Operating Costs & Revenues

In tanning, expenses tend to be continual while business is seasonal, making realistic budgeting even more important. The retail side of the business may or may not have a seasonal base. It would be better if it didn’t have a seasonality to it, or if it did, one that was opposite the tanning business so that one could carry a positive cash flow during the weak months. If, in computation, the salon owner figures expenses by the month for the salon operation, it is given that he knows how much he must charge for the tanning services during that month (no matter how many customers he has) to make back that month’s investment and a profit. Unfortunately, many salon owners cannot just consider their expenses and needs in this business. They must consider their enterprise against the face of competition and the market demands for their tanning services.

The picture for determining profits for retailing is a little different. Here the price of goods is not tied to the number of buyers, but to the number of units. A retail operation has to move so many units during an accounting period to make a profit. Whether there is one customer or 50 customers isn’t the issue. Volume of goods determines whether the operation can be successful or unsuccessful. If the salon owner or retailer doesn’t feel he or she can move merchandise at the rate needed to make a profit, the salon owner should not consider the retail operation without further planning to maximize profit.

The process of incorporating a retailing operation into a service operation requires an accurate knowledge of the retail sales world and how it works. Presented here is a fundamental analysis of retailing and its most important aspects. Obviously this is not a complete study of the subject, but it does give the tanning professional an insight into the complexities of this exciting and often lucrative field.

The salon owner has decided to market a product besides offering the tanning service. Let’s accept as a given that the owner already has selected a suitable product that will work well with his or her established operation. Now the owner must strive to know all he can about the process of selling. This is important information because knowledge of the sales process increases the retailer’s success.

Distribution occurs when a product travels in some way from the producer to the consumer. The means by which the product gets to the consumer is called a distribution channel. These channels can be direct or indirect. A direct channel of distribution bypasses the retailer and goes directly to the consumer. This is a method used successfully by mail-order companies. They send a catalog and the consumer orders directly. An indirect channel of distribution requires the service of several intermediaries between the consumer and the product.

The factory or manufacturer deals usually with a wholesaler or agent that places the goods. The wholesaler works to the benefit of both the producer and the retailer. Because the wholesaler deals with a number of companies, the factory and the retailer don’t have to. If, for example, the tanning salon wanted to order a variety of tanning lotions from a variety of different lotion manufacturers, the work of ordering would be a time-consuming task. The wholesaler makes the job easier. This distributor buys goods (in this case tanning products) from a number of factories/manufacturers at a quantity price, that is a discount. Because goods are bought at this low wholesale price, the wholesaler can afford to pass along some of this savings to the little retailer who otherwise would probably end up paying a higher price for the smaller volume. The wholesaler then serves both the needs of the factory and the retailer.