Since 2001, the indoor tanning industry—like many niche industries—has ridden the highs and lows of turbulent tides. Currently, financial analysts are referring to the U.S. economic picture as a “peanut butter and pasta economy”, meaning consumers are shopping for less expensive staples that will stretch the dollar longer. While the tanning industry traditionally has been recession-proof, 2008 revealed that more and more of the population is scaling back spending on luxuries and services—including tanning.
Many factors contributed to a decline in consumer confidence, including the high price of crude oil and gas, conflict in Iraq and Afghanistan, record unemployment rates, banking fiascos, the real-estate slump, high foreclosure rates and a rollercoaster stock market.
Survey results from TanToday.com reveal that 77 percent of salons said the economy affected their business this year, while 32 percent cited weather as a factor, and a whopping 38 percent said competition and anti-tanning legislation or media coverage impacted their business.
To survive, the entire industry—salons, manufacturers, vendors, distributors and allied members—need to create a strategy in the face of today’s challenging economic climate. We must continue to be proactive instead of reactive by spreading the good news about the benefits of tanning. Of course, we also must be aware that our anti-tanning foes are beating their drums louder than ever to drown out the positive news articles regarding vitamin D and sunlight.
Mergers, Consolidation and Margins
Since 2006, the indoor-tanning industry has witnessed monumental consolidation, mergers, buyouts and closures—all common in a maturing market. The “survival of the fittest” trend continued in 2008, affecting salons, distributors, suppliers, manufacturers and allied sectors.
Just like last year, some industry veterans closed their doors or sold out, while others remained in the trenches fighting the good fight. Even the seemingly unshakeable large manufacturers and full-service distributors were affected. In July, Four Seasons Sales & Service acquired Greensboro, N.C.-based American Sun Systems. In August, Heartland Tanning Inc. announced the acquisition of longtime equipment manufacturer TanAmerica.
Traditionally, industry experts have agreed that tanning salons have a 20-percent annual attrition rate. However, continued economic woes have increased that number to approximately 30 percent. Just like last year, many independent salons also were acquired or simply took down their “open” signs. A number of veteran salon owners who helped define and grow this industry either sold or closed.
The lotion sector perhaps has taken the hardest hit. The issue of lotion diversion is again on the radar as more and more consumers are looking for bargain deals and turning to the Internet and beauty supply stores for product. Salon operators need to educate clients that professional tanning products are sold in the salon for a reason. Lotions also have caused distributors much pain as they are faced with decreased or barely existent lotion margins.
Intense competition on the equipment side also was evident this season with some vendors experiencing increased sales while others struggled to break even. Salon owners are demanding more from potential equipment manufacturers and distributors. With a limited share of the pie, those vendors need to fine-tune relationships and offer a complete package. Unfortunately, the manufacturers and distributors felt the squeeze again in 2008 as the dollar took a severe beating by the euro. This caused manufacturers and distributors to re-evaluate business strategies and tighten belts across the board.
Franchising and large chains, on the other hand, continue to do well. Franchising in particular has taken on a larger role in the industry, mostly due to solid marketing plans and sound financial resources to help franchisees. Meanwhile, the majority of independent salons reported average growth—though some are in the middle of expanding existing salons or opening more locations.
Shedding New Light on Tanning
First and foremost, we need to do a better job of marketing indoor tanning. In plain English, we need to get more butts in the beds and introduce the concept of indoor tanning to non-tanners. As the industry turns 30 years old, many of the first-generation tanners are baby boomers choosing to tan less often. Additionally, dermatologists and cosmetics companies are targeting teens and young adults with ad campaigns portraying tanning as uncool and unhealthy.
So, on an individual level, salon owners need to get creative with marketing. There are a lot of great ideas out there; it’s up to you to implement something that will work for your salon and demographic.
On a larger front, we as an industry need to stop viewing ourselves as each other’s competition. It’s a hard concept to swallow, but as mentioned earlier, the real competition is the anti-tanning coalition. While no one expects every salon owner to embrace each other, you can embrace the idea of a united front.
For example, Don Hirsch, president of Chicago-based Ultimate Exposure Tanning Centers, and member of the ITA board of directors and the Looking Fit advisory board, held a meeting last year and invited other Chicagoland salons to attend. The meeting’s success turned into a grassroots campaign among salon owners, who decided to work together as partners to promote the benefits of tanning and vitamin D. Those in attendance—representing more than 200 tanning salons—all agreed to devote 15 percent of their advertising space to promoting the sunshine vitamin.
Hirsch also says the paradigm of the business is shifting, which means more of the U.S. population should be tanning—and salons above the 37th parallel should be advising clients that there is less sunlight in their areas from September through March.
Another pioneer in this area is Robbie Segler, owner of Darque Tan, which operates more than 90 salons in Texas, Colorado, Minnesota, Massachusetts, Arizona, Nevada and Florida. Segler has been a huge vitamin D advocate and launched a highly successful marketing and advertising campaign this year that included billboards touting the benefits of tanning and vitamin D. Segler has been an outspoken advocate for vitamin D and is committed to educating other salon owners about what they can and cannot say in regard tod health claims, what they should say about vitamin D, how the tanning industry can collectively promote vitamin D and much more.
