Lotion Price-Point Debate Heats Up Among Salon Owners

The debate about lotions isn’t whether to carry them in a salon—most salon owners agree that lotions are one of the most practical and profitable products to carry, and many make lotion sales a big part of their business models. The debate surrounds how much to charge for lotions ... and that’s where things get heated.

Some salon owners sell lotions at just above wholesale price, creating tiny profit margins but boosting sales volume. On the other hand, some choose to price lotions at the manufacturer-suggested retail price (MSRP), which creates bigger profit margins but can result in fewer lotion sales, especially if the competition is selling the same products for much less.

The main debate breaks down this way: Those selling at MSRP are of the mindset that, while the salons selling lotions for pennies might think they’re helping themselves, they’re actually just overextending their salon without a large profit to show for it. Similarly, owners in favor of MSRP have concerns about undercutting and harming the industry in the long run. Meanwhile, a key argument from the sell-for-less crowd is that inexpensive lotions attract customers—and more customers in the salon means more money, regardless of the number on the price tag.

James Coffey, owner of The Island Tan in Dallas, Ga., explains, “I think the goal is to bring people in the door with cheaper lotions. This will give you the opportunity to sell your services. Another possible benefit is higher lotion utilization among clients, which leads to better tanning results.” And, customers satisfied with their tans are more likely to keep tanning. Coffey’s salon sells lotion at about 1.4 times its cost, and his customers tell him that they appreciate his low lotion prices and will therefore continue to tan regularly at his salon.

On the MSRP side of the argument, salons owners say they’ve learned—some from experience—that cheap lotion prices alone won’t flood the business with customers. “Lotion doesn’t drive tanners to salons,” explains Susan Lowes, a moderator on TanToday.com. “Half of the clients never use it anyway—no matter how hard you try to teach them the benefits. Besides, the ones that are looking only at price are the ones who will be most likely buy it on the Internet.”

The availability of lotions at wholesale prices on Web sites such as Lotion Central, Tanfastic or even consumer-auction sites such as eBay, adds another dimension to the price debate. Salon owners who offer lotions at rock-bottom prices note that they are simply trying to stay competitive with the Internet and, therefore, have to charge the consumer near the same price as wholesale plus shipping. But proponents of high price-points say it’s not worth it to try to compete with Web sites in terms of price because customers generally prefer the convenience of buying lotion directly from the salon counter instead of waiting for delivery. The ones who don’t mind waiting for a box in the mail are the bargain-hunters who are simply looking for the lowest price possible.

Let’s say that your average customer spends $200 annually on lotions and you gain seven new customers in a year. Lowes says that, if a salon makes a $25 profit per bottle from selling at MSRP, the salon would need to sell about 56 bottles of lotions annually—eight to each new customer. At a lower price, say $5 profit made on each bottle, salon associates have to make significantly more sales—five times as many, in fact—to make the same profit. The opposing view, of course, is that low prices sell themselves (so high volume isn’t a problem), and salons can make a profit from tanning or other services using lotion as a hook. And the circle of debate goes on and on.

Right or wrong, whatever strategy you decide, commit to performing honest sales practices and good customer service. These principles, first and foremost, are what keep people tanning, and that’s something everyone in the industry agrees is a good thing.

Last, here’s some food for thought: Frankie Burrell, owner of six Silver Sun Tan USA locations in Athens, Ga., brings up an interesting point about the uniqueness of running a tanning salon. Unlike some industries, more customers aren’t always a good thing for tanning salons.

“If I sell my tanning services and products for suggested retail, and you sell yours for 50 percent of suggested retail, I will still make as much money as you with half the customers, which means I use half the electricity, and my lamps last 50 percent longer.”