News analysis: Online options

With more clients going online to buy their beauty products, the salon and spa market is adjusting its retail strategy, discover Lucy Douglas and Eve Oxberry

Online retail of beauty products is seeing significant growth and with many professional brands now selling via their own or third-party websites, some salons and spas are feeling the pinch. According to analyst NPD Group, the internet is by far the fastest growing channel for sales of prestige skincare, up 31% in the year to October 31, 2013. Sales in stores grew 5% in the same period.

However, despite fast growth, NPD says online sales of prestige skincare only account for 6% of the market, a smaller percentage than in most other sectors.

Lopo Champalimaud, e-commerce expert and chief executive of spa bookings site Wahanda, says that major multi-channel retailers now do around 40% of their transactions online in every department except beauty, which is at less than 10%. “Online beauty retail is behind other sectors but it’s changing quickly; people are already doing the searches online,” he adds. “15 million consumer searches are done every single month online related to health and beauty.”

Treatment growth

The rise of online retail is not all bad news for the salon industry. While clients may be buying homecare products via online stores, those retailers are starting to recognise the importance of professional treatments as a means of promoting product.

FeeluniqueBeauty e-etailer Feel Unique and Wahanda are in the early stages of a partnership deal whereby customers buying a professional product from Feel Unique will be shown options to book a salon treatment using the same brand via Wahanda. This, they hope, will drive new customers into spas, which will in turn help the online retailer with repeat sales.

“The more someone is engaged with a brand, the more likely they are to be loyal,” said Feel Unique chief executive Aaron Chatterley. However, he believes those people will still choose the convenience of buying that brand online when it needs replacing.

Many pro brands that sell online also now offer a “salon finder” service on their sites to drive new business to their accounts. Dermalogica’s new Dermalogica Connect software goes a step further as it allows the brand’s salon accounts to offer online retail to their clients by linking the salon’s own website to Dermalogica’s ecommerce site. Dermalogica handles the shipping, and the salon makes a commission comparable to the amount they’d make in store.

New look salon

As the market shifts and more premium beauty buyers spend their money online, salons are getting creative about retail. Venture capitalist Dharmash Mistry recently launched Blow Ltd, a chain of salons offering express services, which he hopes will make 50% of its revenue from online retail (see page 27 for more).

“The physical space is about experience and theatre; the products will be sold on our website,” says Mistry “Our research showed a lot of people are dissatisfied in the traditional salon environment about being pushily sold product.”

Blow LtdWhile salons may struggle to compete with the internet on price or convenience, they can corner the market in service. Etailers are trying to compete on the latter with editorial, such as “buy the look” guides and how-to videos but experts agree that they cannot replicate the personalised advice that physical stores and salons offer.

“The education part is becoming really important to build trust and loyalty with a brand,” says Jensen. “Stores [and salons] have to offer excellent service to drive footfall.” We’ve already seen department stores react by introducing more in-store treatments – the sector gained 2% of the market share for beauty treatments in 2013 according to analyst Kantar Worldpanel – suggesting salons need to market themselves even more strongly this year on the quality of their therapists and the education they can offer clients.