A Maturing Industry
Indoor Tanning Industry Continues Growth
by Scott Hoover
The negatives of ultraviolet radiation have been blasted by the ultra-conservative medical community for more than two decades. They continue to issue reports to the media highlighting all the negative aspects of the sun and ultraviolet radiation. However, despite all the negative press, the indoor tanning industry continues to grow. In 1999, the indoor tanning industry was a more than $4 billion industry, and that number is expected to grow to $4.2 billion in 2000. Over the past year, LOOKING FIT Magazine has compiled a state of the industry report through a number of surveys conducted through LOOKING FIT's Annual International Tanning Trade Expo in Chicago, the Tanning Tour and the magazine itself, as well as conducting interviews with industry manufacturers. The following is an in-depth look at the state of the indoor tanning industry as it begins the 21st century.
The Big Picture
When it comes to service-based businesses such as indoor tanning, one of the main criteria to a growing industry is how the economy is faring overall. At no time in memory have Americans felt more optimistic about the future--and with good reason. As a new century begins, we can look back on one of the brightest decades in memory and look forward to a future perhaps even more luminous. Currently, America is enjoying unparalleled prosperity. Unemployment is at a three-decade low of 4.2 percent. Inflation remains tame, despite an annual growth rate that hit 5.5 percent last summer. By the end of February, the economic expansion will be more than 107 months old, the longest in U.S. history.
What has this meant for the indoor tanning industry? Over the past 10 years the industry has more than doubled. More than 60 percent of the growth in the indoor tanning industry is coming from within the industry itself. In other words, 60 percent of the new salons are current salon owners either expanding or opening another location.
Now, more than ever, tanning is becoming more recognized as a true lifestyle activity. With this increased recognition comes more interest from mainstream businesses that are studying the tanning salon market and venturing into this lucrative arena. This only creates a heightened awareness of the business of indoor tanning. From health clubs to video stores, tanning is emerging all over the business world.
Interestingly, many of these businesses start with an addition of tanning to their existing operations. As they experience the success and acceptance of tanning by their customers, some are opting to open free-standing tanning salons as well. And while some tanning salons view this as competition, it only emphasizes that fact that tanning is a viable industry worthy of the respect of other markets.
According to economists, the real sign of health in an industry is when it begins to grow from within just as the indoor tanning industry is beginning to do.
The maturity of the indoor tanning industry is not only evident in the bottom line, but also in the public's acceptance of indoor tanning as a viable trade. Consumers continue to flock to indoor tanning salons. Overall, the number of tanners has increased 8 percent from 25 million in 1998 to 27 million in 1999. In addition to seeking that golden tan, they also are demanding more from their salons in the way of skincare products and education. The industry veterans also have seen a change in the attitude of salon owners who are entering the market. They are noticing a more professional entrepreneur who is looking for long-term growth.
Corporations also are investing tremendous amounts of money in promotions aimed at distributors and salons designed to increase their marketshare in the lucrative indoor tanning industry. Professionalism can be seen in the more frequent and sophisticated marketing efforts salon owners are using. For example, the gamut of recent marketing programs offered by salons include customer promotions, targeted database and direct mail programs, and advertisements including creative signage as well as imaginative print, radio and cable television ads--many of which support some type of promotion such as a free trial or bed visit. According to salon owners, the most widely used type of advertisements are tanning coupons (78 percent), Yellow Pages (74 percent), and local newspaper advertisements (72 percent).
In addition to the increasing sophistication of marketing activities, there has been a tremendous growth in the use of technology to support business objectives. Many salons are using computer management systems that organize, compile and access data on clients' salon performance. More than 64 percent of salon owners now say they use computers to organize their database as well as promotional activities. In addition, more than 57 percent have access to the Internet and nearly 41 percent say they have used the Internet to purchase products (both tanning and non-tanning). Although there has been a rise in computer literacy, still only 31 percent of salon owners surveyed say they have their own Web site.
