? You bet it does! Preston Wynne Success Systems has installed higher margin products on the shelves of all of its business turnaround clients—all with very positive results—in an effort to increase cash flow. Retail sales have never dipped in any of these companies but, in fact, even grew faster as a new, affordable and higher retail commission spurred employee participation in product sales.
But what if they didn’t sell in my business in the past?
We’ve seen it—the business owner who tentatively invested in a private-label collection only to see it languish and spoil on the shelf. This may have happened to you. Our work with clients who were not successful with private-label retailing share a similar story: employees simply would not support the products and therefore they did not sell. The problem is simple and vexing at the same time. Most estheticians, who are the real selling force in a spa or esthetics clinic, are often trained in beauty schools along the philosophies and product selections of sponsoring cosmetic producers. New estheticians entering the professional market lacking both real-world experience and confidence tend to cling to the security of their initial training, and are not easily convinced to enter uncharted product territory. They resist under the reasonable sounding banner of “quality” and “results”. They simply refuse to switch to product lines that may not “work”. Curiously enough, over the years I have again and again polled audiences of estheticians as to what product lines they use in practice. Most major brands are represented among their ranks. Then I ask them to tell me whether or not they are getting good results from their products. And guess what? They all report getting great results from their line. They also believe that what they use is the best of what’s available to them. So what does this tell us? That all the brands seem to be working. Products sell and customers are satisfied whether they’re famous brands or private label.
The main problem with weak retail sales in the spa or salon remains with both the employee’s and management’s attitude toward it. In businesses where retail sales is required, measured, and training is provided you’ll also see impressive and consistent sales volume. When retailing is left up to individual participation, and where management fails to provide training and support, sales lag. There may be a star retail performer on the team but this is the result of chance rather than a solid plan, and their enthusiasm is not always likely to rub off on others. It’s incredible to realize how expensive this problem is for a business! I watch spas throw away tens of thousands of dollars in nearly certain retail revenue each year because of the reluctance or failure to get a handle on the sales performance of employees. Everyone loses out—the employer, the employee, and the customer.
What are the greatest benefits in private-label products for my business?
Money and the protection of your hard-won customer loyalty! Most private-label manufacturers offer much extremely attractive gross profit margins on their products. Simply put, you keep a lot more money per sale than when retailing items where the markup is a mere 100% or less. Sure some will throw in shipping charges for larger orders and possibly even a discount or free product now and then. But when you compare this to the steady thick margins available in private-label selections the logic is clear. As for the benefits of “free” brochures, printed bags, and samples I think a closer look will reveal an interesting insight. Where spa employees receive little sales training and are fearful of recommending products to clients directly things like “sales support tools” may actually help the customer to sell themselves on them. But relying on support tools as a primary means of product promotion actually encourages many professionals to avoid engaging in the direct approach, and this often results in a delay or loss of potential sales. Placing samples and brochures in the hands of customers is always a better strategy (and a less expensive one) when immediate post-treatment product recommendations by the esthetician is not enough to win the sale. Immediacy is everything in the world of retail. Where you have large gross profit margins you also have an opportunity to pay larger than usual retail sales commissions to employees—a real incentive in increasing individual employee sales performance, 20% commission is twice as attractive as 10%!
 Competition in the spa, salon, and beauty products industry is at al all-time high. Day spa signs are sprouting up around us like spring grasses, grocery stores and gift shops have their own little “spa aromatherapy” departments, and .com companies have the huge beauty and wellness market firmly in their sights. It’s becoming increasingly difficult for even large retailers to retain their share of the beauty products market when so many means of access to these goods is now available to their customers. Customer have beauty.com, eve.com, and the now famous Bliss catalogue at their disposal and these companies make it very, very easy for your customers to browse and buy at home or work. If you haven’t awakened to this business challenge yet it won’t be far off. Even more disturbing is a growing trend for suppliers of spa and salon products to begin  offering their goods directly to the consumer—your customer. The reason for playing both sides of the fence is simple: it’s far more economical for producers to sell directly to the public than through expensive distributors who must deal with lists of low-volume, slow-paying, support demanding small business owners. That’s you and me folks. Once we have worked to establish a product line in the consumer market it is very tempting to bypass us and sell through e-tailers and home websites. Business is about making money and in a changing world companies must respond decisively and correctly in order to survive.
This is precisely where selling your own brand makes especially good sense. As far as the consumer is concerned the only place to get your brand is from you, whether it be at the retail counter, by mail order, or through your own online store. Department and grocery chains are dedicating increasingly larger amount of  shelf space to house brands in an effort to reduce costs and limit competition. Many even feature “select” or upscale choices within their own lines as a means of eliminating holdover ideas in some customers that house brands are merely generic or of a lower quality than better-known products. The decline of cereal giants like Kellogg is an example of the success of this strategy for retailers.
So are private label products right for your business? Only you can answer this question accurately. But if retail profits, customer protection, and building some real brand-equity into your company investment has any meaning for you there are fewer options available that can help you better than this can.
Best of luck to you! |
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