Indoor Tanning: ’08 State Of The Industry Report

Since 2001, the indoor tanning industry—like many niche industries—has ridden the highs and lows of turbulent tides. As we head into the fourth quarter of the 2008 season, it’s time to take stock of the state of the industry so we can better plan for next year.

Some financial analysts are referring to the current 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, this year more than ever 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/media coverage impacted their business. (Click here to see what your peers are saying.)

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 & 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.