A Salon View
When taking a look at the indoor tanning industry, it is interesting to note just how much indoor tanning salons have changed within the last 10 years. It is evident when looking at the responses that indoor tanning salons are growing. Thanks to continued efforts by industry equipment and lotion manufacturers as well as salon owners, the indoor tanning industry remains one of the strongest sectors of the fitness and recreation markets. For example, in 1992-93, the typical tanning salon consisted of 6.7 tanning units and had an average customer database of 1,673. Today, it is estimated that a salon now has about 11 units and an average database of 2,200 plus customers.
The number of commercial tanning locations continues to grow as well. In addition to the estimated 15,000 locations that concentrate strictly on tanning, there are another 12,000-15,000 locations such as health clubs, video stores and beauty salons that offer indoor tanning and that number continues to grow annually.
The demographics of the average indoor tanner has remained fairly constant over the industry's more than 30-year history. The majority of those who tan continue to be in the 16-49 age group, 70 percent of which are women and 53 percent of which are women age 20-39. However, in talking with salon owners, one of the fastest-growing segments of the indoor tanning industry is with older tanners over the age of 55. According to surveys, more than 2.5 percent of indoor tanning demographic now consists of tanners over the age of 55.
What is most significant about the indoor tanning industry's demographic of tanners, is that it contains one of the highest service-based spending groups--a combination of the older baby boomer generation as well as the maturing generation X demographic.
According to American Demographics magazine, as baby boomers, age 35-53, move into a new stage of life, it signals a fundamental change that goes far beyond the demand for products and services that appeal to the middle-aged. The projections suggest that as baby boomers leave youth behind, many markets are likely to be substantially affected--including the indoor tanning market. In general, baby boomers are highly focused on preserving their appearance and spend 38.3 percent of their income trying to stay looking young. One of the ways that they go about trying to stay young is by spending money on fitness and recreation, of which the indoor tanning industry is a part.
As the demographics change, so does the salon profile. More than 53 percent of the salons interviewed offered more than tanning, with the largest ancillary service being nails at 26 percent. One of the fastest growing ancillary services (24 percent) was day spa services, including massage, facials and aromatherapy. Additionally, nearly 34 percent of salons surveyed sold activewear, 29 percent sold some type of refreshment and over 39 percent sold nutritional supplements.
Salon owners also continue to feel the economic boom. More than 86 percent of salon owners say their salon revenue has increased since 1999, and 81 percent say they expect to see their revenue increase in 2000 compared to 6 percent who said their revenue would decrease and 13 percent who said their revenue would stay the same. Additionally, 64 percent of salon owners say they are either expecting to expand their facilities or purchase additional tanning units within the next year and an additional 20 percent say they are expecting to expand or purchase additional tanning units within the next two years.
Although the average tanning salon now has more than 11 units, salons with fewer than four beds still represent the largest component of the industry; this may be attributed to growth within the beauty industry where one or two tanning beds often are added to existing beauty salons. The percentage of salons with six to 10 units has risen to 42 percent, with 11-15 units to 12 percent and those with more than 16 units has risen to more than 21 percent.
The top five problems recently reported by salon owners and managers are the seasonality of the business (62 percent), increased competition (57 percent), bad business practices (50 percent), misconceptions of indoor tanning (45 percent) and lack of industry support (43 percent). According to salon owners, competition is being waged by traditional tanning salons (60 percent), beauty salons with indoor tanning units (39 percent) and other retail stores with tanning beds (15 percent).
In tracking the different segments of the indoor tanning industry, the fastest growing market by far is the lotion and skincare market. Over the past seven years, the lotion market has grown by approximately 300 percent and there is no end in sight. Once a playing field for only a select few, the U.S. indoor tanning market is deluged with an entire roster of lotion companies pushing the envelope of technology to produce products that will help provide the perfect tan.
For salon owners, lotion sales can and should account for a large portion of the salon's revenue. More than 30 percent of salon owners average between $5,000-$10,000 per month, 12 percent between $10,001-$20,000 and 12 percent average more than $20,000 per month. Of this revenue, 64 percent of average salon owners charge between $3-$5 per session with another 23 percent charging between $5.01-$7 and 10 percent charging more than $7.
