“Inventory” refers to two things: First, the tangible merchandise a salon has on-hand, and second, the act of counting, itemizing and recording all transactions relating to that in-stock merchandise. Your salon inventory can be interpreted in two ways: On one hand, it is an asset on the balance sheet (because you can turn it into cash by selling it); on the other hand, it ties up money that could be used for other purposes and requires additional expense for its protection. But, however you look at it, a carefully planned and well-managed inventory is a necessity.
One thing to keep in mind is balance—you should have a good selection of product merchandise, especially in regard to lotions. The best way to appeal to all clients is to offer a range of beginner formulations, advanced formulations, bronzers and tingles in bottles as well as packettes.
Ordering
The next question you need to ask yourself is how much of each product you plan to stock. This can be more complicated than it seems—it depends on a number of factors, including the size of your salon, what types of tanning and spa-related units you offer (as well as how many), your customer demographics and your level of business.
In general, the worst thing you can do is under-stock. Running out of a product will not only cause you frustration, but it can hurt your client relationships. To avoid this, you must have a good idea of anticipating how much business your salon will receive each month. Try looking at last year’s receipts to see what sold, how much of it sold and if its sales increased or decreased during a particular month or time of year.
Beyond the frustration of running out of an item, having only a small stock of a particular product on your shelves can have a negative effect on sales—customers tend to associate a well-stocked display with a top-selling product. You have a lot of it, so it must be popular, right? Use that concept to your advantage and make sure your displays are full—you can even tell clients you “stocked up” because you’re afraid of running out of this hot item.
At the same time, however, you don’t want to order more product than you can reasonably expect to sell. That simply ties up funds that could be better used to pay bills—an important factor in today’s economy.
For surplus inventory that is not out on display, be sure to store products according to manufacturer specifications. Be especially careful with lotions—exposure to extreme heat or cold can cause changes in color and consistency.
Tracking
Monitoring your inventory is extremely important—this is how you will know which products are good sellers (and which are not) and when to reorder. Thankfully, most salon-management software programs take care of this for you by maintaining a database that holds information about all the products that are stored in the salon. This information is constantly updated based on the incoming and outgoing items, and the software will show reorder levels of individual products. The reorder levels are compared with current stock levels, and you can set the software to notify you when it’s time to place an order. In some cases, purchase orders can be automatically generated and sent to the manufacturer or distributor without you even having to lift a finger.
Another helpful feature is the graphs and reports capability of software—this provides salon owners with detailed analytical information regarding individual product quantities and their demand. Some versions of software also include customer information, and record what products each client has purchased and when, which can help you track individual customer preferences and overall client trends. Together, these features provide you with a great way to assess and refine your inventory needs.
Pricing
The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to what you pay the distributor or manufacturer for the product. Another common technique is manufacturer-suggested retail pricing (MSRP). This simply involves charging the amount suggested by the manufacturer. In regard to lotions, this price generally will allow a salon owner to make up to a 50-percent profit on each bottle sold. Of course, salon owners have the ability to discount a product below MSRP or raise the price above MSRP, based on their needs. In addition, it’s important to budget your lotion and retail items across several price categories in order to give customers as many options as possible.
Competitor indexing is another price-setting technique, which generally involves using the price of a competitor’s products to determine the price of your own products. You can choose to match your competitor’s price, set your prices at a specific amount above or below your competitor’s, set your prices at a percentage above or below your competitor’s, or set your price within a specific range of your competitor’s (i.e., no more than five-percent more, but no more than 10-percent less). This is sometimes referred to as a “follow the leader strategy.”
However, if you are considering a competitor-indexing strategy, you must be aware that this can start a price war. By definition, a price war is a state of intense rivalry accompanied by a multi-lateral series of price reductions. Basically, one competitor will lower its price and others will then lower their prices to match. Unfortunately, the back-and-forth lowering of prices can cause result in reduced profit margins and can ultimately threaten a business’s survival.
Regardless of what pricing method you choose, you must keep in mind that it’s important to budget your products across several price categories. This gives customers multiple options when purchasing and allow you to appeal to a wider demographic (for example, clients who are working their way through college are probably looking for a lotion at an entirely different price point than your baby-boomer customers).
Of course, just because you offer a range of prices doesn’t mean you shouldn’t start a sales conversation by offering the most expensive product first. Think about it like this: It’s a lot harder to sell a $50 bottle of lotion if you show the customer a $20 bottle first. Instead, reach for your most expensive lotion at the outset; if the customer balks, you can move down to the next highest price-point until you find a lotion that works. Salon owners have also found success in selling higher-priced items by packaging them with something else—for example, a free upgraded tanning session.
Moving Hard-to-Sell Retail
Maybe what seemed like a product that would fly off the shelves turned out to be a veritable inventory boat anchor. Or perhaps you’re looking to clear some space for new additions to your inventory. Either way, you have product to unload—here are some tips to get those items out the door:
Rework the sales pitch. The best way to move merchandise is though top-notch salesmanship. Make sure your employees are well-versed in the product’s best attributes and can thoroughly sell those benefits to customers.
Hold a clearance sale. The holiday season is the perfect time to host a big sale—many customers are looking for gifts—and all shoppers love a good bargain. You even can make this an annual event.
Create a package purchase. Pair a free bottle of lotion with purchase of a particular tanning package or offer a hair-clip accessory with purchase of swimwear. Ultimately, it makes sense to use hard-to-sell items—especially those that aren’t costly—to help push big-ticket sales while increasing customer satisfaction.
Give slow-movers prime real estate. Place those products front and center in the salon—near or on the reception desk is best. This forces customers to notice the products while checking in for a session or while purchasing other items. Also be sure to highlight these products by prominently displaying the original price and the reduced cost.
