Inventory Basics

Inventory Basics

Deciding how much inventory to stock, and then how much money to ask for your products, are two key factors for successfully retailing lotions in your salon. Deciding how much is enough is an individual task that requires serious consideration if you are to run a profitable business and retain satisfied customers.

The amount of inventory a salon should carry will depend on a number of factors, including the size of the salon, how many pieces of tanning or spa-related equipment it offers, the type of clientele it caters to as well as how much business it does per season. Obviously, a salon should stock up on its inventory at the beginning of its high season and then order more products as necessary as the season begins to taper off.

However, the general consensus among industry experts is that the worst thing a salon owner can do is being caught short-handed, at any time of the year. There is no magic answer to inventory; however, salon owners should not be afraid to have enough because lotion sales mean money.

Some salon owners say, ‘I don’t want to get stuck with a case of something I can’t sell.’ However, properly marketed any salon owner can sell lotions. For example, if a salon owner has a slow-moving product, provide a couple of free tanning sessions with the purchase.

Knowing your customers and anticipating how much business will come through your door in a particular month will help you determine how much inventory to stock. A helpful strategy is to go back and look at the previous year’s receipts to see what sold, how much of it sold, and if its sales increased or declined during a particular month or season. Whatever the case, if you are going to carry a product, don’t just have one bottle of it in your salon because one item on a shelf will never sell because people think nobody wants that one bottle. Veterans suggest having at least three each of one item because it will help sell the product faster.

In addition, having only one or two bottles of a product in the salon means that if one customer buys a bottle, and then another customer also decides to buy a bottle, in one fell swoop you have no product left.

This is especially true with the top-selling items. Salon owners should always have a good stock of product on the shelves, and some for backup. The shelf life of most lotions is at least one year, if not two to three years. One national lotion manufacturing company suggests always making a fresh supply of products available to customers, and displaying them in substantial quantities.

For instance, some salons tend to put out one or two bottles of each product, perhaps because they want to make their retail area look artistic, or maybe they just don’t want to invest in a lot of inventory. However, it’s definitely much more appealing to present a fully stocked retail center with rows and rows of products.

A salon owner in Detroit says her hot products move even faster when she creates a display with a quantity of 12 or more products because it reconfirms to clients that the product must be great because she has a lot of it compared to everything else. She tells clients that she is stocking up on the product because it’s the hottest-selling item and she doesn’t want to sell out.

Salon owners also should study the various manufacturers and order quality products. Once you have decided on which products to order, keep them stocked consistently in your salon so that regular clientele can depend on the product being there when they need it.

Finally, most lotion products can sustain variations in temperature without the quality being affected. Should a salon need to store its surplus inventory, keeping the products at room temperature is ideal as extreme heat or cold can produce slight changes in color and consistency.

Before deciding how to price your retail lotion products, try conducting a break-even and return-on-investment analysis of your business.

According to industry experts, in doing so, salon owners will determine how many tanning sessions they will need to sell each month and what profit they make if they sell X number of bottles of lotion. When they want to make a profit, they can look at their fixed overhead for the month, see that they need to tan X number of people or sell X number of bottles of lotion to achieve their break-even point, and after that they will start making money for themselves. It’s always that perfect combination of the two, the tanning and the lotion sales that will bring you to your break-even point and start making you money. If you can’t break even, you can’t make a profit, so you’ve got to know where your break-even point is. You need to walk before you can run.

Lotion manufacturers and distributors offer a suggested retail price that will allow salon owners to make up to a 50- percent profit on each bottle of lotion they sell. Most manufacturers offer a generous markup for salons, so they can make a profit with the suggested retail price. In addition, most suggested retail prices are very fair and if a salon wants to discount a product, they can still make a profit, and, if they want to charge more for a product, they can do that as well. It just depends on how salon owners want to run their business.

Some salon operators use the suggested retail prices to ensure uniformity of pricing in the industry. “That’s what retail is there for-it’s for everybody to be uniform,” says one salon owner. “The suggested retail price gives us enough money to make a profit, and I don’t think anybody needs to ask more than that. We also use it so that when a customer buys a $60 tanning package, we can give them $3 or $4 off a bottle of lotion if they buy it at the same time. If we ask suggested retail, we have that ability.”

Offering three levels of prices on lotions, an entry-level, mid-range and high-end price, also will encourage sales by catering to a wide range of clientele.

Salon owners need to appeal to everybody, and there is always someone who wants to upgrade and try the next step up. Salon owners can refer to other industries such as airlines, which have coach, business and first-class; the auto industry has economy, mid-sized and full-size cars.

Besides its suggested retail pricing, some manufacturers have developed price curves for their lotions, such as: for excellent results, very good results and good results. One manufacturer suggests when selling lotions, salons start with the excellent products because they don’t necessarily know if customers will object to the price. Salon owners always should start off with the higher-end products and work their way down. If the customer says the price is too much for them, then there always is something else to suggest.

Other ways salon owners can move their lotions while still making a profit are to offer a percentage off a tanning package with the purchase of a lotion, or vice versa, or to offer a free tan with the purchase of a bottle. Another sales method that is gaining popularity is to sell a sample packette of a lotion to a customer, who then can bring back the empty packette to use as a coupon for a certain amount off the price of a full-size bottle.

One salon owner offers an additional piece of pricing advice to salon owners. “If I sell someone a $50 bottle of lotion, and they are coming to my salon to tan, I’ve got to look at that person for at least 10 or 12 more visits,” she says. “If their $50 bottle of lotion is not performing, I’m going to hear about it, and I don’t ever want that to happen. We always can use a demo bottle, but if somebody pays for a lotion and in their first visit or two it’s not working for them, then we get them into something that is. Otherwise they’ve lost the trust in what I’ve said about lotions, and I’ve lost them as a lotion client. If I get them into a lotion that suits their needs, they’re a lotion client forever.”