The Berman Effect
The 2007 State of the Industry Report urged the industry to join together and become more active in anticipating, monitoring and fighting these tanning restrictions. That same message was driven home at the 2007 ITA Tanning World Expo, when the industry decided to hire a public-relations firm to help spread the good news about tanning. Berman and Co.’s work in public relations and issue advocacy challenges commonly held assumptions and encourages people to make up their own mind about controversial issues.
The long-term goal of the campaign is to increase the demand for indoor tanning by jumpstarting a backlash against the current anti-tanning hype and increasing awareness of the positive benefits of vitamin D. In addition, the UV Foundation is working on some groundbreaking studies that will lend credibility to the benefits of tanning.
Salon Regulation
Salon owners and operators must pay attention to proposed regulation changes at all levels—not only to make sure that compliance is met, but also to ensure a voice in the process. The addition or revision of tanning rules at the state and local levels has become an all-too-common trend across the country.
The Indoor Tanning Association (ITA) spent much of its time fighting anti-tanning legislation at the state level; however, many local municipalities also introduced anti-tanning referendums. This is extremely troublesome since what was once a state issue also has become a local and county issue.
Tanning critics will continue to target our industry; however, they can be countered largely by the mounting studies favoring sensible, moderate and responsible exposure to light in a controlled atmosphere. The ITA and salon operators are doing their best to fight state tanning legislations, but they need the help of other salon owners willing to step up to the plate and help at the local level.
’08 U.S. Market Review
In the late 1970s, many naysayers labeled indoor tanning a fad—something that would peak and fade in a few years. Thirty years later, the U.S. indoor tanning industry is generating $5 billion annually through the provision of controlled tanning sessions to more than 30 million Americans.
Statistics indicate there are roughly 20,000 professional indoor-tanning salons and another 15,000 to 20,000 locations—such as health clubs, spas, video stores and beauty salons—that house one or two tanning units. In keeping with tradition, the Midwest and Southeast have the highest number of tanning salons per capita, with Ohio, North Carolina, Michigan, South Carolina, Illinois, Indiana and Florida leading the charge.
The majority of U.S. indoor-tanning facilities are small businesses, and more than 50 percent of them have female ownership (compared to 25 percent of businesses in other industries, according to the U.S. Census). Indoor tanning also provides jobs for approximately 160,000 employees annually.
Today’s salon owner is a professional with a long-term commitment to the future of the tanning industry. Statistics support that the average salon has been in business for about 10 years; however, though some salons have experienced a turnover in ownership. The majority of growth is from individuals staying in the business longer, which equates to more maturity, experience and stability.
The majority of freestanding tanning salons have at least 10 rooms on average; of those, most have four to five levels of tanning and a sunless unit. According to the statistics gathered from the 2009 Top 250 Salons survey, lotion sales continued to shift to the mid-range price-points with 87 percent of salons reporting that lotion income accounted for 10 percent to 30 percent of their monthly revenues. And, only 2 percent of salons reported that lotion sales accounted for less than 10 percent. This is good news as it means more salon operators are educating their customers about the value of professional skincare products.
Industry insiders agree that marketing-savvy salon owners should reap 30 percent of their monthly revenues from lotion sales—even in a difficult economy. Examine your salon’s customer demographic and zero in on what they want and what they are buying. Be sure employees understand the various products and know how to sell them. Also on the marketing front, salons are expanding their advertising options by using salon software, implementing successful e-mail and text-message marketing campaigns, building their brand online through a salon Web site and increasing their reach through targeted marketing with salon social-networking profiles.
The goal of any tanning salon should be to stand out in a crowded marketplace by offering a unique experience, and many salon owners are diversifying services to do just that. Add-on services such as light therapy, sunless, hydrotherapy and spa amenities provide more options for existing clients and can attract non-tanning customers. If you don’t take advantage of the chance to cater to your clients’ needs, a salon down the street will.
What’s Ahead in 2009
For the 2009 season, the industry must continue to find innovative ways to cater to the needs of current and future customers. Salon owners also have been more cautious the past few seasons, opting to take a closer look at their businesses and operations. In our industry, there is a growing concern that people will save money by cutting down on luxury expenses, and tanning sessions will be one of the first things to go.
Unfortunately, griping about these issues and endlessly speculating about what is to come isn’t going to do much for your business. Instead, you need to take this time to find proactive ways to grow your client base and ensure the continued success of your salon—and as an industry, we need to introduce tanning to a new populous by promoting tanning as a lifestyle.
It is important to remember this is a fun, look-good, feel-good industry and that salon owners can help it thrive by continuing to promote sensible, moderate and responsible exposure while educating customers about the benefits of sunlight and vitamin D.
