Although inflation has been trending somewhat downward, prices are still not what we saw in early 2022. According to NielsenIQ, the beauty industry is dealing with a 10% average unit price increase every year, with color cosmetics and nails, facial skincare, and haircare taking the lead.
In a survey from Styleseat, asking participants about their beauty and fashion spending habits to see where they’re cutting back, how they’re cutting back, and what they can’t do without they found that of those who plan to buy an expensive item in 2023, 75% of people will save up for it rather than use credit. When it comes to fashion and beauty items, 64% say inflation has impacted their spending in that category. Before buying, 1 in 3 people price check every purchase either online or in other stores.
That doesn't necessarily mean that because consumers plan to spend less, that they won't be buying - they just want to use money-saving strategies. So value is even more important these days, and this week's post from Mara Jenkins offers us some tips and insight on how to keep our businesses booked and profitable.
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At this point, you’re probably tired of hearing about inflation. Almost as tired as you are of paying for it. (Can you believe those grocery prices?!)
However, we thought it was important to take a look at how inflation is affecting our industry and provide you with some guidance on the best way to deal with it. Plus, we’re hoping to gain some insight from you on how inflation is impacting our community specifically — whether you’re a business owner, solopreneur, or employee. So read on…
There’s no doubt about it: supply chain issues and labor shortages have caused major price increases, from products and supply costs to staff wages. Luckily when we first came out of pandemic shutdowns, our clients were feeling extra passionate about self-care — and, according to ISPA, demand was thriving. In other words, clients were willing to pay for professional skin care and spa services, even when the economy (and their jobs) were uncertain.
However, while predictions vary, the consensus is that increasing costs will persist throughout 2023. And as time and inflation goes on, it is only natural that people will need to examine their spending.
So, the question is: how do we, as skin professionals, continue to charge our worth and make sure our businesses are profitable — while still attracting clients who are also dealing with their own financial woes? The truth is, it’s not an easy balance. But here are a few guidelines to help keep you on track…
TRACK YOUR PROFITS AND LOSSES
Many of you have likely experienced product price increases already, resulting in a simple and predictable increase to the manufacturer’s suggested retail price (MSRP). However, other increased costs are not as clear-cut. Order delays, out of stock supplies and workarounds, staff turnover, among other unexpected issues can be expensive and eat into profits in a less predictable way. Calculating how to make up for these losses gets tricky.
This is the time to get serious about recording your profits and losses. While many of us are diligent at recording our sales, some of us fall short when it comes to keeping track of expenses — especially when times are good. However, how can we truly know how our businesses are doing without seeing the full picture? This is where a formal Profit & Loss statement (P&L) comes in handy. ADJUST PRICES ONLY AS NECESSARY
Once you have a clearer picture of where your losses are really coming from, you can work on solutions to cut costs or decrease spending and even increase profits where possible. Of course, workaround solutions may only go so far before prices need to be increased. That’s okay! Just ensure you are increasing prices to a fair point — making sure your business is profitable and healthy without price gouging.
Price gouging refers to increasing prices beyond what is fair, specifically in response to a major market disruption. You may think, “if I have to increase my prices anyway, what’s wrong with a little extra profit?” In fact, price gouging will only hurt your business, as clients have a greater eye on their bank accounts right now — and will likely lose trust in you if they see comparable businesses are happily offering their services for much less. COMMUNICATE + CREATE COMMUNITY
Remember: we’re all in the same boat, and people are experiencing inflation in every aspect of their lives. It’s best to be honest with your clients and explain WHY your prices are increasing. Reasonable people will understand and will support you as best they can if they want to see your business sustained and successful through this difficult time. PUT YOUR PEOPLE FIRST
And finally, put your people first. Remember that your staff (including their expertise, experience, and the relationships they’ve built) are your most valuable asset — and their cost of living has gone up too. If you’re willing to increase your investment in products and supplies, you should also be willing to invest in your staff. Plus: did you know that the average cost of replacing an employee varies between 30% and 150% of their salary? And that doesn’t even account for training time and integration into your business culture.
What’s more is that our industry is experiencing a labor shortage, especially when it comes to experienced professionals. The bottom line is that it’s just smart business to value your staff as the assets they are — not an expense to skimp on. Because if we don’t, we can be sure another business will be happy to scoop them up.