In our last conversation with Heath Smith, co-owner of Ruiz Salons in Austin, Texas, he explained how salon owners can maximize their productivity per square foot. In this blog, Smith is talking about leveraging your retail for optimal profit.
“We have two revenue streams that are equally important—service and retail,” he says. “When we look at revenue per square foot and efficiency, consider them both. Every part of your space should be producing income—including retail.”
Understanding Your Data
The formula for determining the percent of revenue retail should be bringing into your business is: total retail sales divided by total revenue (service + retail sales).
To ensure you’re correctly determining retail revenue, SalonBiz and Qnity have created a retail productivity calculator (download below). It’s simple to use, and will guide you through the process.
Smith says 12-15 percent is the average percentage most salons determine for retail revenue, but he prefers to be more aggressive in his salons.
“I like it to be 20 percent or better,” he says. “For over a decade, I’ve made sure that revenue stream is as strong as possible, and it has been as high as 25 percent.”
But many salons make mistakes in their software when organizing inventory.
“You should exclude gift certificates or memberships—anything purchased in advance,” Smith says. “This is a big distinction we need to make. Gift card sales paid in advance can skew the formula. You need to compare apples and apples, and exclude anything that’s purposed for the future.”
The first step is to properly categorize your inventory and services. Smith emphasizes the importance of creating categories for every item of inventory: styling products, shampoos and conditioners, skin care, equipment, jewelry, etc.
“You need as much transparency in retail as possible,” he says. “It starts with how you organize products the moment they come in the door.
“And everything that leaves your salon must show up on a ticket,” he adds. “If you give away a promo from a manufacturer for free, it should show up on the ticket at $0. And it will be in your inventory as costing $0 and selling for $0.”
Why does it matter? Inventory must be assessed correctly or it could affect your property taxes. Every state is different, but property taxes are assessed on the things you own, and your inventory must accurately reflect that so your salon software and accounting software are in sync and you aren’t over or under taxed.
Maximizing Your Space to Boost Retail Sales
The most common mistake Smith sees owners make is devoting too much space to retail.
“Be conscious about the amount of square footage you’re allocating,” he cautions. “It has to pay for itself. Every manufacturer has a suggested square footage, but I like to keep it as small as I possibly can to still generate sales.”
Once you’ve determined how much space you’re allocating, make it visually pleasing. Stations cluttered with products aren’t going to entice clients to buy.
“There’s also no need to invent the wheel,” Smith says. “Sure, products suspended from the ceiling look cool, but that’s not the way to get clients to buy. Retail giants like Sephora and Nordstrom have figured it out—look at what they’re doing and modify your space to do something similar.”
One way to get clients’ attention is with disrupters, like tables full of products they need to walk around to get to their stylist’s station.
“You have to interact with that table,” Smith says. “These launchpads are great, but there’s still more you can do. Is there an opportunity to put candles in the changing room where guests put on robes? What about the restroom?”
If you’re intentional with the products you put in these areas, these “disrupters” can be effective selling spaces.
Change it Up
For regular clients who are in your salon every four to six weeks, retail can become predictable, causing them to lose interest.
Smith says choosing products to reflect your brand that aren’t necessarily beauty items helps combat retail boredom.
“Our brand is more classic and traditional, so we also carry several lines of jewelry and boutique/gifts that reflect that brand,” he says. “I mix this all in so clients feel excited about looking at something new every time they come in.”
And once Smith has triggered that buying impulse, it’s much easier to sell the client beauty products as well.
Keeping Your Stylists Focused
You can create the perfect retail environment, but if your stylists aren’t on board, you’re losing sales. Clients who purchase products are more loyal and have a connection to the salon, and stylists are the people who connect them.
“Getting the right products with the right information into the clients’ hands helps retain customers,” Smith says. “We need to focus the service cycle on guests having an experience in our salons that includes retail.”
But in today’s tech-driven world, sometimes that service cycle gets cut short: If a guest checks out at the chair, it’s a missed opportunity to present products at the front desk.
“So we have to figure out other ways to get products in front of guests in really creative ways,” Smith says.
At Ruiz salons, Smith educates his team with role play and ongoing coaching to keep retail front and center in guest conversations.
Competing with Online Sales
Like it or not, you’re now competing with online product sales. If your salon has ecommerce on its site, let clients know they have a trusted source where they can replenish their products.
“Choose the right manufacturer to bring you into the equation if you want to do online sales,” Smith says. “We can’t compete with the convenience of online sales, but we can be really compelling and amazing at delivering an experience in our space so we’re the first place they buy it, and after that, they can replenish on our site.”
But Smith says that’s still not enough.
“There are a lot of resources out there, including online retail curators, to bring in supportive products,” he says. “To stay competitive, owners must get creative in what they offer. If you have carefully curated products made specifically for your salon, there will be no comparison on Amazon.”
And for those products easily available online and in big box stores, like blow driers and flatirons, Smith says salons will shift away from carrying them as there’s a push for more unique items that are not mass produced.
“We need to do the homework and get the right products in our space that are interesting and priced well,” he says. “Then get the team engaged, and engage our customers.”
Keeping retail front and center takes daily focus, but it’s a huge part of your salon’s revenue stream, and there’s always room for growth. But it all starts with the correct use of space, proper inventory and an understanding of how much revenue you should expect from retail.