Salons struggle to make a comeback as the number of infection continue to rise

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June 1, 2020 6:56 AM

Beauty salons open up to offer basic services in some regions, but struggle with rising costs and low footfall

Although ensuring footfall could be challenging in these times, these salon chains are not keen on branching out into home services.Although ensuring footfall could be challenging in these times, these salon chains are not keen on branching out into home services.

After being non-operational for over two months, beauty salons in some parts of the country have opened up. But the business prospects look bleak as consumers continue to limit their exposure outdoors. According to experts, the beauty and wellness services market in India was worth Rs 33,990 crore in 2019, estimated to grow at a CAGR of 16.5% to reach Rs 72,920 crore by 2024.

This industry is highly fragmented, with unorganised players commanding 75% share. Most organised players follow the franchisee model, which had been growing at the rate of 30-35% annually. This growth, however, has been hit severely due to the lockdown.

Spoorthy Shetty, CEO, BBlunt, which operates 30 salons across India, says, “April-May has been a washout, as we have had cash burn even when revenue was zero. That puts tremendous pressure on the working capital. It seems like the business is going to shrink post lockdown, and it will take many months to even reach our past performance level.”

Even though the government has eased curbs in the last few days, opening up beauty services will be challenging for salon chains that have opened shutters, since customers are wary of physical contact. According to Jawed Habib, owner and founder of Jawed Habib Hair and Beauty, the salon chain has seen a 50% drop in footfall in the 90 (out of 900) stores that are open across the country.

Trimming costs

Chains such as BBlunt, Lakme Salon, Jawed Habib and Geetanjali Salon have brought in changes to their day-to-day functioning. Measures such as appointment-only consultations, regular sanitisation of tools, fewer seats to ensure adequate distance between customers, digital payments, and safety gear for employees have been implemented. Most salons are not offering services, such as threading, waxing and beauty treatments, that require personal contact.

Geetanjali Salon is getting employees in its 20 (out of 110) operational salons tested for Covid-19 before they join back. “To ensure the safety of clients, we are using as many disposable tools as possible, and the products and kits being used are given back to them or thrown away,” says Divya Parchani, the salon chain’s marketing head.

These safety and hygiene measures have meant higher cost of operations. “An additional 8-10% hit on the bottom line,” says Shetty of BBlunt. To reduce the overhead costs, BBlunt is looking at reducing the number of working days and hours, inventory rationalisation, reviewing the compensation structure of employees, reducing value added services, and negotiating rent with landlords and credit periods with product partners.

Although ensuring footfall could be challenging in these times, these salon chains are not keen on branching out into home services. Most of them are focussing their marketing communication on assuring their regular clientele about the safety measures in their outlets.

“Customers will have a safe experience in the controlled salon environment with stringent hygiene measures and detailed checks in place. This is difficult to replicate in home services since service providers are likely to go from home to home,” says a Lakme Salon spokesperson.

Beauty can wait

The widely held view among experts is that, as consumers cut down their discretionary spends due to the economic downturn, they would go to salons only for essential services. “Consumers will stop splurging on luxury services, and hence premium and special grooming packages being offered by these chains will be specifically hit,” says Ankur Bisen, senior VP, retail and consumer, Technopak Advisors.

This trend is, in fact, visible at some chains. Habib says there is demand for services such as haircuts, shave, grey hair touch-up, etc, at his outlets that are open currently. “This will end the beauty parlour culture in India, and the industry will transform into a hair-styling industry,” he adds.

In the absence of weddings, which contribute about 30-40% to the business, these salons will be hit further, says Rajat Wahi, partner at Deloitte India.

The lockdown has made the DIY (do it yourself) culture popular. Pinakiranjan Mishra, partner, EY, says, “DIY processes will be adopted for non-essential services such as facial, pedicure and manicure going ahead.” To make up for the lost business, he adds, some of the larger chains could start focussing on their product verticals.

Read Also: Coronavirus Impact: As viewers take to TV, it is the afternoon time band which gets the money and eyeballs

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