As for lotion sales, 8 percent of average salon owners attribute less than 10 percent of their revenue to lotion sales, 70 percent attribute approximately 10 percent to 24 percent of their revenue to lotion sales and 22 percent attribute more than 25 percent of their revenue sales to lotion sales. Many lotion manufacturers will agree that salon owners should be pointing at garnering at least 30 percent of their revenue from lotion sales. Thus, although lotion sales percentages are up over the past couple of years, there still is an extreme amount of growth that salon owners can and should obtain.
In addition, after spending a number of years throughout the middle '90s running in place, equipment manufacturers again have seen their products in demand nationwide. The sudden surge in equipment sales over the past two to three years is credited to improving technology and the health of the industry as a whole. In recent interviews with LOOKING FIT, equipment manufacturers estimate business growth anywhere from 10 percent to 50 percent over the next few years.
Finally, as the indoor tanning industry has surged forward, lamp sales have followed. Lamp manufacturers sold an estimated 7.2 million lamps in 1999. With 7.2 million lamps sold at an average of $10, lamp manufacturers contributed $72 million to the industry's total worth for 1999, double what the indoor tanning lamp manufacturers sold only five years ago. Overall, lamp technology has not really changed that much--especially when compared to the advancements in beds/booths. Many lamp manufacturers are working with licensees on the manufacturing side to integrate lamps, uniquely, as part of an overall system.
Education Is The Key
Finally, one of the most important aspects to consider when looking at the indoor tanning industry is education. Over the past five years, more than 4,000 salon professionals have been trained at LOOKING FIT's Annual International Tanning Trade Expo in Chicago alone. In addition, a number of other industry educational groups also have traveled the nation, training salon owners. Overall, a general estimate of salon professionals who have received some type of certification is approximately 64 percent. What all this amounts to is a more professional, educated industry.
How important is education? Many tanning salon owners are just starting to see the professionalism education can lend to their industry through the creation of seminars, symposiums and trade shows dedicated solely to tanning. Salon owners have started to realize that for their industry to evolve, education is the key to prosperity and integrity. Motivating themselves and their staff to learn and understand tanning will have benefits for years to come.
With educational classes now being offered free or at little charge by the National Tanning Training Institute, commitment to completing educational courses is the only cost to salon owners. If the owners have the training and the background necessary to run a tanning salon, then they can pass information on to their workers. In addition, certification classes are being held year-round at many different locations nationwide through educational organizations.
NTTI has trained more than 5,000 salon owners since its inception in 1992. Currently, Katie Burland, executive director of NTTI and Rick Matoon, technical training director, are working with salon owners to not only hit upon the key physical elements behind tanning--such as proper eye wear, skincare and skin typing--but also to explore marketing, salesmanship, management and customer service.
The mission of education is simple--to improve the professionalism and reputation of the indoor tanning industry. The solution is simple as well. Tanning salon owners need to promote educational training in all aspects of this enterprise. Formal training not only teaches salon personnel to structure secure exposure advice for each individual, it also helps them to understand the technical side of tanning and their level of responsibility. The control that is placed in the hands of the tanning consultant should be treated with great respect.
A Look Ahead
Where does the indoor tanning industry go from here? One thing is for certain, only the industry itself can stop it from growing. With the shifting demographics throughout North America, a better understanding of ultraviolet radiation and benefits it can provide through moderate and responsible use, the indoor tanning industry seems poised on an economic expansion not realized since the early '80s. In addition, with no end to the economic boom, service industries such as the indoor tanning industry continue to surge. The 21st century looks bright indeed for the indoor tanning industry.
57 percent of indoor tanners also purchase some form of vitamins or nutritional supplements.
62 percent of indoor tanners are either on a diet or purchasing diet-related products.
32 percent of indoor tanners tan to relax.
55 percent of indoor tanners exercise on a regular basis.
40 percent of indoor tanners tan at locations other than a free-standing indoor tanning salon.
92 percent of indoor tanners vacation in sunny destinations.
Tuesday, Wednesday and Thursday are the busiest days for tanning salon owners.
Where Indoor Tanning Is Growing
|According to surveys completed by LOOKING FIT and through contacts with industry veterans, there are a number of states where indoor tanning is growing by leaps and bounds. Although these states might not be the largest ones in terms of numbers of tanning salons, they represent the fastest growing segment of the industry.|