Although we have been supplying the Australian Beauty Industry for fifteen years and seem many ideas come and go, we have not previously witnessed one with such depth and penetration as the Coupon Companies.
It feels like every day that you download your emails there is a new coupon company, offering heavily discounted services from Beauty Salons.
It seems the majority of the deals offer such good value that it is hard for the consumer to resist them.
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A typical deal is a $49 ticket price for services with a menu value of anything from $150 to $500 depending on the short term needs of the individual salon.
The appeal to the salons is that it puts a lump sum into the bank account and brings many new customers who may become regulars or can be up-sold to other full price salon services.
That is how the theory goes………….what about the reality.!!!
We talk to many of our salon clients on a regular basis and almost without exception the feedback is, that the reality is nothing like the perception and it is not something they would do again.
Already regional press is covering the phenomenon and its effect on the Beauty Industry.
However, Council of Small Business Organisations chief executive Peter Strong said the idea was all bad for business.
Many companies that offered a deal did so because they already had problems and found themselves drowning after the demand just made the situation worse.
“The model is set up so that the small business gets absolutely nothing except a big loss out of it,” Mr. Radisich said.
This is obviously disappointing for the industry as a whole, as one would think that any service that drives more customers to experience the benefits of Beauty salons and cosmetic Clinics has to be good for the industry.
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It must be tempting for many salons when business is slow to participate in one of these deals, but the question is are they just hastening their own demise.
How can you up-sell a client to a full priced menu item when they know there will be 50% 60% or even 70% discounts waiting for them in their email inbox when they get home.
And are these the types of clients who are going to provide repeat business for your salon or clinic.
We heard of one salon who sold 800 $49 dollar coupons which had redemption expiry of six months and had a 2 hour treatment value.
We understand the salon actually only got $27 after deducting the coupon company commission and GST and while $21600 might have been a welcome boost to the bank account, if we examine the long term implications it does not make such attractive reading.
800 vouchers each with a value of two hours of treatment equates to 1600 hours of staff time and even at low $ 20 per hour you have $32000 of basic wages.
Once you add in holiday pay, super, workers comp etc your $21600 is not looking like such a welcome boost.
Selling circa $50 of staff time for a nett $27 only makes sense if you can convert a lot of the coupon customers to full price paying regular.
Then who pays for the consumables used in a facials, massages etc.
But there is a much bigger problem and a one that is not so obvious.
When calculating a typical working week for a therapist is around 35 hours you would need almost the entire time of two therapists for the entire six month validity of the coupons just to service these bargain hungry customers.
And what about your regulars who are happy to pay full price, how do you fit them in or do you risk losing them to a competitor who does not partake in coupon discounting.
We are sure coupon companies will have a place in the industry but from experience to date it seems for salons to benefit they must take a more active role in dictating the terms of the deal.