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Beauty Businesses
Are Embracing New Revenue Streams

Our Most Compelling Data:

51%

of consumers said they spent less on products or services at beauty businesses in the last 12 months, while other industries saw steeper cuts.

71%

of beauty leaders say they plan to increase their prices in the next 12 months.

4%

of consumers said they purchased retail items from a local beauty business at least 10 times in the last year.

Consumers have pulled back their beauty spending

While just over half of consumers we surveyed said they’ve cut their spending on beauty purchases (51%), there’s a silver lining: people are still putting their beauty needs first and ahead of other discretionary expenses.

In comparison to restaurant and retail purchases, in which consumers have cut back spending by 63% and 58%, respectively, beauty consumers aren’t pulling back nearly as much.

But that doesn’t mean beauty sellers aren’t feeling financial pressure. Decreased consumer spending, increasing wages, and new wage laws have made 63% of beauty leaders (beauty business owners and managers) say that they’ve felt some financial pressure, with 16% describing that pressure as significant.

All things considered, it’s not surprising that 71% of beauty leaders said they plan to increase their prices in the next 12 months. While some owners will cringe at the prospect of asking their customers to pay more, this is actually a reasonable and healthy response for an industry that usually holds off on raising prices in order to maintain customer relationships.

Key takeaway:

Price hikes can be healthy, and beauty leaders shouldn’t be afraid to make changes over fear of straining vital client relationships. While beauty customers generally respond to higher prices by going a few extra weeks between appointments, they’ll likely return to their normal patterns as the months go on, just as they did after the Great Recession in 2008.

Beauty leaders are embracing the upsell, and consumers like it

Of course, raising the costs of a haircut, a massage, or a skin treatment aren’t the only ways to boost a shop’s financial fortunes.

Diversifying revenue streams, such as by adding new products or by implementing in-person classes, are tried-and-true ways for beauty leaders to grow their businesses. More than a third of beauty leaders told us they’re doing this by introducing loyalty or rewards programs (42%), by adding new products or services (40%), or by offering memberships or clubs (34%).

To take the point further, more than four in five beauty leaders said that expanding their offerings beyond traditional services by adding things like classes or increasing retail product sales was important to their growth plans. Consumers seem to be on board with that; 55% percent of consumers told us that they purchase products or adopt practices their beauty specialist recommends, with shampoos and cleansers topping the list.

Our survey also shows consumer purchase volume appears to be there for sellers who want to create new revenue streams that appeal to both their core clients’ broad and localized tastes. Forty-six percent of consumers worldwide said they purchased retail items from a local beauty business at least once in the last year. Going even deeper, about 20% said they purchased retail products four or more times in the last year, and 4% of that group made at least 10 purchases.

Key takeaway:

If you’re not diversifying revenue streams, you’re missing out on two fronts. While the obvious opportunity is to boost your sales, the second opportunity is to identify and cater to those core customers who’ll make an extra purchase on almost every visit, which could change the trajectory of your business. Identifying and nurturing those relationships can create a small army of brand ambassadors for your work. Keep them happy, and watch your appointment slots fill up.

Pro tip:

The Square ecosystem supports businesses that have diverse revenue streams with a variety of tools, including Square for Retail and Square Appointments. Square has the ability to grow with your business however and whenever you choose.

The Beautiful Co. Hair & Lashes is a Greenville, South Carolina-based salon that specializes in hair extensions, styling, brows, and lashes. Seven years after starting the salon, The Beautiful Co. has grown from a two-person company to a team of eight hairstylists, three front desk team members, and four lash technicians. But most notably, The Beautiful Co. has mastered a community-oriented business model, and they’ve maintained a nearly 95% customer retention rate. High-quality offerings, such as cafe drinks, one-of-a-kind customer service, and easy-to-use tools have helped make growth simple.

Offering retail products has not only helped boost profits, but it also attracts new customers who come in just to browse. We have about 100 SKUs for our retail products. Knowing all that Square knows about how that inventory is churning, and then how much we have on order, and then taking their suggestion and being able to tweak that to what we know is coming up … it makes it really quick.”

Braden Heckman, Operations manager at The Beautiful Co., Greenville, South Carolina, USA

Memberships and subscriptions have potential, but will salons and spas act?

Businesses that aren’t in a position to expand their products or services may want to try a different approach: memberships.

Eighty-five percent of beauty leaders told us that memberships and subscriptions provided a positive return on investment for their businesses. In the past year, 34% of beauty leaders said they’ve offered memberships or clubs that give discounts for paying for services or product deliveries in advance, and 24% who haven’t offered memberships said that they’d consider adding similar programs in the future.

There’s a sizable audience waiting for these businesses. Several consumers told us that they’d be interested in paying for memberships or clubs (18%), online tutorials (13%), or subscription boxes (9%) created by a beauty business.

Key takeaway:

Subscriptions and memberships can create a situation in which your best customers lock into a contract with you that’s paid up front, with the bonus of getting to offer them exclusive upsells throughout the year. Think of it this way: How much better off would your beauty business be if it had 20% of its revenue in the bank on the first day of each month? How many of those consumers who are willing to make 10 or more extra purchases a year could you get to sign up quickly?